Why Understanding Customer Behavior Is So Valuable in Commercial Banking

5 min to read · By Tony Iero

Customer experience ranks as one of the top three reasons a customer will choose your commercial bank. But you can’t optimize your customer experience strategy without first understanding their behavior.

To understand their behavior, you’ll need to run a customer behavior analysis. A customer behavior analysis involves researching customer habits, identifying the steps your customer takes in their banking journey, and knowing how external factors such as social trends impact their decision-making. That way, you can find ways to personalize their experience.

Tl;dr: Customer behavior analysis is the foundation of your commercial banking strategy.

Customer analysis leads to better satisfaction.

While many retail banks aim to create extremely personal customer relationships, it’s not common on the commercial side. That said, a more personalized experience will allow commercial banks to provide more targeted marketing and services to their customers to increase satisfaction.

By analyzing customer behavior, you can identify patterns that you can use to predict their next move in the buyer journey. It allows you to anticipate their expectations at each step of their journey, so you know what to do in advance to meet their needs. Some actions you can predict with the data include:

  • What are the deciding factors in determining if a banker should make a call, or send an email, or schedule an in-person meeting?
  • What indicators signal the potential for a customer to shift to another bank?
  • What leads should be prioritized?

By uncovering these insights, your team can then adapt to each customer’s individual needs and provide them with the best help. It maximizes your commercial bank’s productivity and profitability.

Conducting a customer behavior analysis allows you to keep track of changing trends and customer expectations, so you can adapt accordingly. According to a study by Accenture, more than half of banking customers now expect an omnichannel experience. More and more customers are also looking for self-service options from banks, with self-service activity increasing by 69% from 2020 to 2021.

Adapting to trends prevents you from falling behind the competition, helps you stay relevant in the market, and keeps your customers satisfied.

3 ways to use customer behavior data in banking

Understanding customer behavior helps you adapt to each customer’s individual needs and reach out to them with the right offers. As a result, it will increase customer loyalty by giving them a reason to stay.

Here are examples of using customer data to create a personalized customer experience and maximize customer interactions.

1. Personalize content based on audience segments.

For customers, receiving content in their inbox that isn’t relevant to them can be annoying. That’s why you must create blog content for different customer personas and promote them in front of the right leads by using your customer data.

For example, let’s say that part of your audience is between the ages of 18 and 24 and looking for a loan to get into college. You can create content showcasing your different education financing services and advertise these blog posts to this segment of customers in your email list.

Or, you could have customers at your commercial bank who are interested in buying their first home and searching for financing options. You can create content for them on the different mortgage services you offer, such as USDA loans, FHA loans, or VA loans, so they can learn about which option fits them the best.

2. Personalize offers and services.

Leveraging customer data in commercial banking helps you better understand what services and products customers want. In return, you can boost retention and loyalty by targeting them with personalized offers.

When HSBC wanted to improve the results of their rewards programs, they dove into their customer data to see how clients were redeeming their credit card points. That way, they could use personalization to better promote their rewards services across different categories, such as travel, merchandise, and gift cards.

HSBC sent out personalized rewards via email to 75,000 cardholders by leveraging the data on their preferences. The result? Over 70% of the email recipients redeemed the rewards and their number of opened emails increased by 40%.

There are two ways to personalize banking offers for customers: upselling and cross-selling. Upselling involves getting the customer to purchase a high-end product, while cross-selling involves getting them to purchase a complementary item.

An example of using personalization to cross-sell could be to get banking customers who frequently fly for business to acquire one of your travel credit cards so that they can earn airline miles with every trip. You can dive into your data to identify these customers and target them with content showcasing the benefits of your different travel cards.

An example of upselling in commercial banking can be persuading customers to upgrade their existing credit cards. To do this, you can identify which customers are spending more than they used to and explain how upgrading their credit cards will lead to better credit scores and more rewards.

3. Personalize customer onboarding.

The way your commercial bank handles onboarding directly impacts customer retention. According to a survey from Deloitte of more than 3,000 banking customers, customers who find the onboarding process difficult are several times more likely to consider opening an account in another institution.

Personalization plays a significant role in helping customers get the most out of onboarding. You can set up a survey with questions about income, lifestyle, and financial goals that new customers must fill out during their onboarding process, so you can personalize the experience to their needs.

Collecting this data helps you understand each customer’s different expectations for your bank. And it helps you gain the customer’s trust and start the commercial banking relationship off right.

While it may not be a bank, wealth management platform Wealthfront is an excellent example of a company in the finance industry that leverages personalization to improve onboarding. Once a new user signs up for their services, the company asks them questions on their financial goals to personalize the experience for their needs.

In the same survey from Deloitte, a major complaint from banking customers that the consulting firm found is a lack of follow-up. If a customer has a question during onboarding, you can continue to make the experience feel more personalized by sending educational content that provides answers.

Summing up

Delving into customer analytics in commercial banking to drive business decisions can be challenging and time-consuming. That said, understanding your customer behavior helps increase profitability and improve the productivity of your commercial bank. It makes sure you stay competitive and build a better connection with customers.

 

This post was originally published in October 2016, and has since been updated.

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