Rewarding Customer Loyalty: Build Your Own Bank

How does a new bank (or any bank) attract and then keep its customers?

Rewarding customer loyalty
How does a new bank (or any bank) attract and then keep its customers? Offering the lowest savings rate or the longest balance transfer deal may work short term. But can lasting loyalty be embedded through tactical attractors alone? And how does a challenger bank grow their customer base and their portfolios through the art of cross-selling? The answer is simple – create an eco-system.

At the heart of every challenger bank’s offering should be something to make that proposition ‘sticky’ – a unique aspect that represents the brand values. The brand in question could be luxury, recognised all over the world and renowned for unrivalled customer experience. It could be a local community brand that focuses on ‘down to earth’ service, based on intimate customer knowledge. In both cases, the DNA of success is the same. And the route to effective cross selling may well lie in a rewards-based customer loyalty scheme, embedded within the bank’s core.

Best-laid loyalty schemes
Evidently, loyalty schemes in the retail sector are prolific. By contrast, within the banking world they are still few and far between. Examples of those that have been successful include, unsurprisingly, schemes offered by non-traditional challengers. From our experience, most propositions that we have worked on went to market with integrated loyalty schemes. Based on redeeming benefits in retail stores, these schemes reward customers for banking account activities, thus growing both sides of the bank/store business. Meanwhile, examples of successful loyalty programmes from established banks (not ultimately connected to a wider retail business) include cashback incentives and personalised special offers.

Our research shows that a growing number of banking customers are motivated to accumulate reward points. Firstly, these points are viewed as a valuable virtual currency used to redeem products or services.

A secondary attraction is the perceived status value of some rewards schemes. (Think of George Clooney’s character in the film ‘Up in the Air’, where he tries to collect 10 million air miles to join an elite club and see his social status rocket.) Consumers relish the sense of exclusivity or social success that possessing very high numbers of points can generate.

Real-life challenger reward programs
Our experience with non-traditional banking offers has brought us many challenges. But none has proven more rigorous than developing plans to take the rewards points of one UK-based challenger to a whole new level. In practical terms, this involved turning points into a virtual currency that can be transferred, stored and traded electronically. Just like any virtual currency, it was determined that points would have a defined monetary value. This value can be accrued and redeemed electronically and is accepted only within the brand. This logic and behaviour sequence is at the heart of a ‘Brand Accelerator’ concept: a customer experience booster that will be offered to the bank’s customer base to drive loyalty and product uptake and usage.

True service differentiators
A rewards scheme can be a real service differentiator when a bank holds an intrinsic knowledge of their customers and they can individually match store rewards to preferences. In turn the bank can create value for the wider organisation. In summary, customers spend points accrued, as a result of banking services, elsewhere across the bank’s ecosystem – thus earning more points at time of ‘purchase’ (redemption). Participation in the rewards scheme will keep customers coming back to the rest of the business for further products. The journey is a virtuous circle – propelled by accrual and redemption of points and the connection between the bank, the wider organisation and the customer -the creation of an eco-system based on a ‘differentiated currency’. It’s schemes like these that build a true end-to-end brand experience.