Opportunity Time for Community Banks

Community banks and credit unions are well-positioned to gain market share from their larger counterparts in today’s turbulent economy.

Based on ath Power research findings, customers at community banks and credit unions still have the highest banking experience satisfaction levels and their customers are far more likely to recommend their financial institution to other people compared to customers at their larger competitors (who actually did see an increase in their ratings this past year).

Results show us that smaller institutions are well positioned to be successful and that this is an opportune time for them to take an initiative to sway potential customers of their larger competitors to join their community bank or credit union. Tactics for achieving these gains include marketing, advanced products and loyalty programs.

Reputation Play

Whether your organization is a large national bank or a community player, trust and bank reputation continue to be major intangible requirements that customers seek in their primary banking relationship. In fact, nine in 10 consumers feel that trust in their bank and the employees that work there is a “must have” or would make their banking experience ideal; 84% of bank customers say that a strong reputation is also a must-have or ideal component. Not surprisingly, loyalty and advocacy have turned into a central focus for banking organizations, large and small.

Smaller institutions, by employing steps that build trust and reputation, can attract more prospects, increase customer loyalty/share of wallet and prevent attrition. The first step is to communicate with your customers – as much as possible and in the format they prefer. Use several channels to tell your story, including your Website, email, your social media pages or blogs and, yes, the telephone – long-term, loyal relationships are difficult to create with one-way communication.

Additionally, record your customers’ preferences to leverage more targeted and individualized communication. The outreach strategies and the communication mediums you choose for select segments will have a significant impact on expanding current relationships as well as strengthening loyalty and increasing customer advocacy in the coming year.

Specifically in today’s economy, it is also crucial to be transparent. Be upfront about your offerings and fees. Remember: today’s customers want to be appreciated, but are also willing to pay for the right conveniences, if they receive the right value in return. Show them the true advantages of being your customer.

Proactively educating your customers on industry changes demonstrates that you want them to be aware of how these reforms will affect them – ultimately, demonstrating the general care and concern they are seeking.  Additionally, banks have struggled with the shift of being a place to deposit money and conduct transactions to providing a team of trusted advisors to their customers. When we asked mass affluent customers why they would consider using an advisor from their primary bank, 84% stated that they would appreciate “that level of attention” from their institution. And just as important, another 33% revealed that they are currently in need of investment and/or portfolio type of financial advice.

Our data also cites that only one in eight mass affluent respondents had a designated financial advisor at their primary bank. Of those that did not, more than 20% said they would definitely utilize this type of service if offered, while 55% said they would, in the very least, be open to it. This is a clear opportunity for smaller institutions to deepen their relationships with their customers, and show them that you have their best interests in mind.

With the economy in a continued state of uncertainty, many people are still unsure about what to do with their finances. “Should I cash out my stocks?” “Do I apply for a mortgage or HELOC at this time?” “Is a 529 a smart thing to do in this market?” “Who can help me!?” Consumers are thirsty for advice, but may not know that your institution is even an option to turn to – so let them know. Our research shows that those organizations that strike the right balance between offers and advice will see increases in customer satisfaction, loyalty and profitable growth.

Follow Early and Carry On Strategy

While you may not carry all of the products or possess the development budgets that larger banks do, you still need to provide the services consumers find convenient and essential to bank with in today’s world. The services we are talking about are essentially within the realm of online banking, remote deposit capture and mobile banking offerings.

Competing with the large financial institutions that are more established in this arena typically means applying an “early follower” mentality for the community player. Budgets at these smaller organizations do not typically incorporate technological advances for mobile. However, by knowing their customers and small business clients, community banks and credit unions can develop sound strategies to meet the specific needs of their targeted consumers. Furthermore, by implementing and maintaining these strategies now, community banking organizations have the best chance to stand out among not only the industry giants but also against their direct local competitors.

Loyalty programs have likewise proven to be effective in engaging customers and solidifying a customer’s commitment to an institution and significantly reducing the likelihood of attrition. Sound loyalty and rewards programs also provide the type of communications and proactive outreach that facilitate cross‐sell opportunities.

As with other categorical comparisons in our study, community banks and credit unions received higher satisfaction ratings regarding the loyalty and rewards programs they offer. Their participation rates however, are significantly lower than the larger institutions — only about 1 in 5 community bank customers cited participation in their respective bank’s program.

This can be fixed. Start by educating your frontline employees on your program and train them to communicate the value to your customers. Utilize other mediums such as your Website, emails and mobile alerts to keep customers engaged and informed. Most importantly, reward them on the most optimal products and services with the types of rewards that speak to them individually. Offering customers the ability to customize their reward package, based on a specific product bundle, enhances buy-in and accentuates engagement.

While community banks and credit unions generally score higher than the large regional or national banks in customer loyalty, challenges remain. Our research shows that most of these smaller institutions still lack the defining elements of a high-level customer experience. Most notably, these weaknesses are found in the areas of personal connections and communications, knowledgeable guidance, and delivering products and services that are in the best interest of the customer.

 

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