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The growing challenge of customer disengagement

Financial institutions that focus on manufacturing engagement may actually be driving customers toward the exit.

Dec 6, 2022 / Customer Experience

Do you know what your customer disengagement rate is? More importantly, do you know the cost of customer disengagement?

Many customers today are disengaged. Among financial institutions alone, 22% of customers are disengaged and 44% are barely engaged, according to a 2020 survey of 3,000 U.S. consumers by Cornerstone Advisors. The question is “why?

Many chief marketing officers identify new customer acquisition as a top goal. They see the growth of the customer base as the quickest way to increase revenue. So they pepper prospects with display ads, TV commercials, social posts and other lead-generation tactics that occasionally find success. But what happens once a business acquires a new customer? Does it take the opportunity to develop the kind of mutually beneficial relationship that raises the top line not only now but also well into the future?

Business leaders today must focus on improving customer engagement for a number of reasons. Happy customers are more than five times as likely to renew as unhappy customers, it can cost up to 25 times more to acquire a new customer than to retain an existing one, and companies that provide a positive customer experience can grow revenues up to 8%.

The best way to reduce the rate of disengagement is for businesses to develop “true” customer engagement. This type of engagement not only fulfills customer needs but also helps businesses achieve better outcomes. True engagement differs from traditional engagement, which is transactional and opportunistic. Customers who feel they’re being truly engaged are far less likely to churn.

Another way to look at this is in terms of real-life relationships. Several key factors are critical in building relationships, including trust, care, connection and reliability. Parties must have each other’s best interests in mind, conversations should be relevant and mutually beneficial, and relationships should be nurtured with consistent touch points.

If customer engagement initiatives are falling short, it could be because they rely on technology investments that create back-office efficiencies but don’t lead to true engagement—the kind that builds relationships, fosters trust, maximizes customer lifetime value and reduces the cost of disengagement.

How can businesses achieve their full potential when many of their customers are disengaged?

Look at your engagement tactics: It’s critical to establish meaningful touch points with existing customers and adapt to their changing needs. This is what transmits a sense of value. But find the right balance between establishing regular touch points with customers and overwhelming them with offerings. Insufficient communication can leave customers feeling neglected and underserved. Conversely, too much communication can lead the customer to opt out of communications and possibly take their business elsewhere.

Examine your digital strategies: If your road map consists primarily of email, chatbots, and portal and web enhancements, then true engagement is not on your agenda. Challenge your team to think about disengagement rather than engagement. Institutions place too much emphasis on more and better engagement, and not enough on stemming the tide of bad outreach that causes disengagement. For example, how does your business prevent multiple business units from concurrently attempting to engage the same customer (thus likely causing that customer to become disengaged)?

Learn how customers engage with information and communicate accordingly: Many people engage with social media feeds on platforms such as LinkedIn, Instagram and TikTok. Feeds serve relevant content in a way that’s familiar to today’s digital users. Feeds are self-contained and sorted in the order most relevant to the user, and they catalyze the user to engage only when their algorithms identify a highly relevant engagement opportunity. They can create a content stream that makes the user experience contextually relevant and offer calls to action that feel timely and useful.

Businesses will continue to invest in systems that help acquire new customers and manage existing accounts more efficiently. And they should. But these systems are just part of the solution. More effective tactics will address the costs associated with churn and the disengaged customer by focusing on true customer engagement. It’s the secret sauce that will generate value—not just this quarter, but across the full customer life cycle.

Matt Gillin is CEO of Relay Network.

Explore key topics you should be considering as you build your marketing plans for 2023 and beyond in the BAI Executive Report, “Marketing in 2023: Opportunities and challenges”