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Data Analytics Now Fuels Customer Loyalty In Banking

June 28, 2016 at 1:33 PM

As the banking industry pursues improved customer engagement, unlocking the value of data becomes critical in designing a successful loyalty programme.

The balance of power in banking has changed. What customers expect, how they want to be serviced, what information they are prepared to share, and how loyal they are prepared to be, have all changed radically. According to leading industry analysts, Forrester Research, we are in the age of the customer, in which the only sustainable competitive advantage is knowledge of and engagement with customers.

This realisation has led successful banks to drastically change the way they do business. The most significant, and most successful change is undoubtedly the growing focus on extracting value from their most valuable commodity - their data - in order to extract value from their most valuable assets - their clients.

This is both a science and an art, which we refer to as Customer Engagement, or the deliberate efforts of a business to build and sustain positive customer experiences with their brand, in order to drive behavioural changes. Regardless of whether this is driven through a loyalty programme or more subtly through client experience optimisation strategies, it is no longer a differentiator for banks, but a table stake to remaining competitive.

Read The New Science of Customer Loyalty

Four Factors for Success

When we look at the leaders in loyalty in South Africa, we can see that there is no single secret recipe to success for driving retention and loyalty. However, there are some distinct commonalities amongst the most successful loyalty programmes in South Africa with the highest satisfaction, engagement and retention rates that form the basis of a successful model. It is interesting to note that despite these programmes operating across vastly different industries, these traits remain consistent, indicating a must-have list for creating customer loyalty.

The four things successful loyalty programmes all share are:

They commit to data-derived customer intelligence and decision making

According to a recent Harvard Business Review paper, businesses have 95% of the data that they need to build a robust understanding of their customers, but only 36% of businesses have any idea of how to extract any value from this data.

Building your business proposition and strategy based on data derived customer insights that reveal customers’ needs, motivators, and expectations allows you to prioritise and invest in what is most important to your customers and therefore will deliver the greatest return. It also allows you accurately predict what your customers will do in the future, and execute interventions to optimise your customer lifecycle journey.

They have a business-wide commitment to data driven customer centricity

For the leaders in loyalty, factual understanding based on data forms the basis of everything they do; and this leads to shared vision, top down commitment, customer-centric KPIs that drive customer engagement improvements, and a common language and understanding of their customers.

They build a consistent customer experience

Their data derived customer insights and understanding are used to consistently provide customers with experiences that are relevant, timely, convenient, and seamless across channels, and demonstrate a well thought-out customer lifecycle path.

They innovate

There is another significant benefit to better understanding your customers and being able to craft experiences based on their needs: It creates an environment that supports and fosters innovation. Leaders in loyalty commit to staying fresh and relevant, and are not afraid to abandon what isn’t working for their customers in favour of what is. They tend to make it to market with innovation significantly quicker, and have a much higher rate of success - proving that factual decision making is quicker and more accurate.

Read A Lesson in Customer Loyalty and Management from Three Yuppies

Data-Driven Decisions drive Profitability

A focus on understanding, connecting with and engaging customers in a relevant and personalised manner has an impact on a company’s bottom-line. McKinsey & Company state in their research that businesses that are considered customer analytics champions improve profits by 126% on average compared to their competitors. They are also over seven times more likely to upsell and cross-sell to existing customers and 21 times more likely to migrate an above-average share of customers to profitable segments.

The winners of the battle over customers will be won by banks that successfully make the mind-shift from relying on traditional marketing methods for customer retention to investing in customer analytics and data-driven marketing to better understand customers and engage with them in a relevant and personalised manner. The speed and accuracy in which banks can derive and action data derived customer intelligence will soon mean the difference between a market leader and a follower.

This blog post originally appeared as "Customer Intelligence now fuels Retention and Loyalty" in Banker SA, Edition 15

using data analytics for customer engagement

Luke Turnbull
Luke Turnbull
Luke Turnbull was the Head of Customer and Lead Analytics at Principa, until the end of 2017, after which he returned to his home country of New Zealand. He worked in the financial services industry since 1995, during which time he worked in process, strategy and operational design across a range of organisations in New Zealand, the United Kingdom and South Africa. Luke had been with Principa for 9 years and led consulting engagements with Principa’s local retail clients across the customer lifecycle, with a particular focus on customer engagement and lead generation.

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  It is common knowledge in the industry that the credit risk assessment of a consumer applying for credit is far less complex than that of a business that is applying for credit. Why is this the case? Simply put, consumers are usually very similar in their requirements and risks (homogenous) whilst businesses have far more varying risk elements (heterogenous). In this blog we will look at all the different risk elements within a business (here SME) credit application. These are: Risk of proprietors Risk of business Reason for loan Financial ratios Size of loan Risk industry Risk of region Before we delve into this list, it is worth noting that all of these factors need to be deployable as assessment tools within your originations system so it is key that you ensure your system can manage them. If you are on the look out for a loans origination system, then look no further than Principa’s AppSmart. 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