Customer loyalty is key for banking sustainability, but UK’s high street banks and British consumers have a vastly different idea on what exactly “loyalty” means.
The basic ideology of customer loyalty remains inertia, however a changing financial industry has raised the bar on what consumers expect from their banks. Financial institutions need to understand that new consumer demands cannot simply be remedied by plugging in loyalty programs to fill in the gaps. In order to overcome the customer disconnect, banks must look through the lens of the customer when trying to determine the new meaning of loyalty.
Recent research from TNS illustrates the significant loyalty problems commonly found amongst UK banks, along with possible consequences if the issue continues. At present, it is clear that retail banks and its customers are on separate pages in terms of satisfactory products and services. The report’s results highlight the urgent need for banks to make changes, or suffer major losses.
Redefining Customer Loyalty
Loyalty is a loaded word, and one that encompasses several meanings. For the purpose of this study and its context, the qualitative research summarizes that the respondents view loyalty in a high regard.
The study stated, “People value loyalty very highly in their lives. It is part of their closest relationships with family and friends, where commitment and support are both given and received in good times and bad. It is a two-way street.”
Keeping this definition in mind, the study then noted that UK consumers reported that banks and their services have no correlation with the meaning of loyalty. Participants listed that banks are not interested in mutual respect, do not value customer relationships, nor do they work towards strengthening customer relationships. Customers revealed that they felt their banks did not treat them as individuals, and were often pushed out the door when they sought help.
Reading Between The Lines
The TSN research reports that the majority of customers, 74 percent, have only one bank. Moreover, two-thirds, 66 percent, also stated they have been with their bank for at least five years.
At the surface, banks believe these figures to be good news, and think the numbers indicate consistency and brand loyalty. TNS suggests that longevity of accounts do not typically mean the customer is happy. Banks overlook the market environment, and the consumers’ need for banking services. Customers report that they need a bank because “its very hard to operate without one.” So, instead of switching banks or not having one at all, people are forced to pick one out of what they describe as a poor selection of banks.
Beware Of The Alternative Seekers
TSN discovered a new group of banking customers during its research, which banks should pay close attention to. The emerging group is dubbed, “The Alternative Seekers.” These customers represent a huge threat for banks, as well as almost every sector of business concerned with brand loyalty. The majority of these consumers are part of the younger generations, which further highlights their importance since they are the future of the industry.
The Alternative Seekers stated they don’t see any difference between high-street banks, and their technique for picking a bank is a pre-meditated as closing their eyes and pointing to one blindly. These consumers are likely to have more than one account, and have little incentive upkeep traditional brand loyalty. They are four times more likely than the average consumer to switch bank accounts, and more than half said they are “embarrassed by their bank.”
UK banks have their work cut out for them with this generation of customers. If banking strategies aren’t being rebuilt now, then banks are likely to lose these Alternative Seekers.
Banks Have A Lot Of Making Up To Do
At the moment, UK consumers have a low perception of the high-street banks and the loyalty intentions. TSN pushes that the banks must understand that brand loyalty is founded strongly on trust. Reputation plays a big role as well, since this can make or break attracting new customers. The numbers add up, as the research reports that 76 percent of respondents said they wanted a trustworthy banks, and 69 percent said they wanted an honest bank.
This all means banks can’t stamp on a temporary band aid to fix the problem. They need to start over and rebuild loyalty schemes from the ground up. It is important to convince consumers that the efforts are genuine and two-sided. However, this is naturally much easier said than done.
To read the full report at TSN click here.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More