Change Your Mindset #17: Reward customer loyalty in ways that are relevant and meaningful to your market.

Everyone is on the look out for the loyal customer. In fact, most banks are beginning to realize that without customer loyalty, their attempts to achieve organic growth will be scarcely possible. Some banks are actually enjoying some success. According to the newly released J.D. Power and Associates 2007 Retail Banking Study, consumer satisfaction with their banking experiences and commitment to their primary banking institutions increased appreciably during the past year. But while industry wide progress is being made, many banks are still making serious miscalculations and missteps when attempting to achieve customer loyalty.

There are obviously multiple factors that can influence a customer’s decision to stay with you or switch to the competition. In fact, there are even different degrees of loyalty depending on a customer’s demographics and needs. But one expectation seems to cross demographic lines, namely that customers expect that their loyalty should be rewarded.

This is one area where financial institutions could definitely change their mindset, especially when it comes to choosing how to reward customer loyalty. First of all, if you want loyal customers start by being loyal to them. Many times banks put all of their time, attention and financial incentives to acquiring new customers. When was the last time you offered a discounted rate to a customer that has maintained high balances for 10 years or more?

Secondly, the rewards you do give should be relevant and meaningful to your customers. You cannot imitate what Bank A does in Los Angeles if you are in Des Moines. You cannot duplicate what Bank B offers to its affluent white customers in Minnesota if your market is moderate income Hispanics in Texas. There is no one size fits all approach to rewarding customer loyalty. You have to do the hard work of identifying your most important (and profitable) customers, understanding their behaviors and unique needs, and then developing and implementing an appropriate strategy.

This whole topic of customer loyalty also prompts me to think about how many banks have yet to engage their most obvious partners in this effort – their front-line employees. The persistent industry mindset has banks rewarding employees who bring in new customers. Imagine how your culture would shift if you change your mindset and begin rewarding employees for customer retention. That, however, is a topic that will have to be explored in another blog post.