We know banks aren’t just like retailers. But consumers are increasingly treating banks that way. They’re looking for the best, or most convenient, hassle-free deal. Banking competitors like PayPal, meanwhile, are proving that anyone can figure out a way to move money around. So retail banks, like brick and mortar merchants in the ’00s, need a new value proposition.
Banks can find a way forward by thinking like retailers to create successful—and therefore lasting—relationships with customers. So how do retailers promote good customer experiences—and how can banks apply those experiences?
- They let customers choose the channel. Sure, banks offer multiple channels, but they’re configured primarily for convenience and speed. Customers use different retailing channels because each offers different ways to learn about products, compare prices and make purchases. Where they make a purchase—online, on a mobile device or at a brick and mortar store—depends on many factors, including price and their familiarity with the product. But the best retailers don’t force consumers to interact in a prescribed way. They’re embracing an integrated, multichannel business model because there’s evidence that consumers who shop both online and in physical stores spend more.
- They help customers use the products. Barnes and Noble provides classes for Nook owners to learn how to use the device. Home improvement stores offer DIY classes as well as installation services. Many electronics makers support user communities to help troubleshoot hardware and software problems. Similarly, banks could offer customers more advisory services, such as helping them find the right insurance policy or do their tax planning based on their individual financial profiles. Putting financial advisors at local branches could help banks revitalize their branch networks as consumers do more transactions online.
- They target the right products and services to the right customer. The iTunes Store recommends music based on the songs in a customer’s library. Grocery stores tailor their merchandise to local tastes. Auto dealers let customers know when its time for a tune up—and when the trade in value of their vehicle can help them get a good deal on a new one. Retailers can tailor their offerings because they’re mining data about their customers’ buying behavior. Banks could target products better, and attract more assets, if they analyzed their rich stores of customer transaction data for more than simply trying to detect credit card fraud.
- Customers benefit from remaining loyal. Most merchants offer perks for frequent shoppers, whether discounts on merchandise, private sales or access to special deals from partners. Retailers also build customer loyalty by providing superior customer service, which may include liberal return policies, a thank you note for making a purchase, and opportunities to interact with knowledgeable sales and support staff online in addition to on the phone or at a store. Banks frequently offer special services to their wealthiest clients, but the average customer gets little more than a free checking account.
Individual retailers might not have the perfect formula—or yet deployed all the technology they need—to deliver all of these elements. But improving the customer experience has become a critical factor driving retailers’ business process improvements and supporting IT investments.
Research suggests that giving customers a better experience increases profits. A March 2012 study by the Temkin Group found that companies with $1 billion or more in revenue collected anywhere from $140 million to more than $300 million in added sales following a “modest” customer experience improvement. Retailers are among the industries that profit most, while banks fell into the middle of the range.
Whether customers choose—or choose to stay—with a bank depends on more on the experiences they have interacting with the bank than other factors, according to the 2011 World Banking Report by CapGemini. Ease of use and quality of service matter more to bank customers than fees or interest rates.
Are your business decisions being driven by what customers want? Put yourself in the shoes of a retailer, and tell us what you’d do differently.