“Putting your money where your mouth is” takes on a whole new meaning for a financial institution.
These days, financial institutions are talking about customer engagement, but the question remains: Are they doing what they say they are? As we approach 2019, it is particularly timely and relevant to review how financial institutions are allocating their budgets.
When asked to name their top priorities, institutions responded in Digital Banking Report’s annual survey that enhancing current customer relationships is far more important than creating new ones. Yet, when it comes time for those institutions to dedicate resources, the final allocation does not reflect the same vision: 54% of financial institutions spent at least 30% of their marketing budget on new customer acquisition, and only 25% spent that much on cross-selling or up-selling to their current customers.
“As has been the case in every year of the survey, ‘deepening current relationships and increasing share of wallet’ continues to be the most mentioned ‘top three’ marketing priority in 2018 (mentioned by 51% of the respondents), decreasing slightly in importance from 54% in 2017,” writes The Financial Brand in its coverage of its sister publication’s survey.
The Financial Brand’s summary analysis goes on to point out that the acquisition of new customers decreased in importance in the 2018 survey, dropping to 30% of respondents who mentioned it as a priority – down from 35% in 2017.
There’s usually a linear relationship between client base growth and business health, and outreach to people who aren’t already a part of your customer base continues to be the most expensive route for organic growth. So, it comes as no surprise that a sizable amount of budgets are earmarked for new client acquisition each year.
Yet, from a larger business sense, financial institutions are continuing to find that steady, meaningful growth often comes from the clients they already have. That’s why in every year since its 2013 debut, the Digital Banking Report’s survey has found that financial institutions prioritize “Cross-sell, deepen relationships, improve share of wallet, increase products per household” above all other growth opportunities.
So, why don’t those same institutions allocate the adequate resources to meet those goals? As always, inertia plays a role – “we’ve always done it this way,” they might say. And until recently, the higher cost of acquisition vs. retention has been an accepted truth of the business because there have been sophisticated mechanisms to acquire new clients, whereas client retention was usually limited to a handshake and a Christmas card.
With the advent and continuing advancement of digital marketing strategies, and our ability to use analytics and metrics to measure customer activity, we are now able to analyze exactly what they need, want, and do in their financial lives. We can tell, for instance, when a customer isn’t getting the most out of their debit cards, or when there’s a product or service that they could use – often before they know it exists.
These advanced technologies and techniques deliver real and proven ROI which allows institutions to focus on delivering the best customer experience. For institutions that are spending large amounts of resources on acquisition only to find that current client engagement is more meaningful, it’s a no-brainer.
When they answer survey questions, institutions know they need to increase and enhance their relationships with current clients. Now, it’s time to put their money where their mouths are.
Boston, Mass.-based Saylent, named to Deloitte’s Technology Fast 500 list in 2014 and 2015 and a sixtime Inc. 5000 Fastest Growing Private Company (2012-2017), provides financial institutions with data analytics software and services that improve profitability and product innovation by delivering smarter, deeper, actionable insights on the financial behaviors of consumers and businesses. With Saylent, financial institutions are empowered to drive new revenue streams and increase loyalty by delivering targeted programs and solutions that their customers and members desire.