This article and additional insights on deposit growth and customer attraction are available in the BAI Executive Report. Strategies for customer growth, deposits, and retention.
In the dynamic world of financial services, the challenge of securing deposits while dealing with shrinking marketing budgets is omnipresent. Financial institutions are continually seeking smarter approaches to household acquisition, striving not just for better outcomes, but for sustained success.
This pursuit will be further complicated by a complex regulatory landscape, changing consumer preferences, and market noise through 2024.
core issues
Financial institutions face several important hurdles.
» Acquire major customers: They struggle to attract new customers, manage declining balances, and face stiff competition from direct banks and unconventional financial institutions.
» Impact of external events: The upcoming presidential election and Summer Olympics are expected to impact media availability and increase costs.
» Regulatory and compliance compliance: The need to ensure that all marketing communications comply with regulatory standards.
» Rising ROI expectations: Tighter budgets increase the pressure to achieve a higher return on investment.
» Demographic changes: The decline in residential moves, which traditionally led people to switch financial institutions, is creating other challenges.
5 key learning questions
In the highly competitive financial services sector, building a solid framework for customer acquisition and retention is essential for sustained growth. Taking a strategic and methodical approach to navigate complexity is the key to a successful marketing strategy.
Below are important questions that financial institutions need to consider to strengthen their market position.
- Identify your best market: The basis of a successful acquisition strategy is identifying the most productive markets. This includes understanding not only where your potential customers are geographically, but also their behavior, preferences, and financial needs. Analyzing demographic data, economic trends, and consumer spending habits can reveal which markets are ripe for growth. For example, markets with a large number of young professionals may find greater acceptance of tech-savvy banking solutions. Being aware of these nuances will help you tailor your services and marketing efforts to each market's specific needs, ultimately driving new account growth and deposits.
- Channel selection: Once your target markets have been identified, the next step is to choose the most effective channels to reach those markets. This selection process is critical because different demographics prefer different channels. Younger audiences may be more accessible through digital platforms such as social media, while older audiences may be more responsive to traditional media such as direct mail. Additionally, channel selection should be tailored to the nature of your message and product. For example, complex financial products require more detailed explanations, so his website or in-person seminars are better suited than short posts on social media.
- Spend optimization: Budget allocation plays a vital role in the success of your marketing efforts. Spend optimization involves not only splitting your budget across channels, but also doing so in a way that maximizes ROI. This requires a thorough analysis of past marketing campaigns to understand which channels have brought the best results. For example, if digital advertising has traditionally brought you more valuable customers, it may be wise to allocate a larger portion of your budget to digital advertising. The key is to create a balanced mix that leverages both high-performing and emerging channels to ensure that each dollar spent contributes to the overarching goal of customer acquisition and retention.
- Executing an omnichannel strategy: In today's interconnected world, a seamless omnichannel strategy is essential. This means creating a consistent customer experience across all channels: online, in branch, and over the phone. The goal is to provide customers with a unified and consistent journey, where each channel complements and supports the others. For example, a potential customer might start the journey on her mobile app and complete it at the branch. Ensuring these transitions are smooth and integrated will improve your customer experience and increase your chances of customer acquisition and retention.
- Measuring success and improvement: The final step is to evaluate the effectiveness of these strategies. This requires measuring not only quantitative results such as number of new accounts and deposits, but also qualitative aspects such as customer satisfaction and brand awareness. Tools like customer feedback surveys and engagement metrics provide insight into whether your strategy is resonating with your target audience. Additionally, continuous analysis of these metrics allows you to continually refine your strategies, ensuring they remain effective in an ever-evolving market environment.
strategies for success
To address these challenges and questions, financial institutions can adopt several strategies.
» User Experience Audit:Financial institutions must audit the account opening process from the customer's perspective. This includes ensuring that the promise of ease and convenience is delivered and in line with standards set by other industries.
Proximity Marketing: Despite the digital shift, many customers prefer institutions closer to home. Successful marketing often requires targeting within a three-mile radius of your branch location, be it urban, suburban, or rural.
» Media mix optimization: With limited marketing budgets, it's important to understand the effectiveness of each channel. For example, a $400 incentive can increase response rates by 20% and provide insight into optimal channels and spend balances.
» Use your data effectively: Driving growth requires strategically leveraging the wealth of customer data available. Actionable data points include organizational benchmarks (average product balance, product penetration), industry insights, geographic and competitive intelligence, and predictive analytics.
In 2024, financial institutions strive to overcome the many challenges associated with deposit acquisition and customer retention, and the power of a data-driven approach cannot be overstated.
Stephenie Williams is Vice President of Financial Institutions Marketing Product Operations and Strategy at Vericast.
