Here’s how I think about successful customer relationships these days: Entanglement does not equal engagement.
The way we do business now, in trying to become our customers’ primary financial institution, we entangle them: We get them in and then make it hard for them to “undo” the relationship web we’ve created.
Direct deposit represents a great example. The thinking is that if you directly deposit your money at my institution, I have your primary account and you will do all of your spending from here. But the truth is you can do all of your spending via PayPal, American Express or Venmo. So I have your direct deposit, but maybe not the engagement and fee income I expected from all of these payment transactions.
And yes, getting customers more deeply involved with your financial institution with direct deposit, multiple products and full wallet share results in good things. The problem is, this “get-them-in-and-make-it-hard-to-leave” entanglement model goes against two of today’s realities:
First, customers have many options for transactions, loans and cards. So winning at the “more is better” game, while good, might not appropriately measure loyalty or future value. We really should focus on making our interactions with them so terrific that customers willingly choose us.
Second, making it hard to leave or move money—or hard in any way to do business with us—runs counterintuitive to good customer service. We’re all grown-ups here—so why do we treat our customers like potential escapees? Why create friction, whether their money comes in or goes out? To me, it makes more sense that customers feel so good that they want to come to us again and again because they like doing business with us.
Exploiting the value of incumbency
While the ultimate measures of success may indeed get the customer to do more, borrow more and stay longer, that’s not enough. We’re no longer in a short-term game anymore. Customer experience is a journey—not just a moment in time. It requires a different way of thinking.
To my mind, one of the defining elements of good customer engagement centers on being top of mind for the next action: the next deposit, payment, loan or card application, for example. This goes beyond mere entanglement with the incumbent institution.
In other words, can I get you to do more business based on your experience with me rather than a marketing incentive? If I get your first $1,000 in deposits, what’s the likelihood that I’ll get the next $1,000?
Customers once had to interact with their financial institution by visiting the branch and talking to someone. Now they interact with us in ways that don’t involve a human: They touch the phone or pop open their laptops, do their banking and finish in seconds. Given this new type of relationship, how can you retain or recapture the value of incumbency? I think it comes through delivering an exceptional customer experience.
So let’s say your customers do a Google search for a product or service you provide. If your name doesn’t pop up in the search, you’ve lost the value of your incumbency. And if your name does pop up, what value does it have? Does your brand have pull? Is your customer’s reaction good, bad or indifferent?
If the experience your customers have had with you to date isn’t great, you’re not potentially the first one chosen—but may become the first one eliminated. If you fail to deliver at a minimum an aggravation-free experience, you will lose.
Drones in the air, boots on the ground
Customer engagement does not replace marketing. It’s a component of marketing. Not only must we measure ROI on various tactics, we also need to implement a way to measure ongoing return of good (or bad!) customer engagement.
Can you win on positive customer engagement alone? Maybe.
Can you lose on mediocre or bad customer engagement? Absolutely.
It seems to me that this is the differentiator we seek. Products and services have become commodities, so the true differentiator becomes customer experience and engagement. We need a new set of metrics, a new way of thinking about returns—and especially a way to capture what we’re missing when we aren’t the first choice for the next action.
Marketers have made many attempts over the years to quantify the value of the customer relationship, whether through better retention, longer and deeper relationships or increased propensity to buy. But I’m not sure we’ve identified the best metrics to assess what we gain when we provide a constantly positive customer experience (or lose by not doing so).
How to measure this poses a challenge—and we’re working on it. I’m going to continue to think about this new mindset and measurement and hope you will, too.
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Geoff Thomas is chief product officer at Harland Clarke.
For more articles like this, check out our recent BAI Executive Report: Raising the customer engagement bar.