This content was originally created and presented by the Riger team as a webinar for the members of the Independent Bankers Association of New York State (IBANYS).

The premise: Treat retention as a growth strategy.
The promise: Reduce churn, minimize costs of acquisition, and hit your growth goals.

Accelerate Growth Through Customer Retention

For community-based financial institutions, maintaining vibrant, long-term relationships is a key to achieving sustainable, profitable growth.

Consider that attracting a new customer or member costs more —anywhere from five to 25 times more—than retaining an existing one. In fact, according to consulting firm Bain & Co., a boost of just 5% in retention can potentially increase bottom-line profits by 25-95%.

Yet today, it’s harder than ever to keep a customer, because of an increasingly fragmented financial services ecosystem and evolving consumer expectations.

Fortunately, retention is the growth lever community financial institutions can most reliably influence—and the one that determines whether acquisition ever pays off.

Community banks and credit unions enjoy some natural competitive advantages: you are community-minded; you promote fast, localized decision-making; and you can bank on a reputation for outstanding service. These attributes will give your organization a head start on the competition when it comes to keeping your existing customers or members in the fold.

But to reduce churn, minimize costs of acquisition, and hit your growth goals, it’s critical that you treat retention as a growth strategy.

5 Steps To Retaining Long-Term, Profitable Relationships

Step 1: Know your customer (or member)!

According to recent research from Rivel, 24% of customers say they may leave their current bank due to customer service issues, a factor that falls just behind high fees and poor rates.

Only 48% of bank customers believe their institution truly understands them as a consumer. And only 37% feel they receive personal advice most or all the time.

How do you counteract these trends? It starts with understanding what today’s financial consumer wants and needs.

“Knowing your customer” or “KYC” is a core principle of banking risk management. But it can also be applied to serving your customers through a deep understanding of their needs.

It all starts with assessing your current customer or member base. We recommend segmenting your clientele based on relevant common attributes.

Start with demographics (including factors like age, gender, income, employment, and education), and then expand your analysis to include behaviors. Then, assess how well these segments fit with your product, service, and channel mix.

One practical way to conduct this segmentation exercise is to use the Experian Mosaic Profile System, which assigns every household into one of 19 unique group categories. The system even includes a geo-coding feature that segments households based on street address. You can then add in your own primary research, through customer surveys, intercept interviews, and discussions with staff and stakeholders to fill out the data.

Step 2: Develop targeted retention campaigns.

Once you have a strong understanding of your client base, the next step is to create targeted, customized retention campaigns—ideally using all that good data you compiled through your research!

To do that, look for opportunities to build on the positive first impression you’ve already made with your customer. Focus on making a strong second impression, complete with upselling offers, that anticipate what they might be wanting or needing next.

Whether that’s through a marketing campaign, special event, or product promotion, keeping the conversation going with your current relationships is key.

Here’s an example of how this works:

Some time back Riger worked with Utica-based Partners Trust Bank to develop a mail campaign focused on both potential and current customers. We took a “Hi, Neighbor!” approach, inviting the individuals to visit their nearby branch for an open house event, where they could activate special offers (such as bonus rates on deposits and loans) and enter to win one of several $50 gift cards or even a $1,000 grand prize. The campaign was a success in terms of both attracting new customers and increasing the loyalty and engagement of existing customers.

Step 3: Rethink loyalty.

Speaking of loyalty, it’s a good time to take a peek under the hood of your relationships, to see just what keeps your existing relationships walking back through your door.

Most of your clients aren’t looking for anything fancy. They do crave some simple recognition—whether in-person or online—along with consistency, convenience, and access.

Of course, offering rewards points never hurts in building that loyalty, too!

Citibank’s ThankYou® rewards is a case in point. Like many institutions, the banking behemoth offers its customers extra rewards points if they add a savings account, a mortgage, home equity line or loan, or personal loan to their relationship. But beyond that, they also offer their cardholders extreme freedom and flexibility in how they can redeem their points. Cardholders may cash them in for money or gift cards, use them to pay bills online, donate them to charitable organizations, or even share them with other Citi accountholders. This might be a nice touch to offer to the people who you know have teenagers living at home—information you will glean based on their Mosaic profile.

Step 4: Watch for early signs of disengagement.

Throughout a relationship lifecycle, it’s important to keep your eyes peeled for early signs of disengagement. Some common triggers include:

• Fewer mobile banking logins
• Declining card usage
• Loss of direct deposit
• Lower checking transaction volume

Just as critically, make sure someone within your organization is assigned the responsibility for monitoring these metrics regularly. It could be a member of senior leadership, or a supervisor on the front lines. It doesn’t really matter who is responsible—just that it’s clearly communicated, that individual is held accountable for results, and incentives are clearly aligned.

Lastly, you must establish easy, repeatable processes to measure relationship health over time. This means treating the entire customer or member lifecycle like a system.

Step 5: Treat relationship like a system.

To ensure you’re measuring the most critical components of relationship health over time, you must treat customer or membership relationship management as a system. Ask yourself the following questions:

• What happens after account opening?
• Do you have a 90-day onboarding plan for engaging your customer or member, through direct contact and digital nudges?
• How do your customers transition from single-account users to having a primary financial relationship with your bank?

The keys to successful relationship management are to set performance goals based on the right metrics, and to have a set of tools to make it automatic.

Because remember—what you don’t measure isn’t likely to get done.

There are several methods available for measuring relationship health. A few of the more common approached include metrics like Customer Relationship Value (CRV), Net Promoter Score (NPS), and Risk-Adjusted Return on Capital (RAROC). Each of these considers relationship health from a different angle, and many institutions use a combination of these (and others) to provide a holistic look at how well they are doing on the retention front.

Compete and Grow By Focusing On Your Existing Relationships

Today, in a world of heightened competition, digital dominance, and evolving consumer expectations, it’s harder than ever to keep a relationship for the long-term.

But remember retention IS a growth strategy, and community financial institutions have some natural advantages to achieve this. Now’s the time to rethink and update your marketing and relationship strategies to focus on retention. And the above five key steps are a great place to start.

At Riger, we’re here to help! Contact us to learn how we can help you make retention a regular part of your growth strategy. Request a copy of our IBANYS presentation by contacting Jamie at jjacobs@riger.com.