Life goes on

With the economic landscape in flux, it’s natural for banks and credit unions to turn inward and focus on conservative strategies to stabilize operations. But there’s a big opportunity waiting for financial institutions (FIs) that double down on customer centric.

It’s easy to see why FIs are hesitant right now. Rising rates are putting banks and credit unions in a double bind, slowing loan activity while also prompting rate-sensitive savings customers to shop around for better rates on both loans and deposits. At the same time, a reduced money supply is intensifying competition for funds among banks and credit unions. FIs are staring down the high cost of federal funds, putting even more pressure on leadership to drive customer deposits.

Luring customers with better rates and other perks can certainly help bridge the gap. But to avoid a race to the bottom and build a more stable base of long-term loyalty, banks and credit unions need to focus on making genuine connections and delivering meaningful, differentiated value to their customers— particularly as customers face their own challenges around rising rates and economic uncertainties.

Veterans of the banking world know that significant life events always present the most valuable opportunities to connect and deepen customer relationships. This brief will outline four ways FIs can harness data to show up in their customers’ lives at the right time— and in the right way.

Life goes on: The power of consumer life events

As the market contracts, consumers are making fewer financial decisions, delaying or forgoing some larger scale and discretionary purchases entirely. But rising interest rates don’t change the fact that consumers continue to face pivotal life events—even in challenging macroeconomic environments. People get married. They start or grow their families. Parents send their kids off to college. Empty nesters downsize. And events like divorces or deaths spur the reorganization of assets and wealth.

As we all know, life must go on. These pivotal life events are critical opportunities to strengthen customer relationships and build trust. A robust marketing and customer engagement strategy allows FIs to anticipate and address life events with personalized campaigns and product offerings that encourage customers to stick with them in the long run.

Personalized strategies for a personalized world

Personalization is no longer a key differentiator. Now, it’s something customers expect—and demand—from their FIs. A recent Salesforce survey found that 73% of consumers expect companies to understand their unique needs and expectations, up from 66% in 2020.

To capitalize on consumer life events, FIs should explore personalization strategies in four key areas.

1. Segmentation and targeting. FIs need to recognize the signs and signals of customer life events because Experian doesn’t include “had a baby” in their consumer reports.

Day-to-day customer behavior produces a wealth of data that can alert FIs of significant life events. Specific purchases, consumption trends, opening and closing accounts —these behaviors and transactions often arise from a customer’s anticipation of (or response to) a major change.

The key is making sense of these signals. Banks and credit unions need to identify and utilize technologies capable of aggregating and analyzing customer data in practical ways that enable customer segmentation. More importantly, they need tools that can perform this function at scale and in real time. No individual or team has the time to manually review customer data, which means they need automation and analytics tools that are purpose-built to recognize these signals and bring them to the surface.

The key is making sense of these signals. Banks and credit unions need to identify and utilize technologies capable of aggregating and analyzing customer data in practical ways that enable customer segmentation. More importantly, they need tools that can perform this function at scale and in real time. No individual or team has the time to manually review customer data, which means they need automation and analytics tools that are purpose-built to recognize these signals and bring them to the surface.

Too many marketing strategies sputter out after the segmentation phase. FIs lack the time or tools to effectively create and deliver personalized messages to align with their segmentation. Now is the time for banks and credit unions to seek out and invest in modern customer engagement tools that can solve this challenge by automatically crafting and delivering tailored messaging and personalized offers. This level of targeted outreach generates new ties between customers and their FI, deepening the relationship.

2. Proactive financial planning. Once you’ve segmented your customers and flagged a life event, how do you engage them? You can’t just call the customer and say, “I see you just had a baby—would you like a loan to buy a minivan?”

Consumers crave guidance and education on core issues of financial literacy. This presents an opportunity for FIs to provide proactive financial planning resources related to specific financial needs—and prevents customers from feeling like they’re just another transaction.

Banks and credit unions can leverage their understanding of consumer behavior to create touchpoints with customers who are approaching, going through or recovering from life events. For example, if spending habits indicate that a customer is considering buying their first home, a targeted outreach tool could engage them with an email campaign regarding saving strategies and lending options.

This personalized engagement solidifies FIs as trusted financial partners, increasing customer loyalty and building lifelong relationships.

3. Product innovation. FIs should also be using customer life events as the foundation for product innovation. Patterns in customer data can give banks and credit unions unparalleled insight into the real-life, real-time needs of the people who use their financial services. They can then create and enhance offerings to address these specific needs.

Depending on your customer base, certain life events may be more prevalent than others. Banks and credit unions need to understand where their customers’ lives and needs are headed and push their product innovation to stay ahead of those needs—for example, creating specialized mortgage packages for new parents or developing tailored investment portfolios for downsizers.

4. Data-driven insights. At the core, none of this is new. These are the essentials of relationship banking—the old-fashioned notion of knowing each of your customers by face and name and using that familiar relationship to deliver value. But the frustrating reality for most FIs is that achieving that level of connection is nearly impossible today. The scale of the average customer base, combined with the acceleration of digital-first interactions, has removed the closeness that once existed between finance leaders and the people who rely on them.

FIs can get back to that level of hyper-personalized service and value. But it requires harnessing all their customer data so they can understand customer behaviors, preferences and needs—at scale. Data analytics and customizable customer outreach enable this type of close relationship through personalized communications and trend predictions. Savvy financial leaders can leverage this data to refine their customer engagement strategies, anticipate customer needs and build a stronger overall relationship with their growing customer base.

Meeting Customers where they are

High levels of volatility and uncertainty have wrought hesitation and indecisiveness on FIs across the country. But this environment makes it more critical that banks and credit unions move to meet customers where they are. Where are they? They’re anxious, rate-sensitive and quick to switch allegiances. Life is still happening—marriages and mortgages, kids and college funds, downsizing and deaths—and broader uncertainties make them crave trusted financial guidance more than ever. FIs need to build the marketing tech stacks that enable them to identify and elevate these customer life events as the tremendous connection points they are—and empower them to make the most of these connections by delivering hyper-personalized messages at exactly the right time and at scale.

James White is the banking general manager at Total Expert.

Explore key topics you should be considering as you build your marketing plans for 2024 and beyond in the BAI Executive Report, “Marketing strategies for the digital age.”