Engagement – Is it Important ?

There is much talk about how important engagement is in banking and the role the digital experience has to play. With interest rates trending below zero, squeezed margins, reputation issues and a whole swag of tech based competitors, many bankers are voicing a commitment to improved customer experience. Of the 50 largest global banks, three out of four now pledge themselves to some form of customer-experience transformation.

But is it really that important?  Just before he was replaced at the beginning of this year, the outgoing NAB CEO appeared to answer “No”.  A review of his annual report of the banks performance and focus ahead demonstrates an unsurprising focus on:

• Economic metrics such as ROE, market share, expense management and growth
• Response to the Royal Commission with fees, culture and executive remuneration
• Operating in a low interest rate environment

The continual shift of customer interactions and sales to digital is unashamedly tied to sales. Technology is represented strongly throughout the narrative, showcasing the move to cloud to improve resilience, cost and agility.  Resilience is a cornerstone for experience and compliance and the bank has made strong progress in this regard. Great work Yuri and team.

Nowhere however is customer engagement mentioned. Growth and customer acquisition remain a high priority, with the biggest challenge remaining generating near-term profitability and building long-term relationships with customers.

Engagement is the building of connection through trust and dialogue. When done right it should lead to growth and share of wallet. Research by Gallup indicates that fully engaged customers own more products, switch less and represent a 23 per cent premium in terms of share of wallet, profitability, revenue, and relationship growth compared with the average customer.

Digital engagement is fostered by repeated interactions that strengthen the emotional, psychological and physical investment a customer has in a brand. It places strategic emphasis on the creation of valuable relationships and encourages both parties to see mutual advantage in that relationship.

Engagement is critical for competitive differentiation now that banking has become a commodity. Better experiences, the number one factor in achieving engagement, is a clear motivator for customers to switch banks. With customer apathy widespread, engagement is necessary for banks to be relevant and create customer advocacy. Customers that feel nothing special toward their existing banks are a major competitive vulnerability, one that strong engagement strategies can address.

We know that the best application genres for engagement are gaming and social.  Dating apps, and video are not too far behind. These apps drive engagement by tapping deeply into human needs and in doing so fire the human reward system at the base of the hypothalamus. They provide a little dopamine kick that makes users want to return: the celebratory music that plays upon completion of a puzzle, the voice options on the Waze navigation app, Shazam’s infallible name-that-tune music service. Players overcome challenges, pass through win states, level up, get rewarded, stack habits and celebrate with friends. These things happen every time they use the apps. Engagement in banking is predicated on harnessing these methods; incorporating great graphics and animation, easy and fun-to-use interfaces, celebration, connection, coaching and more. It’s about instant gratification, delivering a delightful experience and there is a lot of material to work with. Customers sign up to banks for very real reasons. They want to get an education, run a business , own a home, raise a family, party with friends, put food on table, optimise their money, get outcomes, waste less, save more, retire well. There is a huge amount of work to be done for most people, a huge number of moments for banks with the appetite to understand and engage in. Moments far more meaningful and with a lot more at stake than a Tik Tok trick or a Fortnite fight.

Customer engagement comes down to customers getting outcomes, delivered through curated and emotive journeys designed to get them there. Advanced analytics is revolutionising much of banking, with increasing success in risk decisioning and automation generally. But data has been used only sparingly to accelerate customer engagement. Data technologies enable continuous engagement with customers through proactive messaging around their win states, a key concept of game design. The race is on to build powerful and sophisticated capabilities to define the right value-adding offers, support, guidance and celebration. These then need to be delivered to customers at the right points in their journey in a way that delights them and helps them feels valued, connected and successful. This requires customer analytics capabilities that are wired into engagement engines that become increasingly hyper personalised as the machine begins to understand individual customers and their needs. As Tinder collects 800 pages on each of its 50 million customers and 1.6 billion daily swipes, to match and keep them hungry, banks can do much more to employ data to drive a personalised experience and find homes for the newlyweds.

Banks are getting good at analysing data to remove friction from the experience, improving application times, reducing customer pain points, and speeding delivery with products such as one-time virtual cards. Using data to fuel the experience is the new frontier. As they cross this threshold from “data to reduce friction” to “data as fuel for engagement” they will not only understand how to  improve the experience but will hold themselves accountable at the highest levels to making gains in reducing friction and adding fuel. Personalisation will drive product design and delivery, mandating core transformation en-route as well as an authentic focus and curiosity on customer success and helping customers feel in control. This personalized advice approach goes beyond simple long-term financial goals as it moves into habit stacking. Digital engagement in banking orientates the product and journey design around encouraging behaviours that create a strong and durable financial partnership between the bank and the customer. As digital becomes the primary point of contact in the industry, engagement strategies centred around customer behaviours and habits that build wealth is the new path for relationship building between bank and customer.

As team FAANG continually demonstrate, real value resides not only in the products and services a company provides but also in the way that it delivers them. Customer experience can be worth at least as much as a superior product or efficient process—building customer loyalty, reducing costs, making customers happier, boosting relevance and revenues.

Bain invented the Net Promoter Score and Net Promoter System to help companies earn customer loyalty and inspire employees. Most leaders want customers to be happy; the challenge is in knowing what customers are feeling, establishing accountability for the customer experience and deriving actionable insights. Yes, we all know that customer promoters buy more, stay longer, refer friends and provide feedback and ideas. The problem with NPS is that it does not tell you enough as is evidenced by the 4-year progress below. It just tells banks and other utility companies that customers do not like them. We know that already.

When it comes to measuring experience banks still favour  “Do you like me?”. The answer remains across the industry “Not really” and is broadly on par with other utility providers. Is it improving? Not sure. Is there more work to do? Yes. But what? NPS doesn’t provide enough insight.

You can’t improve what your note measuring correctly. As noted in the EY Consumer Banking Survey, a revision of NPS is due. Customer engagement needs to be designed as a weighted combination of:

• Traditional indicators, such as assets, number of products owned and the value of these products
• Quantity of interactions and inquiries across channels, including digital and mobile transactions completed, sessions abandoned, time on site, etc.
• Quality of the interactions Level of satisfaction, number of complaints, likes and shares of bank content, and net promoter score or likelihood to recommend
• Customer Success – How well do our customers do for the things they come to us for? Homes owned, budgets held, wealth achieved, habits stacked

Such a mix offers a well-rounded and multidimensional view of engagement and could clarify areas of improvements with individual customers, broad segments or specific channels. It would motivate executives to deliver customer experience as a priority and identify specific ways in which customer engagement can drive customer and company success with the customer firmly at the centre of operations.

When banks prioritise making interactions positively memorable it automatically leads to better customer engagement. Every business has two primary goals. One is to acquire new customers for business expansion and the second is to maintain a long-term, profitable relationship with existing customers. A good customer engagement strategy paves the pathway to achieve both. Banks that are highly curious about engagement and hyper personalising customer success are set to win

There are very practical measures that can be adopted:

1. Prioritise customer experience
2. Adopt a new way of measuring experience and engagement that has customer success at its heart
3. Design customer journeys for experience not just speed
4. Capture data and feed it into a hyper personalised engagement engine

Moroku’s platforms and services are designed for financial services firms authentically focused on customer success and experience.