Sticky Business: Increasing Customer Loyalty

Nancy Ozawa (00:08): Well, hello, and welcome to this episode of Banking Out Loud. I am Nancy Ozawa, I'm the senior vice president of marketing here at PCBB, and I'm gonna be your host for this episode. Today we're discussing customer loyalty. We're gonna discuss how do you create it, and maybe you don't have it so you need to create it, or maybe you need to grow it. You've got great customers, but you want to increase it. We also want to talk about what can you do today, what are some tips to get started, as well as some mistakes you definitely want to avoid. (00:36): Customer growth and customer opportunity is very high on the list for community bankers. And it's always a good time to focus on keeping your customers happy and loyal. Regardless of the shape of the economy, regardless of the market, customer loyalty is very important. And we also realize that one of the keys is to know the share of the wallet, because many customers have multiple relationships with financial institutions. So, how do you develop and increase loyalty when all of these other relationships exist as well? It used to be that the old rule was, it costs five times more to acquire than to retain. I think the latest research says it's seven times more. But either way, it's great to start with keeping your customers (01:17): So, to help shed some light on what works, what doesn't, and how to get customer loyalty to grow, I've invited two guests today, Paul Louderman and Sushil Wenholz from Customer Communications Group, or as I call it, CCG for short. PCBB has worked with CCG for several years. They're a full-service agency specializing in customer relationship marketing, and they've got an impressive client list including Synchrony, Hancock Bank, Nordstrom and many others. (01:48): So, Paul, Sushil, welcome. How are you today? Paul Louderman (01:49): Very good. Good to be on, Nancy. Sushil Wenholz (01:52): Yes, thank you for having us. Nancy Ozawa (01:54): So, we know each other pretty well and we've worked together many, many years, actually. I was starting to count them this morning. But I want to get our audience to be familiar with both of you. So, Paul, let me start with you. Can you tell our listeners a little bit about your background and what you do at CCG? Paul Louderman (02:10): Sure. So, uh, I'm at Customer Communications Group. I've been with the company now about 15 years. Uh, we are based in Denver, but we have clients nationally and internationally, and my role is as senior vice president of account management. It's kind of a fancy title, but what it means is that I'm working day to day with clients such as you, Nancy, at PCBB, and Synchrony and other clients helping them to develop their strategic vision, helping them to develop a more profitable relationship with their customers or their members. (02:45): I've been in the marketing business for about 35 years, and I've worked on not only the agency side, but many, many years on the client side. So, I feel I bring, like... uh, I really have a unique perspective to our clients And, I work with them to kind of help get them to where they want to be. Um, and then I'm just gonna... just one other secret I'm gonna share with you all. I'm a diehard Chicago Cubs fan. Sushil Wenholz (03:10): (laughs) Paul Louderman (03:11): I just want to point that out. It goes with me wherever I'm at, and I know that most years it's not been good, but, uh, you know, I stay with them. I'm very loyal to my Chicago Cubs. So, Nancy Ozawa (03:25): And that's perfectly on par for today's topic there, Paul. Paul Louderman (03:29): Absolutely. Nancy Ozawa (03:30): Perfect (laughs). You'll know it from the consumer perspective. And Sushil, I mean, I- I've had the experience of working with you as being a wonderful content writer. You just make words turned into music. But tell us a little bit more about yourself and your background. Sushil Wenholz (03:44): Well, thanks, Nancy. That's a lovely intro. Um, along with being one of the senior copy writers at CCG, I'm also the creative director, and I also have been with the agency a really long time, more than 20 years, actually. before that I started in advertising with a small ad agency on the East Coast, and then moved into magazine journalism, and then finally into marketing. And I've worked in a number of industries including lots of work in the financial services world, as well as retail and small business. So, lots of experience, in content development for a variety of audiences, and definitely a lot of work on the loyalty front. Nancy Ozawa (04:24): Perfect. Well, you've also been steeped in customer loyalty, both, getting your own customers, being the customer, or advising a lot of your clients about this. Before we get started, let's get our listeners on the same page as us. Let's define what we mean by customer loyalty. So, one of you want to kick off with how you would define customer loyalty for the purposes of our conversation? Sushil Wenholz (04:46): Yeah, I'll- I'll start. Um, I don't have a- a neat and tidy definition, because like many things, it's constantly evolving. The fundamental obviously is customer retention, keeping those existing customers over the long term, turning them into profitable relationships, and a thing we're hearing more and more about is creating strong emotional connections with your customers, and- and that is definitely a part of loyalty. Uh, one thing we've noticed that's interesting is that customers and companies don't always see loyalty the same way. So, for instance, there's an industry study that shows most bank customers would consider themselves loyal to their primary bank or credit union, but as Nancy touched on, they also have a relationship on average with more than three financial institutions. And trust me, they would consider, as you know, shifting that banking business elsewhere for any number of reasons. So, that- that may not sound like loyalty to you, but to the consumer they still see it as loyalty. Paul Louderman (05:48): And just to- to follow up I think the hope is that the customer is going to feel a- a- a strong connection to your company, that that customer is engaged, right? And- and willing to- to use your services versus going to another competitor. And so, I think what we want with customer loyalty is to create that- that positive experience for the consumer, and at the same time work to develop trust (06:16): Now, loyalty programs, customer loyalty programs in the banking industry, are not necessarily new. But if you were to compare today's... perfect loyalty program with what maybe was 10 years ago, it's drastically different. And, you know, as Sushil talked about, you know, the consumers have connections, and you've mentioned it, with more than one financial institution. Why is that happening in today's world? Well, just think about it. I mean, we see it all over. You know, consumers are more digitally savvy, right? They- can look anywhere to- to find out what's going on. They're- they're able to compare products. They can put up two different websites and put them up on the screen and say, "Okay, I've got this and I've got that, A versus B." You know? And they're able to make that comparison, and you don't have anything to say about it, you know? It's what you have on your website. (07:08): So, they're looking at programs much more easily and comparing. Um, and here's the other thing. They're being incentivized by cost savings. We may not want to admit it, but They're looking at how it affects their wallet. So, Given the levels of the innovation that's really happened with financial technology services, the traditional banks, the community banks, the credit unions, they're all facing a lot of pressure, right, to try to keep up with the Joneses, the- the new competition, and trying to eliminate that- that customer churn. Nancy Ozawa (07:43): Absolutely. everyone has got this- this churn that they're concerned about, especially as the consumer gets more digital savvy. Now, you mentioned cost savings, and I think the consumer is doing a little bit more than just looking at how it hits their wallet. They're also talking about how it saves them time, or gives them some convenience. You know, they don't mind paying a little bit more for Instacart to deliver it, because it saves them on other things. So, that cost savings might be a little bit more loose in terms of hours, time, schedule flexibility as well as pure price. And I think that makes it even more difficult to put your arms around how to drive customer loyalty in today's decade. Paul Louderman (08:22): And following up on that, I think there's that, uh, unmeasurable value that you were just describing. How do you measure time? You know (08:29): I don't know how much that time is worth to you. What do I need to do to buy that time, to- to save you time? And so, that is difficult today, right, in trying to measure that. Nancy Ozawa (08:40): And some customers would say, "My time is very valuable," and some would say, "I've got the time available; I'd rather save it in real dollars than- than, again, in my hours." So, it does make it a little bit more complicated, and we sit there and say, "Okay, why is this important?" it's important because if you don't retain these customers, again, you're going back to now acquiring customers, which I think I started off by saying it's a lot more expensive to do that. Sushil Wenholz (09:04): I was gonna bring that same stat up because it's such a standard in the loyalty world, and the newest stat that I've read actually said eight to 10 times more. It costs eight to 10 times more to acquire new customers than to simply retain existing customers. So, that's a- a huge differential. Nancy Ozawa (09:23): So, if- if it's so difficult, how does a CFI, a community bank, a credit union, put their arms around this? What can they do to start creating the loyalty? Sushil Wenholz (09:35): There are so many different ways to approach how to grow loyalty and maintain loyalty. I think one of the ways to start is to think about increasing interactions with your customers. Uh, it sounds basic, but it can be every valuable. Uh, I'm gonna toss out another report stat here, that 44% of customers who had six interactions per week with their bank or credit union were extremely loyal, and that's compared to just 30% of people who had less than two interactions per week. So, you can very clearly see the difference: as you increase interactions, you increase loyalty, and interactions are- are so many different things, and that I think that's really important to remember. It's.., making a withdrawal or deposit, but it's also visiting your website to check those new interest rates, reading your newsletter or watching a financial education video, using an online calculator. Sure, calling customer service. Those are all interactions. So, the more of those you get with a customer, the better the loyalty is gonna be. And I'll say there's also a nice correlation between the number of products someone has with you and the number of interactions they have. Paul Louderman (10:47): Yeah. And I- I think what we're hearing right now, is that- that people want to be able to use services 24/7, not just during normal banking hours, right? the product itself is- is no longer enough they're expecting now a product that- that sees them, that sees their needs, and one that understands their own individual customer lifestyle. So, all of us have to sharpen or develop new tools in our financial toolbox to stay (laughs) ahead or keep up with the- the competition, all those fintech companies that are popping up all over the world and taking business away. Nancy Ozawa (11:27): Yeah. No, I think you make a really good point. I... You know, this digital savvy customer wants to be known as myself; I want to be known as Nancy, versus, you know, just another consumer. So, you talked about that personalization. And I think that's truly key on developing that customer loyalty, which means you've got to mine your customer data. Have you found that with the customers that you work with, there are certain ones that are just able to successfully mine their data and develop that personalized experience? Sushil Wenholz (11:58): Yeah. In fact, uh, we have a- a- an instance where we've worked with, um, a particular financial institution to create these highly-personalized HELOC mailings, and that's based on data mining. Nancy Ozawa (12:09): Okay. Sushil Wenholz (12:09): And so, we're able to actually pull the real home value and mortgage balances for individual customers, put it into a direct mail piece so that customers are seeing their available equity, their potential estimated monthly payment. So, it's very, very relevant, it's very personalized; it's not just a generic, if your home was worth, you know, $500,000, you could have this much equity. It's really keyed in on their personal information, Um, and so, they're doing a lot of cross-selling through that, and as you said, it goes back to mining data. Obviously, tons of things you can do with data or segmenting your audiences and finding ways to create personalization by understanding the next best sell, what's the product that they're most likely to be interested in next. What can we bundle this product with? That goes back to cross-selling, you know? (13:03): But, I think also when it comes to data, you have to be really careful today. There's so much concern over data privacy, your customers have to know how you're protecting them and how you're gonna use that data, and then you have to use it in a way that adds value to the relationship Paul Louderman (13:22): A- and I'm sure they... Our- our listeners have taken steps, especially coming out of COVID, to ramp up their data security and protecting consumers' data. You've got to make sure that you're protecting those consumers and their data, because you're gonna lose that trust. (13:39): They start feeling like you're not protecting them, They're gonna find somebody else who's gonna protect their data. Nancy Ozawa (13:47): And I think by protecting the- their data and protecting their information, you're revalidating that you are... you're trustworthy. (13:54): That you're creating that trustly bond, and that's part of... Going back to customer loyalty, that's a key element of loyalty, is that I trust that this brand is gonna do right by me, do right by me with providing... uh, protecting my information or providing me that personalized experience or that personalized, um, suggestion of what I should be looking at next. So, it's all intertwined, the ability to cross-sell and be personalized in your approach, as well as being, um, safe and, uh, trustworthy with the data as well. Sushil Wenholz (14:24): And in fact, Nancy, I've read that more than 40% of consumers say trust is their number one loyalty driver; so critical. And then building on that... honest, open communication. You know, that- that builds that trust, and that trust builds the loyalty, obviously. Nancy Ozawa (14:43): Right. It- it seems like, you know, you've got data and you've got trust, and you've got this personalization, and that all leads to ability to do cross-selling. Are there other examples that you've seen with clients of being able to m- pull that all together and be able to cross-sell other products m- differently than you did before? You know, we used to say you opened an account and you got the toaster. But, you know, we're in a new world here. W- what are some of the newer approaches to cross-selling and upselling, Sushil Wenholz (15:14): So, a lot of this comes back to content, but that is an example of a different approach to cross-sell. It's not just promotions, it's what we call the value-added content where you're helping people see a need and understand how to solve that need, uh, with a product or service, and that goes back again to data and understanding what those... what individual customers want. (15:38): We did, um, a cross-sell campaign. It was a bank that had actually made two recent acquisitions of other banks. They wanted to cross-sell across the new households, and so we did a lot of data analysis to determine, you know, by household, what products are most relevant to this household, and created a direct mail letter. But the unique thing was there was a little sidebar that shared value-added information about the product. So, it's not just, "Hey, we've got this product. We've got a great rate," but, "Here's what this product is, here are the benefits for you the customer," really taking it from the customer's point of view, which, again, I- I think is a- a huge part of loyalty, is having that customer-centric mindset and seeing things from their point of view. And I think that's very important for today cross-selling; uh, any- any kind of cross-selling campaign today. You've got to think from a customer mindset of what's in it for me. Nancy Ozawa (16:36): Absolutely. And I- I think that bears repeating. I think a lot of us forget that it's the- the acronym, WIFM. So, you know, that is key. We always got to look at it from the customer's perspective. How is this adding value to me? Absolutely. Paul Louderman (16:50): I think cross-selling with your customers is absolutely paramount, but we should not forget to cross-train our staff to cross-sell, it's really important that if you're going to be cross-selling aggressively, that you make sure that everybody on your staff who are the front-line sales team, whether they're in the office or they're at the call center, that they're familiar with the products, at least basic information, so that way they can at least talk intelligently and use that opportunity, 'cause you only may get one chance. Nancy Ozawa (17:20): Right. and it almost ties back to where Sushil started, um, us off on, is you're empowering that front line to have the knowledge so that when we do have that interaction, we want to have more of those interactions that drive loyalty, that those interactions are more valuable. And so, people see them, all of the staff, as involved in creating those valuable interactions the more interactions, the more loyalty. So, we've got to really look at who all is involved in making sure that those interactions are good ones. Paul Louderman (17:49): Absolutely. Nancy Ozawa (17:52): Now, you know, you bring these customers in, and now we, uh, want to retain them and build that customer loyalty from the very beginning. I think a lot of banks do a really good job of onboarding, but what happens after the onboarding process? Paul Louderman (18:05): Yeah. A- and- and I think one of the things is, it's kind of carry forward what Sushil was talking about, the added value is…they want that relationship to give them advice, to help them make decisions, to tell them about the trends. They- they actually want that advice, they want that guidance, so that they won't switch over. (18:25): Just a personal story. I was a few years ago, um and my wife and I were trying to downsize on our house to move to a smaller home. Well, we were trying to figure out with the housing market as to how it was so fast. You know, we're gonna have sell our house and then we're gonna have to find something, and we're not gonna find it right away. So, we're having this conversation with our credit union, and they bring up something like, "Have you heard about a bridge loan?" A bridge loan, where you- you can borrow money to go ahead and buy the house you want. Then you can sell your house. (18:58): It's that kind of advice that just improved my trust with them. I built a stronger relationship because they were, throwing out ideas. I did not go into that meeting thinking that that was gonna be the- the outcome. So, what you bring in that relationship, you're not always there to sell a product. You're trying to help them solve a problem. Nancy Ozawa (19:20): That's a perfect example. Now, we've talked a lot about what customer loyalty is and what are all the different elements of it, and how do you get it. But if, uh, you were to - tell someone some tips on how to build the customer loyalty, what are three s- tips, that they should do to start building that? Sushil Wenholz (19:38): I think one of the big ones is being customer-centric. And it sound simple, but it's truly a new mindset for a lot of organizations, and to understand that that has to be enterprise-wide. So, you can't just put it all on that front-line staff. Yes, they have to be able to understand what's in it for the customer, but way... it's got to go all the way to the top and just be part of the- the fiber and fabric of the institution, really, to put that customer benefit at the forefront. (20:09): A- and I think, again, the- the second thing for me is remembering that loyalty isn't just transactional. Yes, your customers want the special offers, they want the discounts, but they also want that financial advice, they want the guidance, they want the convenience, they want the amazing customer service. It's about this whole customer experience through all the channels and the interactions and the devices that's... to me it really boils down to- to that customer experience is all-encompassing, which is a lot (laughs), a lot to ask for, a lot to do, but if you want loyalty, um, that's where you've got to go. Nancy Ozawa (20:49): Perfect. Paul, is there something you would add to that? Paul Louderman (20:52): Yeah. It's- it's I think we need to know who our audiences are. Who are the customers? They're different. you may see a lot more of Gen Z, a lot more Millennials…take a look at who our customers are. What do they want? Not what we want to give them, what do they want? One of the things that we've done at Customer Communications Group has been surveys I know that sometimes you don't want to always hear the answer. But It's important to understand what their wants and desires are. You know, how do they communicate? What channels are they using most? Do they want personalization? Sushil Wenholz (21:31): A- and I'm gonna piggyback on that, because along with understanding who your customers are, you have to understand where you are right now on this loyalty journey. Um, for example, y- you can audit your communications. What are you sending and saying to your customers right now? How does it measure up to what we're talking about? Is it providing useful information? Is it giving good advice? Is it helping people solve problems? Um, and then start filling that... those gaps as you see them. Where can I add personalization? make sure that you are now understanding this from that customer-centric mindset, and how you're adding value to that relationship. Paul Louderman (22:13): And Just one more thought, I think we need to recognize that one size does not fit all. Um, we need to treat our different customers differently, you know? Um, you know, I'm a little bit older than others in the world, and I probably don't communicate the same that my daughter does, who's in her thirties, or my son, who's in his forties. Nancy Ozawa (22:37): Yeah. You've both laid out some m- amazing tips to get started, and as I think Sushil, you early said, all of these sound easy, but they're not. They take a lot of time, a lot of effort. So, if you were to prioritize and give a- a tip for a listener who gets off this call and says, "I need to do something, I need to start doing something today, or this week," what are some baby steps that they can do now that gets them started on one of these other tips that you just laid out? Paul Louderman (23:07): One of the things that we do with our loyalty programs, one of the first things we do, and I mentioned it earlier, is research, is- is talking to the customer. Before we design a program, before we assume what they want, we always put a survey in the field. We just launched a loyalty program earlier this year for a major, uh, retailer, We had a thought of what we might be needing, but guess what? (laughs) Guess what? The consumer said, "No, I would like that." And so, good thing we waited till that field research information came back, we analyzed it, we discussed it. But that to me is- is really, really critical, to listen to the market.. Start by asking, "What do you want? What do you need? What do you desire?" And then keep listening to them, even throughout the whole program. Nancy Ozawa (24:00): Perfect. That's a great s- first step. Sushil, you got other first steps? Sushil Wenholz (424:05): I have another one; something banks are already most likely doing. Almost any bank or credit union out there is already doing some kind of cross-sell marketing, and a lot of them are already creating those product and service bundles that we talked about. So, I would say put some more emphasis on that, but again, go back to that idea of how is this package of products offering a new value to the customer? What am I saying in my cross-sell marketing, uh, that shows the customer the benefit for them, that I'm not just trying to sell you another product? So, I think just taking those existing programs that you're probably already doing, taking a fresh look at them with this customer benefit mindset. Um, going back to that idea of adding value, adding convenience, creating emotional connections, y- you know, so it's taking what you're already doing, putting maybe a fresh face on it or a fresh approach. Nancy Ozawa (25:02): Perfect, perfect. You know, y- you make me realize, these are tips to get started, but there's got to be some mistakes that you've seen clients do. Uh, and I think, Paul, you even started to allude to it, where a client thought they knew the customer, and then you did the research and figured it out. What are the mistakes you might suggest for them to avoid? Sushil Wenholz (25:22): So, generic communications. Yes, sometimes you'll have a promotion or a message that doesn't have to be personalized, but there are so many places where the more relevant you make it, the more loyalty you have, because you're really striking home with people. And then you hear about these communications where they're so far off the mark with that particular individual that the person is annoyed and will stop using that business. That is a misuse of data also, which is gonna hurt trust and credibility, you know? You're getting this data. It's very personal data for these people, because this is their financial life, and if you're not using it properly, you're doing something that crosses that line into creepy data usage. Um, you're doing it to push a product, not to add value. Uh, those are definitely loyalty mistakes. Paul Louderman (26:18): And I- I would just add one other thing about, uh, don't be siloed. Uh, you really have to deliver great customer service and a cohesive experience across all of the channels that you and your customer use, whether it's the brick and mortar, whether it's your website, whether it's your mobile app. That takes a lot of coordination. Internal departments need to be able to communicate with each other and be able to see the customer information across department. It amazes me — Nancy, you may have seen this; Sushil and I have — where we're working with a cou- a couple of different departments with a client. Department A has not seen the information that Department B has seen about the customer. (27:03): And so, I think when you're looking at those kind of communications, think to yourself, "Who else in my team...," your team is not just that department, but the whole company, "Who else on my team needs to see this information?" You're gonna get fantastic ideas from all the departments if they're involved from- from the ground zero. Sushil Wenholz (27:22): Not only that, but your customer is gonna have that great customer experience, because if I start a loan application on my mobile phone, I want to be able to finish it either on the phone with you in person, or on, uh, your website. If I can't, well, you just cost me a huge convenience factor and a lot of trust. And so, poof, there goes some loyalty right there. Nancy Ozawa (27:45): As we kind of wrap up, um, you know, let me just give you each a chance of, what's one final thought that you had about customer loyalty? I mean, I'll throw out mine first, it's almost everyone's responsibility to help in customer loyalty. It's not the marketing team, it's not just the sales team. Everyone plays a part in a customer experience, which means they're playing a part in keeping the customer loyal. That was one of the things I think I'm taking out from this particular session. Are there other ones that you would have a final thought to share? Sushil Wenholz (28:18): I personally would just wholeheartedly agree with you, Nancy. It's an enterprise-wide undertaking to build and maintain customer loyalty. Um, you can't just say it's this department or that department. It has to be everybody working together, and again, everybody developing that customer-focused mindset and just approaching every step with that customer benefit in mind. Paul Louderman (28:44): And the only other thing I would add is just realize the- the t- technology is there now, as opposed to 10 years ago, to reach those younger audiences: the Millennials, the Gen Z, that's spending more than any other generation. And in order to reach them, we need to have the technology, we need to have the personalization. They want a relationship. We have to give them what they want, because that's gonna be your consumers for the next 25 years to keep your company going and profitable. Nancy Ozawa (29:14): Absolutely, well said. Well, that was a great discussion, thank you both for joining us. I always enjoy getting together with you two. (29:23) I can say from our experience here at PCBB that CCG has been very instrumental in several of our marketing campaigns. You both have really helped us to reframe some of our perspectives. So, we're thankful for your partnership and your advice. (29:37) To our listeners, thank you for tuning in today. If you have any questions about customer loyalty or would like some help, please reach out PCBB or CCG. We are very happy to help. You can email us at bankingoutloud@pcbb.com, or reach out directly to Sushil or Paul – we will make sure that we list their contact details in the episode’s description. Thank you again for tuning into today’s episode, make sure to check out all of our episodes and subscribe so you are alerted when next episode drops – speaking of which, the next upcoming episode is on cryptocurrencies. So, you don’t want to miss out on that one. Also, listeners, if you have a topic you would like us to cover, we’d love to hear from you on that. Please make sure to email us at bankingoutloud@pcbb.com Until next time, take care.