Posted on: Wednesday 1st of August 2012
Loyal customers are the bedrock of business and the benefits of loyalty are well understood. But what does customer loyalty actually mean in today’s changing environment, what are the drivers and factors that determine loyalty, and what are the opportunities for those who are getting it right?
These are the key questions we are asking as we initiate a board level strategic study into the changes affecting customer loyalty in banking. Here’s a little more about what we are doing and why.
The shifting sands of customer loyalty
Loyalty currently suffers from confused terminology. People use the ‘L’ word to mean many different things. What drives ‘loyalty’? An emotional commitment to the brand? Product preference? Customer satisfaction? Inertia? Lock-in? Companies talk about targeting, capturing and ‘locking in’ customers prompting them to buy and buy often, whereas consumer debate is about concepts such as value for money and choice. If we ask customers what they want from brands, very few say ‘to be loyal to the brand’.
This schism is part of what’s happening more broadly as customers are becoming empowered to change the way they deal with organisations. New channels, smart devices, social networking and price comparison sites are all contributing to this shifting relationship and the need for companies to respond and rethink how to build strong, loyal and prosperous relationships within this environment is both a challenge and an opportunity.
Some organisations are seizing the chance to do just this. They are developing information services that help customers to make better decisions and exercise greater control whilst simultaneously providing a chance for the business to learn about customer attitudes, insights, plans and preferences, creating value for both parties. These new types of information sharing relationships have the same potential as some of the more successful retail loyalty schemes – the use of data to gain insights that focus offers and promotions on where the return is greatest whilst driving activities that deliver improved customer retention and satisfaction.
The retail banking sector
So with this context in mind our research will look specifically at the degree to which banks are evolving towards new and more successful approaches to customer engagement and loyalty. How good are they at engaging their customers through an effective information sharing relationship? Are they willing to empower their customers in return for greater insights? What information services and technologies are they making available to support customers’ financial needs?
Evidence is growing that embracing new ideas and approaches about what drives customer loyalty is becoming key to delivering competitive advantage along with engaging increasing numbers of digital savvy multi-channel customers. Our research will look at the difference between longevity based on inertia and loyalty as a positive product of brand preference. We want to shed light on the challenges of engendering loyalty and the opportunities and best practices that exist.
Our research process
The research interviews – all anonymous and confidential – commence next week and we are aiming to speak to a substantive base of senior executives. We’ve gained strong interest to date and we are also delighted to have been asked by the British Bankers’ Association to speak at their Customer Valuation and Data Maximisation conference on November 21 about the implications for banks of the changing customer data landscape.
We’ll be publishing our findings in the early autumn and we expect them to be of great interest to organisations in the finance sector, and relevant to those in other sectors wanting to understand the changing nature of customer loyalty.
If you would like to help us develop this piece of thought leading research then please let Chris know. Or, equally, please get in touch if you’d like to see the results.