Today, more than ever before, customer retention has become crucial for banks. After all, it has been well established that, for banks, the cost of new customer acquisition is much higher than the cost of retaining the existing customers. Hence, the role of effective customer loyalty management cannot be overemphasized. When customers are more loyally engaged with their banks, they not only buy more products and services but also aid in new customer acquisition through word-of-mouth publicity. Moreover, loyal customers have been seen to purchase more services and products and have a long-lasting relationship with their bank.
For the past few years, many banks have leveraged myriad approaches for their customer loyalty management - for example, by enabling preferential rates and discounts, personalized and efficient services, attempting to deliver unique customer experiences, and much more. However, today, there is far more pressure on banks to maximize value for their customers and with minimal impact to the bank's bottom line vis-à-vis their loyalty management programs. It is in this light that the role of the mobile banking channel in customer loyalty management becomes crucial.
The favorable trends listed above are further complemented with three key enabling attributes of mobile vis-à-vis loyalty programs
1. Accessibility accentuator
- Loyalty programs through "offline" channels (like a branch) are more transaction oriented, for example, customer enrollment, point-of-sale transaction, etc. The mobile channel, on the other hand, enables pull-based and relationship-driven engagement.
- Enabling a loyalty program through the mobile banking channel can help banks immensely increase the program's access to their customers. Customers have better control and access on a real-time basis. The loyalty program becomes embedded in the customer's lifecycle with the bank on a real-time basis.
- Mobile banking users are known to access their financial information more than users who access only the online banking channel. This provides greater opportunities for banks to cross-sell and up-sell services and products, and enables purchase rewards and other loyalty incentives. Customers who use their reward points make even more purchases, thereby generating revenue for banks.
2. Stickiness solidifier
- Convenience is the most important factor for a customer's stickiness with their bank and the mobile channel has proven its capabilities in terms of enabling convenience. A significant percentage of mobile banking users consider their mobile banking experience as the primary reason for staying with their bank.
- The mobile banking channel is already enabling deeper customer engagement and helping meet evolving customer expectations (for example, customers have taken a liking to sophisticated capabilities like remote data capture, or RDC)
- Moreover, mobile banking users have been found to be better advocates of their banks - they are more likely to recommend their banks to others as compared to non-mobile banking users
3. Contextual clarifier
- Mobile banking enables banks to provision new types of real-time contextual information about the customer - purchasing behavior, spatial and transactional information, etc. Loyalty programs of banks can effectively leverage these real-time contextual insights to gain the greatest bang for their buck.
- The mobile channel enables greater control to banks (vis-à-vis their loyalty programs) on when and how they interact with their customers - in both the pull and push mode.
- It enables greater timely leverage of opportunities for banks from the customer's relevance and context perspective. For example, based on real-time information, the bank can send customized messages on personalized offerings - one that is based upon the customer's current location, financial behavior and transactional data history.
Proactive banks are already capitalizing on their mobile channel to achieve effective loyalty management. Last year, Intuit Financial Services released a mobile loyalty rewards programs for banks. The "Mobile Purchase Rewards" feature enables customers to receive/activate rewards based on their personal purchasing habits or customized discounts that are merchant-funded. Customers are able to redeem the reward/discount by simply swiping their bank's ATM/debit card.
In my next blog, I will share recommendations on what banks must do to effectively leverage their mobile banking channel for robust loyalty management.