Understanding ways to increase loyalty that converts to customer longevity is a priority for retail banks. We know that loyalty results in profitable growth, but satisfaction does not always equal loyalty, earning trust and loyalty is not easy, and keeping trust and loyalty is harder.

According to a 2016 study conducted by Accenture, not only do attrition rates remain around 11%, but annual churn rates linger in the 20-25% range during the first year, half of which leave within 90 days.  While those numbers show a significant attrition issue within the banking industry, the study did find that 45% consumers say they will remain loyal to their bank if the institution offers discounts, loyalty, or rewards programs. Bottom line, banks must give their customers reasons to stay.

As a bank looks for ways to engage customers in a meaningful and lasting way, they must consider the target market. While all groups are relevant to a bank’s customer base, the emergence of millennials as a major defining factor in the future of the banking industry is undeniable. According to the American Bankers Association:

  • Millennials make up the largest generation – 83.5 million
  • By 2022, 40% of the workforce will be millennials
  • Millennials will inherit $30 trillion over the next 30-40 years
  • 71% would rather go to the dentist than listen to what banks are saying
  • 53% don’t think their banks offer anything unique.

So what do banks do? Data continues to emerge around the best ways to engage millennials, but many times those strategies create more work and require more resources from the bank. As a result, we conducted a case study to evaluate the impact of actively marketed insurance products on the longevity of bank customers.

The case study focused on two regional bank clients actively marketing AD&D for 10 consecutive years with assets in the $10-30 billion range. Studying 491,636 households between the two banks, provided specific insight into the data files and revealed exciting connections between a product offering and extended customer lifetime value, since both banks showed positive results in the lifetime value analysis across their customer base.

The most interesting results revealed that this type of offering was most effective with those key customers – millennials. For Bank A, the results show an increase of 57.5% for complimentary and 59.9% for paid supplementary insured customers. For Bank B, the results show an increase of 45.6% for complimentary and 48.1% for paid supplemental insured customers.

When a bank is able to add life to their customer engagement, it allows banks to:

  • Have more touch points with their customers
  • Reap the benefits of net interest income from deposits and loans
  • Collect additional fee revenue
  • Provide additional cross-sell opportunities when life triggers occur
  • Plan for future revenue as millennials continue to acquire wealth

As retail banks strive to differentiate themselves to drive loyalty and increase retention, they can do so through a deeper understanding of customer needs and providing solutions and offerings that will engage consumers at a level beyond account management. By investing in programs that provide discounts and rewards opportunities, as well as providing solutions for their customers that connect them with the right product at the right time, banks will create a culture of loyalty and engagement that will pay off both in extending customer lifetime value and driving income.