Acquiring the New Segments in Retail Banking

The digital revolution is empowering consumers to dictate how retail banks communicate, interact, and acquire customers. Thanks to advances in technology, today’s consumers now have greater access to and are more engaged with financial services content and brands. However, consumers aren’t the only entity benefiting from these powerful advancements. Unlike the past, today’s technology and data availability also enables retail banks to engage—at scale—by delivering relevant addressable content that truly reflects the consumer’s financial situation and behaviors.

Technology is changing the researching and shopping behaviors of consumers. Online shopping is critical to at least half of new primary bank relationships today; branches matter for those with less banking knowledge or product familiarity. Customers with more experience making banking product choices are more likely to prefer online to branch interactions. These shoppers are often young and digital-oriented and tend to rely on both recommendations from friends and branch visits more than online-only segments. The shifting demographic and channel usage is creating new segments that will primarily engage thru digital media and non-traditional channels.

Today’s retail bank market is made up of three behavioral segments:
  • Branch Traditionalist: This segment, representing one-third of US banking customers, uses a traditional brick-and-mortar bank branch as its primary form of engagement. They tend to value personal relationships with branch staff, and have slightly skewed lower income levels than other segments. 
  • Multi-channel: This segment, also representing one-third of US banking customers, uses all channels offered by their banking institution (in-person, online, etc.) for financial transactions. They tend to have larger deposits and loan balances than other segments.
  • Online Only: This final segment also represents one-third of US banking customers. With most transactions conducted through digital channels, this segment is nearly 70% cheaper to serve. And, there is great opportunity to cross-sell through digital channels.

As banks improve their products and services online and customers become more comfortable using digital channels, the Branch Traditionalist segment will decline and the Multi-channel and Online Only segments will grow. This will allow banks to have cross-sell conversations with customers outside the branch and lower operating costs.

New Segment Acquisition Case Study:

These new, digitally savvy market segments also present a real opportunity for traditional banks to acquire new customers. However, it cannot be done using the marketing tools and tactics of the past. New capabilities must be gained in order for retail banks to seize this opportunity.

By retooling its existing marketing strategy, a top retail bank saw a 2X lift from responders outside of their traditional footprint, a 25% lift from responders under 40, and a 50% lift from responders with annual income greater than $100k. In order to yield these tremendous results, this client expanded its skill set, intellectual property, experience, technology and data.  Some of these new efforts included:

  • Built a common customer and audience definition
  • Developed an integrated strategy and plan across the customer lifecycle
  • Coordinated experience delivery on owned and third-party channels
  • Measured and attributed online activity with a tieback to offline activity
  • Implemented ongoing evaluation and optimization with increased frequency

In summary, to capture these new segments, retail banks must gain capabilities for inbound and outbound engagement—across traditional and non-traditional media and channels—into a consolidated view of each customer. Retail banks that fail to develop these new capabilities will risk losing market share. Therefore, partnerships with solution providers are strongly recommended to accelerate growth and retain market share. 

To learn more on this subject, read our corresponding article in The Financial Brand.

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