Holding on to profitable customers in a high-switching world



Holding on to profitable customers in a high-switching world
Thought Leadership for the UK Financial Services Industry Distribution and Marketing Services
Holding on to profitable customers
in a high-switching world
How to earn customers’ loyalty
Holding on to profitable customers in a high-switching world
Executive summary
Loyalty: what’s the problem? 6
What is loyalty and what drives it?
How to create satisfaction and drive functional loyalty
Conclusion: time to raise the bar on loyalty
Holding on to profitable customers in a high-switching world
Executive summary
The financial services market is evolving fast.
Across the world, consumers’ behaviours and
expectations are changing. Today’s customers are
interacting in new ways with the organisations
they buy from, and are demanding more
transparency and better value for money. They
also expect the flexibility to transact and interact
in ways and at times that suit them best. And, if
these requirements should not be met, they are
also increasingly willing to switch provider.
The competitive landscape for banks
and insurers is also changing fast, with
highly differentiated new entrants from
both inside and beyond the FS industry
(for example Virgin Money and Marks &
Spencer) seeking to take a share of the
market. Against this backdrop, financial
services institutions (FSIs) face the
challenge of restoring their relationships
with consumers who for nearly two
decades have been encouraged to interact
with them primarily through direct
The trend towards direct has impacted the
relationship between FSIs and customers
in two crucial ways. Firstly, with online and
mobile interaction so dominant, customers
have come to expect the same seamless,
frictionless experience across all channels.
Branches and contact centres, with their
opening hours and routing, may represent
a jarring experience for those rarely using
them, and may be perceived as delivering
poor service if the experience does not
measure up to that normally associated
with the bank’s online presence.
In retail insurance, sales through brokers
and independent advisers have been
dwarfed by internet sales, giving way to
competition based on premiums rather
than service. Meanwhile, in retail banking,
the rise of telephone, internet, and latterly
mobile channels has seen a generation of
bank customers grow up defaulting to selfserve, with more costly branch interaction
relegated to delivering ATM access, services
not available online via the counter, and
dealing with moments of truth, where
specific needs demand swift action
delivered with the same lack of friction
they experience in their normal, day-today interactions with the bank.
More profoundly though, the resultant
de-emphasis of the personal touch has
served to loosen the bonds of trust that
once existed between FSIs and their
customers, who have simultaneously
acquired much more information with
which they can now compare providers
more readily. A new breed of modern,
self-directed, and increasingly demanding
and savvy customer has arisen, ready
and willing to use the information placed
at their fingertips to make better, more
commercial decisions about the products
and services they buy.
Holding on to profitable customers in a high-switching world
The increasing willingness of modern
consumers to pick and choose providers is
forcing industries like financial services to
refine concepts such as “loyalty” to reflect
the much more complex relationships
that now exist between customer and
provider. In this paper, the term “loyalty”
describes a scenario where customers have
sticky financial relationships, eschewing
other providers in favour of maintaining
a sustained and concentrated association
with their bank or insurer from whom they
purchase multiple products.
In a banking context, this is a very
traditional model, and reflective of the
information asymmetry that existed before
the birth of the Internet. At this time,
information about products and services
was largely disseminated by institutions
to their customers in the form of advice,
placing them in a highly privileged position.
Following a litany of scandal, high
profile and costly public bailouts of
some of the UK’s biggest banks, and an
unwavering focus on the incentivisation
and remuneration of financial services
professionals, the days of “my word is my
bond” seem far behind us. And yet, our
latest survey of current account customers
in the UK and Ireland1 indicates that
satisfaction and recommending activity
have held stable in recent years. Instead
the impact is being felt in loyalty. In
the midst of this fast changing market,
and against a backdrop of deteriorating
perceptions and weakening ties, the power
in the relationship between financial
services institutions and customers has
shifted irrevocably.
FSIs now find themselves at risk of
becoming providers in a utility market
where products are undifferentiated,
players compete on cost rather than
service, and the number one reason to
switch is value for money. In the new
world, where the strength of concepts such
as “my bank” or “my insurer” is fading, we
must think more in terms of functional
loyalty. Instead of “disloyal”, the modern
consumer is becoming “less sticky” and
“more mobile” and, through this more
positive interpretation, loyalty can perhaps
be earned back by encouraging customers
to choose you, and go on choosing you
day-after-day for as many products as
they need. This is the reality for businesses
operating in the retail and utility sectors
and, for better or worse, this is the
direction in which many FSIs are headed.
As Figure 1 shows, in the last year we have
observed a strong swing towards mutuals
in our latest UK/Ireland (UKI) banking
customer survey, with their well-articulated
ethical credentials and strong customer
focus clearly chiming with switchers.
To thrive in this new world, FSIs need
to drive that daily customer decision
to continue their association with their
current bank or insurer. And, to do this
efficiently, it is essential for FSIs to
understand which customers on their
books drive income and profit, and which
have the greatest future potential, so the
customer base can be cultivated to drive
sustainable value for all.
To drive loyalty with today’s customers,
we believe banks and insurers must do the
• Ensure they deliver relevant services
to their customers by deploying data
analytics to enable differentiated,
data-led treatments for high priority
customers, and using social media to
“listen” to customers wherever they
congregate to discuss their financial
• Reward customers for loyalty in ways
that deepen their engagement with the
bank, promote profitable behaviours and
ensure that rates and offers are available
to all the customers the bank wants—
new customers entering the market,
those they hope to win from competitors
AND those that already have one or more
products with them.
• Understand the needs of their customers
better by defining key journeys from
their point of view, for example account
opening or customer servicing. By
bringing retailing principles to financial
services, banks and insurers can better
understand where the moments of
customer pain and delight can be,
helping them to deliver the seamless,
friction-free experience many are
looking for.
Through relevant, tailored products,
delivered in a low friction way, supported
by compelling loyalty schemes, banks and
insurers can begin to recover the strong,
trust-based relationship they once enjoyed
with customers.
Holding on to profitable customers in a high-switching world
Movement of survey switching population (2012 n=250)
Internet Banks
Irish Banks
1% of switchers swapped
one Internet bank for
2% of switchers swapped
one Irish bank for another...
… there was 5% net
outflow from the Irish
bank segment
… there was 0% net flow in
the Internet bank segment
Big 5 Banks
48% of switchers swapped
one Big 5 brand for another...
…there was a 12% net
outflow from the Big 5
Banks segment
2% of switchers swapped
one mutual brand for
…there was a 20% net
inflow into the mutual
0% of switchers swapped
one challenger for another…
...there was a 2% net
outflow from the
challenger segment
Figure 1: Strong flow of customers in 2012 from the Big 5 banks to mutual brands
Source: Accenture UKI Current Account Customer Survey 2012
Holding on to profitable customers in a high-switching world
Loyalty: what’s the problem?
Rapid customer change…
Switching of current accounts
and other financial products
grew in 2012
Banks and insurance companies are feeling
the impact of the changing consumer,
through the ways they want to interact,
their rising expectations and, notably,
through their willingness to switch.
As Figure 2 shows, an Accenture survey
of more than 10,000 bank and insurance
customers in the UK and Ireland,
conducted towards the end of last year,
found that switching of both current
accounts and secondary products such as
cards, mortgages and savings, as well as 8
life insurance rose sharply in 2012. Motor6
insurance switching meanwhile held stable
at close to 40%.
Current accounts
Other products
Meanwhile, banks in particular have found
themselves coping with an increasingly
hostile economic and regulatory
environment since the global financial
crisis, while a blend of tightening credit
conditions, technical failures and ethical
and regulatory scandals has further
damaged customer trust.
As Figure 3 illustrates, our 2012 study
uncovered a significant decline in the
extent to which customers, particularly
those in the 18-24 age bracket, regard their
bank as trustworthy, ethical, or fair and
transparent. In our view, banks wishing
to restore and deepen relationships with
customers cannot afford to ignore these
adverse trends in perception and must act
to retain the customers they have.
A small rise in motor insurance
switching in 2012
Our study supports the view that today’s 0
financial consumers are becoming more
mobile, less sticky, and harder to influence
through pricing, discounts and offers.
A big jump in life and pensions
product switching in 2012
Figure 2: Switching of financial products jumps in 2012
Source: Accenture UKI Financial Services Customer Survey 2012
Deteriorating sentiment, particuarly amongst younger customers,
in 2012
“My bank
“My bank is “My bank
is fair and
trustworthy” is ethical”
“My bank
“My bank is “My bank
is fair and
trustworthy” is ethical”
All respondents
Figure 3: Strong evidence of deteriorating trust amongst
bank customers, particularly 18-24s
Source: Accenture UKI Current Account Customer Survey 2012
Holding on to profitable customers in a high-switching world
…accompanied by rising
The need to take action is all the more
pressing given the rising tendency for
customers to switch provider. As well as
increased switching, our 2012 survey also
reveals a rise in the number of loyal-butfrustrated customers who want to switch,
but choose instead to stick with their
existing provider. For many, the decision
to remain “loyal” was down to a mixture
of concerns and anxieties about the speed,
difficulty and risk of switching providers.
However, a significant proportion also said
that they didn’t know who to switch to,
pointing to a distinct lack of differentiation
in the market.
As the UK Payments Council prepares to
launch “guaranteed” seven-day accountswitching for customers, a combination
of regulation and innovation is set to
make switching easier in the future. As
the process is improved over time, this
could trigger an upward step-change in
the UK switching rate. The banking market
in particular is also seeing a fresh wave of
interesting and differentiated new entrants
joining the market, as the benchmark for
customer experience rises.
This change is being driven primarily by
new UK entrants. New banking players like
Virgin Money and Metro Bank are joined by
non-banking players like Marks & Spencer,
Tesco and the Post Office, all of whom
are looking to bring fresh, differentiated
propositions to a marketplace that has
seen little innovation for some years.
The financial services ecosystem is also
expanding, with process specialists such
as iZettle and PayPal in the payments
space increasing the range of providers
for specific banking needs.
Our customer study confirms that
banks should not underestimate these
competitive threats. As Figure 4 shows, a
significant proportion of bank customers
are willing to consider using alternative
providers of financial services. Significantly,
the growing base of mobile banking
customers interviewed in our survey are
particularly keen to try out new non-bank
Would you consider giving business to the following alternative financial services providers?
Average (n: 4,009)
Regular Mobile Users (n: 896)
Post Office
Branchless Bank
Mobile Wallet
Retail Store
P2P Payments
P2P Lending Network
Figure 4: Mobile customers particularly amenable to alternative providers
Source: Accenture UKI Current Account Customer Survey 2012
Holding on to profitable customers in a high-switching world
Holding on to profitable customers in a high-switching world
Mass-affluent customers:
the biggest prize…
Before looking at the measures FSIs
should take to address the challenge of
more mobile and less sticky customers, it
is worth reminding ourselves that some
sectors of the market are more attractive
than others. For insurance companies,
attractive customers are those who have
long term relationships with them, who
reliably renew their policies, concentrate
their retail insurance holdings (e.g. buying
their motor, home and contents cover from
the same insurer), and who have a low
incidence of claims. For banking though,
the picture is somewhat more complex.
Taken together, the industry dynamics
we’ve highlighted and our research
findings underline the fact that customer
loyalty needs to be earned rather than
assumed. And the business case for banks
investing in efforts to earn and sustain
loyalty is grounded in simple economics.
We know for example that there are
approximately 1.25 million banking
customers in the UK with net incomes
of £60,000 or more, commanding an
aggregate total of nearly £150 billion
of net income3. Logically, these higherearning customers would be more likely
to purchase more complex and potentially
more lucrative products and services
than those on lower incomes. This “massaffluent” customer segment represents a
bigger prize than the UK’s 28 million
mass-market bank customers with an
aggregate net income of around £500
million, who enjoy “free” current
accounts and can be much harder to
service profitably.
In theory many FSIs have offers in place to
address this more affluent market, but do
they really step up to the mark? Looking at
offers from different providers around the
market, we do not believe they always do.
… but the hardest to keep
The potential for cross-selling products and
services to these different segments must
be balanced against the specific challenges
that each one presents. It is possible
to keep mass-market customers both
happy and profitable, if they’re serviced,
treated and managed in the right way. The
challenge is to find a way to address their
needs effectively at scale and at a low
enough cost to generate decent margins.
With mass-affluent customers, the
challenges lie more in their behavioural
traits as a group. While customers with
incomes over £60,000 a year offer the
highest profit potential, our survey
shows that they also display a number of
challenging characteristics. For example,
compared to customers on lower incomes,
they are less satisfied, more likely to switch
their current account and other financial
products and more likely to consider
alternative non-bank providers
(see Figure 5).
Attitudes and behaviours of survey respondents differed by income band in 2012
Less than £20k
More than £60k
all (n: 4,009)
Switch their current account
Switch another FS product
Satisfied with their bank
15 %
Wanted to switch, but
remained loyal
Would consider an
alternative non-bank
Figure 5: High income customers are less satisfied, more likely to switch and more likely
50 those on low incomes
to consider alternative non-bank providers than
Source: Accenture UKI Current Account Customer Survey 2012
Holding on to profitable customers in a high-switching world
While these traits are less pronounced
amongst lower-income mass-market
customers, they too have exhibited an
increasing tendency to switch product
and provider in the last year. So, whatever
customer segment or segments a bank
decides it wants to retain, adopting
more sophisticated and targeted loyalty
treatments will be vital for holding on
to target customer groups, and servicing
them successfully and profitably in the
long term.
Our study underlines the importance of
keeping existing customers on board,
since loyal customers are more likely to
do business with their bank in the future,
driving more profitable and durable
relationships. The Net Promoter Score4
(NPS) data in our 2012 study show that the
number one bank in the UK market by NPS
was 50% more likely to be considered for
a future financial purchase (49%) than the
lowest-ranked UK banking group (33%).
Our survey also finds that customers who
make frequent use of mobile banking
services tend to be younger, are more likely
to be high earners, and are more likely
to be in full-time employment than the
average customer, all of which indicates
a higher potential lifetime value to the
bank. However, as we saw in Figure 4,
they are also much more likely to consider
alternative banking providers than their
branch-bound colleagues.
The message is clear: banks’ highest-value
customers are the ones whose retention
is placed most under threat by the rising
tendency to switch. So, in our view, it is
vital for banks to take proactive steps to
drive loyalty, if they are to sustain longterm profitable relationships, increase
cross-sell and fend off the growing threat
of disintermediation that could rob them
of their highest-value customers.
Holding on to profitable customers in a high-switching world
What is loyalty and what drives it?
As has already been described, FSIs need to consider the “loyalty”
that they are seeking to drive, as well as the actions they can take
to promote stickier, more concentrated customer relationships.
Loyalty is often defined as “faith in a person, product or service”. As has been noted
though, it is arguable whether any customer is ever truly faithful to a product or service
provider. However, among brands that do inspire loyalty, what is clear is that some
succeed in inspiring their customers to identify strongly with them on a personal and
emotional level, while others generate less intense forms of loyalty by keeping their
promises and providing a consistent customer experience.
Different NPS groups exhibit different “sticky” behaviours…
NPS Promoters
Informed advocates, willing to recommend and sporting high
levels of satisfaction and strong positive perceptions of their
banks. Yet much more mobile and still willing to switch,
requiring care and attention to retain.
NPS Neutrals
Satisfied but disengaged, this group is much less likely to recommend and
just as likely to switch providers. Banks must focus on re-engaging, building
on the satisfaction they already drive with this customer group to stimulate
more positive advocacy and migrate them up the pyramid.
NPS Detractors
This inert majority is disengaged from the banking market – unlikely to recommend, with a low
opinion of the trustworthiness, fairness, transparency and ethics of the brands they bank with.
However, rather than displaying strong dissatisfaction, the majority instead are neutral, with a lower
propensity to switch in their belief that today’s banks are all the same. Banks must re-engage this
group, driving moments of joy to drive up satisfaction and trust, moving these customers further
up the pyramid.
Figure 6: The three levels of loyalty in Financial Services as they relate to NPS
Source: UKI Current Account Survey
Holding on to profitable customers in a high-switching world
The types of loyalty exhibited by
the current account customers
in our survey map closely to
the different NPS groups we
identified, which we explore in
more detail in Figure 6.
Interestingly, none of the groups exhibits
a strong demographic skew, with ages,
income bands, employment status,
region and gender splits all closely
tracking the survey averages across
so-called “detractors”, “neutrals” and
“promoters”. However, in terms of their
levels of satisfaction, advocacy, perception,
switching behaviour and switching intent,
they exhibit very different traits…
NPS Promoters (aka “INFORMED
ADVOCATES”): This group are strong
advocates for their banks, with 97%
of promoters in our survey declaring
themselves satisfied with their bank, and
79% recommending their bank in 2012.
Between 75-90% considered their bank
ethical, fair & transparent, and trustworthy.
So, we may imply that hygiene factors for
this most active and positive of customers
are high satisfaction and a strong positive
reputation, which stimulates high levels
of advocacy.
However, dig deeper and the label
“informed advocates” starts to make sense.
Of this highly satisfied group of customers,
who hold their banks in high esteem, nearly
one-in-five (19%) had switched their
current account at least once in the last
three years, and 8% still planned to switch
one or more products from their bank in
the year ahead.
T his indicates this group is mobile and
aware of the different providers out in
the market, willing as they are to switch
and switch again. Elsewhere, with nearly
one-in-ten intending to switch products
to other providers in the year ahead, the
power of satisfaction and reputation to
drive loyalty is called into question. These
motivated, mobile and informed customers
are precisely those who must be reminded
frequently why they chose a particular
brand if they, and their valuable advocacy
in the marketplace, are to be retained.
NPS Neutrals (aka “SATISFIED BUT
DISENGAGED”): This group were also highly
satisfied, yet much less likely to advocate.
79% were satisfied with their bank, yet
only 49% recommended them in 2012.
Perception scores were lower, with only 3249% considering their bank to be ethical,
fair & transparent, and trustworthy. But,
fewer (18%) switched their current account
at least once in the last three years, while
roughly the same proportion (9%) planned
to switch one or more products from their
bank in the year ahead. This group display
many of the same traits as promoters, and
are just as willing to switch.
owever, if their banks can find ways to
increase levels of satisfaction and engender
a more positive perception of themselves,
there could be an opportunity to elevate
this group to “informed advocacy” and
out of the domain of “functional loyalty”,
which is driven by an organisation simply
demonstrating its competence as a utility,
performing relatively simple but important
tasks for the customer. The relationship
with these neutrals can be bolstered
through offers and various other types
of inducements supporting cross-sell.
However, if banks get their allotted tasks
wrong, there’s a risk of the customer’s
loyalty slipping back down the scale.
Holding on to profitable customers in a high-switching world
NPS Detractors (aka “THE INERT MASSES”):
Surprisingly, only 8% of this group
declared themselves “dissatisfied” last year.
Rather, the majority (57%) were neutral
on the subject of satisfaction, reflecting
an inertia that sees them stay with their
bank on sufferance. Significantly only
10% recommended their bank in 2012.
This is not to imply that 90% gave a
bad report to friends and family. Rather
the evidence suggests that this group
represent the disengaged majority who are
not moved to advocate on behalf of their
bank. Perception scores were of course
lower, with only 12-21% considering their
bank to be ethical, fair & transparent and
But, only 13% had switched their current
account at least once in the last three
years, though a larger proportion of 19%
said they planned to switch one or more
products from their bank in the year
ahead. This is evidence perhaps of further
disengagement, and the beginnings of
frustration, with brands they feel utterly
disengaged from in a market lacking
differentiation, where one bank appears
very much like another. To move this large
group of customers up the pyramid, banks
should focus on encouraging a more
engaged relationship with the bank, with
opportunities to drive moments of joy for
the customer that deliver satisfaction and,
if repeated consistently, help to move
the needle on perception (especially
around trust).
Given the range of behaviours here, FSIs
evidently have an opportunity to tailor
their loyalty strategies to each group.
However, as has already been implied, there
are certain specific hygiene factors that
must be met first.
Banks and insurers must visibly
demonstrate their ability to deliver basic
services consistently well. By removing
friction and meeting customer expectations
with each and every interaction, FSIs
can compete on more level terms with
the enhanced service experiences their
customers have had in other areas of life,
such as seamless one-click online shopping
or telephone services that aim to connect
the customer directly to a customer
services representative within only a
few rings.
Historically, FSIs would likely have
had a much higher proportion of NPS
“promoters” in their customer bases. Trust
was higher, by virtue of the concentration
of information with a few main brands,
and “power” in the relationship was
stacked in favour of providers. Traditionally,
many customers would have opened
their first account or purchased their first
insurance policy from the provider used or
recommended by their parents. However, as
the rank and position of FSIs within society
diminishes, customers increasingly view
FSIs as simply a group of service providers
from whom different products and services
should be acquired at best price.
The mystique of the bank has vanished,
along in large part with the concept of
the “provider for life”. However, in this
new world, FSIs can still make efforts to
move customers up the loyalty model
from “detractor” to “promoter”, or rather
from “inertia” to “satisfaction”, through
well executed, data driven, relevant and
tailored retention strategies. It is here that
successful interventions will generate the
biggest returns on investment. However,
having sacrificed their privileged position
as trusted advisors, this task is very much
harder in 2013 than it might otherwise
have been.
With this in mind, we’ll
now go on to examine the
mechanisms that FSIs can
use to drive functional
loyalty among today’s
increasingly disengaged,
demanding and mobile
customer base.
Holding on to profitable customers in a high-switching world
How to create satisfaction ⎯
and drive functional loyalty
To drive the functional loyalty
1. Understanding customers’
that will keep customers on
board and generate repeat cross- Deploying data analytics to enable
selling, we believe that banks
differentiated treatments
and insurance companies should Going forward, FS loyalty leaders will
focus on three key priorities:
identify their customers’ needs by using a
first, understanding customers’
range of data sources, including customer
data from internal systems, social media
needs through data analytics
monitoring, and “Big Data” from external
and social media; second,
sources and strategic partnerships with
defining tailored propositions
other companies. These partners might
that reward customers for their
include complementary providers such
loyalty in ways that deepen their as mobile telcos and retailers, who can
engagement with the business
collaborate with banks or insurers to
and its brand; and third, focusing provide location-based services triggering
specific offers as the customer passes
on the customer experience.
by a particular store.
The data harvested from these internal
and external sources can be subjected
to analytics and used to drive product
development and loyalty schemes, as
well as to highlight specific triggers that
might signal the customer is about to
switch to another provider. Examples of
these triggers might include large balance
transfers to accounts at other banks,
the cancellation of regular payments or
deposits, or the approach of the annual
renewal date for an insurance policy.
Having identified these types of high-risk
behaviours or milestones, the bank can act
to head off the customer’s defection by
deploying targeted messaging and offers to
persuade the customer to stay.
The value generated from analytics can be
increased by identifying the most profitable
customers, as well as those who are likely
to represent a net cost for the business.
Mobile operators have been actively
allowing their lower-end customer base
to churn for many years, while investing
in relationships with high value customers
through offers such as “membership”
discounts at retailers and tickets for
sporting and cultural events.
Some FS providers are already running
similar schemes, such as the Barclays
Premier Life’s Rewards programme and
the Virgin Money Lounges, located in
busy shopping areas around the country.
However, we believe there is a much wider
opportunity for banks to differentiate more
actively between their customers based
on their long-term value. As our research
underlines, mobile banking customers are
a potentially high-value but high switchrisk category that should be managed and
nurtured with particular care.
A recent Accenture project focused on
delivering data-led differentiation was for
the life insurance business of a leading
global insurer. The Accenture team worked
with the client to analyse its customer
value and product holdings and identify
appropriate cross-sell treatments. By
enabling the insurer to use needs-based
selling to increase product holdings
successfully across its target customer
groups, we helped it to increase its
retention rates and generate several million
pounds in extra premium revenues.
Using social media to listen to
your customers
Harnessing social media as a way to listen
to and engage with customers is becoming
an increasingly valuable tool in FS
companies’ analytical portfolios. However,
research suggests that banks in the UK are
lagging behind their peers in other global
markets in exploiting this opportunity. For
example, in a recent study by Pearlfinder5,
only 22% of UK banks said they intended
to invest in social media, while 88% of
Japanese banks claimed they were
already doing so.
Holding on to profitable customers in a high-switching world
Would you consider interacting with your
main bank using any of the following methods?
I would consider/like the opportunity to interact
with my bank in this way
Customers want to keep contact with
their bank on their terms... 3x more
likely to consider ‘arms length’ IM
over social media communication
How likely would you be to consider disclosing
more personal information to your bank in
exchange for... (responses 5-10)
Only 1-in-4 customers would
share more information with
their bank...and they expect
to be paid for the privilege!
Figure 7: Only 10% of UK/Ireland customers would consider 21
with their bank
Source: Accenture UKI Current Account Customer Survey 2012
Tools such as Radian6 can be used to
start tracking and listening to social
media chatter, and can be a valuable aid
in understanding what customers want.
However, much work still needs to be done
to firm up the social media proposition for
financial services companies.
As Figure 7 illustrates, only 10% of the
customers interviewed in our survey
would even consider interacting with their
bank via social media, with three times as
many (32%) preferring to consider a more
arm’s-length, Instant Messenger-style
form of communication. Some 71% were
strongly against the idea of using social
media for banking interactions, though this
may be evidence of the need to articulate
an offering that would benefit the client
beyond “friending” them on Facebook, or
“following” them on Twitter.
However, these findings do underline
the fact that customers will only share
their data and allow it to be used by a
commercial organisation if they can see a
clear benefit in doing so. This behavioural
tendency means banks face the challenge
of finding ways to interact through
social media that bring explicit value to
the customer. Looking across various
industries, some models are emerging that
might enable them to do this.
Brands outside financial services are
leading the way here—Johnson & Johnson’s
“BabyCenter” is an online social community
for new (and not so new) parents, and
banks are similarly well-placed to run
financial education and awareness sites
that create real value for customers,
if only they can restore trust.
Holding on to profitable customers in a high-switching world
Holding on to profitable customers in a high-switching world
Current loyalty initiatives in UK
financial services: two case studies
Halifax, part of Lloyds Banking Group,
offers two separate reward accounts6.
One is the basic “Rewards Current
Account”, which gives customers
£5 cashback if they deposit at least
£1,000 in their account each month.
The second is the “Ultimate Rewards
Current Account” that operates like a
standard packaged account, providing a
£5 discount on the cost of the account
if the customer deposits at least £1,000,
as well as providing a range of packaged
account services. Halifax’s aim is to
create a win-win relationship: put more
money into your account and we’ll
give you more discounts, which are
transparent to the customer and
simple to manage.
A second example is NatWest’s
CashbackPlus7 reward scheme for
current account customers. Launched
in 2012, this enables the bank’s
customers to earn rewards by using
their NatWest Visa debit card at a range
of participating UK retailers. Once
the reward balance hits £5, funds can
be paid into the customer’s NatWest
current account, traded in for gift cards
of a higher value, or donated to charity.
In creating this “retailisation” model,
NatWest has emulated supermarkets by
incentivising customers to remain loyal
to build up their reward balance, and
generating useful data on their spending
habits that could ultimately drive more
sophisticated customer analytics.
2. Defining tailored propositions
ewarding customers for loyalty in
ways that deepen their engagement
with the bank
To build functional loyalty and boost
retention, it is not enough for banks
simply to recognise that a customer has
been loyal. They also need to reward
loyalty in ways that the customer wants
and that deepen their engagement with
their provider. With traditional loyalty
programmes appearing to have limited
appeal for customers, a number of UK FS
providers are trialling different types of
loyalty products to try and find different
customers’ “hot-spots”. Two case studies
are described in the information panel
on the left.
Going forward, UK banks may be able to
learn new approaches to building loyalty
from innovations elsewhere. In the US,
Regions Bank’s “Quick Guides” have been
developed to answer common questions
and provide key points about checking
accounts and loan products8. The Regions
Quick Guides were created by Regions’
Customer Clarity Team, a cross-enterprise
group of associates at Regions, and
incorporate feedback from consumers
and small business owners. Additional
Quick Guides are being developed for
other products and services and will
be introduced on an ongoing basis. By
showing its readiness to make its products
competitive and demonstrating how they
stack up against the market, the bank is
positioning itself as its customers’ partner
rather than provider.
Back in the UK, it’s interesting to note how
the mutual society Nationwide has won
over large numbers of former “traditional”
bank customers with its recent marketing
campaign telling customers they “need a
bank account, but don’t need a bank”9. By
articulating their commitment to put their
members first, and clearly stating that they
are in no way beholden to shareholders,
Nationwide has struck a chord with a
disenchanted customer base that is looking
for alternatives. As we saw in Figure 1,
our study provides evidence of the power
of the mutuals’ message, by revealing a
significant inflow of customers from the
UK’s Big 5 Banks in 2012.
However, the problem for any challenger
experiencing a sudden large influx of
customers is that it must be able to handle
these higher volumes and keep their newly
acquired customers satisfied, or they may
just as easily flow out again.
3. Focusing on the customer
Defining key customer journeys from
the customer’s point of view
To clarify and sharpen their focus on the
customer experience, leading financial
services organisations are identifying key
customer journeys, for example account
opening or customer servicing and plotting
them from a customer point of view, from
end-to-end. This approach brings retailing
principles to banking services, and helps
banks to understand how to improve.
Mapping and designing the experience
journey from the customer’s point of
view is vital if banks are to fend off the
competitive challenge from new alternative
non-bank entrants, who are seeking to
differentiate themselves on customer
experience. The key is to be able to identify
the “hygiene factors” that will bring you
up to par with other providers, as well as
the “delight factors” that will genuinely
differentiate you from the pack.
Using these insights, organisations can
implement coordinated changes to people,
processes and/or technology to deliver the
smoothest possible customer experience
at the lowest possible cost to the business.
Increasingly, loyalty is earned not through
the initial offer, but through customers’
experience of the delivery of the offer
through servicing and fulfilment.
Concentrating on these elements of the
journey is critical for a bank or insurer to
move its customers up the advocacy scale.
Holding on to profitable customers in a high-switching world
time to raise the bar on loyalty
More than ever before, today’s financial services
providers face a very real risk of losing large
numbers of customers to new entrants which
supply the same basic financial services while
offering a more personalised and engaging
customer experience.
However, there is growing evidence that
incumbents can see off this threat by
boosting loyalty and keeping their most
valuable customers. Already, experience
shows that that a well-executed loyalty
strategy can drive impressive results.
Loyalty leaders will be able to remain
relevant to their customers throughout
their lifetime, using smart analytics to drive
data-led treatments that keep pace with
their customers’ changing lives. All FSIs
can now achieve these goals, possessing
the tools they need to develop a better
understanding of customers’ behaviour,
provide them with personally tailored
messaging and offers, and create clear,
simple-to-use products that reward
customers for keeping and concentrating
their business with the bank.
By using these tools effectively, banks
can move their most profitable customers
up the loyalty scale from inertia to
satisfaction, and potentially to advocacy.
That means customers will stay, and
continue to buy. And they will stay not
because they think all banks are the same
but because they see their own bank as
the trustworthy, competent and relevant
provider of the financial products and
services they need throughout their lives.
Holding on to profitable customers in a high-switching world
Peter Kirk
Managing Director
Financial Services UK
[email protected]
Joanna Levesque
Managing Director Banking
[email protected]
Rebecca Skiles
Senior Manager, Accenture Interactive
[email protected]
Robert Stubbs
Banking Research Manager
Financial Services UK
[email protected]
1. Accenture conducted online interviews with more than 4,000 current account customers in the UK and Ireland in late 2012, probing the perceptions and behaviours
governing their banking relationships, switching and complaints activity, levels of satisfaction with service experiences, and the factors that influence provider selection.
This was part of a larger study of 10,000 customers across banking, motor insurance and life insurance, which is referred to in this paper as the
“Accenture UKI Financial Services Customer Survey 2012”.
2. “Challengers” refers to the group of non-mutual UK current account providers that sit below the Big 5 in terms of their market share.
3. Source: Accenture analysis of HM Revenue & Customs statistics
4. Net Promoter Score is a customer loyalty metric based on willingness to recommend, which is derived from the likelihood of a group of respondents to recommend
a brand or a business. Their willingness to do so is expressed on a 0-10 scale, where ‘0’ is ‘definitely would not recommend’ and ‘10’ is ‘definitely would recommend’.
NPS itself is calculated by subtracting the proportion of respondents who rated their willingness to recommend as a ‘9’ or ‘10’ on the scale (these people are said to
be ‘promoters’) from those who rated themselves from ‘0’ to ‘6’ on the scale (these people are said to be ‘detractors’). An NPS score can therefore be as low as −100%
(everybody is a detractor) or as high as +100% (everybody is a promoter). An NPS that is positive (i.e. higher than zero) is felt to be good, and an NPS of +50% is excellent.
5. “The Emperor’s New Social Media Site,” Banking Technology, 12 October 2012, via Factiva, © 2013 Dow Jones & Company, Inc.
6. “Best interest-paying current accounts to make your money work harder,” Daily Mail, 26 April 2013, via Factiva, © 2013 Dow Jones & Company, Inc.
7. See NatWest corporate website: https://www.natwestcashbackplus.com
8. “Regions Financial pledges to make banking simpler,” Investment Weekly News, 14 July 2012, via Factiva, © 2013 Dow Jones & Company, Inc.
9. “Waking up to Mutual Benefits,” The Independent, 7 July 2012, via Factiva, © 2013 Dow Jones & Company, Inc.
Holding on to profitable customers in a high-switching world
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for the fiscal year ended Aug. 31, 2012.
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