Are Your Financial Services Customers Loyal |TLC Worldwide

Are Your Financial Services Customers Loyal or Just Haven’t Left Yet?

Picture the scene – you’ve just had another customer sign up to your bank, so you give them the offer you promised and call it another successful day at the office. Then, months go by and they haven’t touched your card once. Sound familiar?

But they haven’t left, so that’s a good thing, right?

If there’s one mistake financial services brands keep making, it’s confusing inactivity with loyalty. Just because they haven’t left, doesn’t mean they think of you when it comes to making those all-important transactions. After all, isn’t that the whole point?

Acquiring customers is not enough. Brands need to go the extra mile to not only keep these customers, but ensure they are engaged, transacting and considering more of their products and services. This means switching your strategy from acquisition-led to engagement-driven, giving consumers a reason to choose you over other options – whether that’s to save, invest, spend, finance a project or insure their home.

With over 30 years’ experience working with the world’s biggest financial services brands, we know a thing or two about transforming dormant customers into active ones. But first, let’s explore what we mean by inactive customers.

What causes a customer to be inactive?

Most banks offer some sort of cash incentive to entice new customers to join. Which makes sense, right? It’s an instant reward for choosing your brand. But the problem is, once that cash is spent, there’s little to encourage customers to keep using their account or credit card. Worst case scenario, they switch to another provider to get their sign-up bonus too, and the cycle continues. These customers tend to leave their account open but unused. According to the Motley Fool Money Survey 76% of consumers are willing to switch banks for the right offer.

If you’re counting that as a win, that’s where so many are going wrong.

Too many financial brands are tracking the wrong metrics, equating acquisitions and total number of customers to success. But low churn doesn’t mean high loyalty. The real indicator of success is tracking usage and how engaged your customers are with your brand, leading to longer-term customer value.

How do you build long-term customer loyalty?

So, the question is – how do you encourage customers to engage with you? Most brands adopt a transactional approach to loyalty, believing they can earn this through awarding points for every £1 spent. Here’s the thing, true loyalty goes beyond rational and financial considerations. Investing in emotional engagement is key to deeper customer relationships, increased retention, and longer-term customer value.

At TLC, we like to think of this as the Loyalty Benefits Trinity. To unlock emotional loyalty, benefits must appeal to a customer’s head, pocket and heart. For example, rational benefits appeal to the head, like advisory services and a good app; financial benefits appeal to the pocket, like competitive interest rates and transaction fees; and finally, emotional benefits appeal to the heart. The crux of delivering emotional benefits is understanding your customers as individuals and being able to deliver a level of personalisation with rewards that are genuinely attractive or useful to them.

Customers want to feel understood and valued, that they’re not just another number on a screen. They want a bank that understands them and their personal needs, life stage, and interests, so they’re served content, benefits and rewards that actually matter to them. That’s one of the secrets to building long-term emotional loyalty – personalised rewards. In fact, 74% of consumers across all generations want more personalised experiences from their financial institutions.

When a customer receives a reward tailored to them, it creates a feeling of exclusivity that is hard to fake. It’s like a personal thank you from someone who knows exactly what interests you. Rewards shouldn’t be stagnant either, they should get better with time, as you learn more about the people who engage. So, the longer a customer stays with you, the more valued they feel and the more valuable they become to your business.

The rise of the experience economy

So, what are the best kind of personalised rewards? It’s all about experiences. Everyone has the ambition to squeeze more out of life – we have bucket lists, dreams to realise and memories we want to create with the people we love. This means we choose to spend more of our disposable income than ever before on experiences, over things. After all, memories remain long after the money has gone.

As a result, experiences have fundamentally changed how customers value businesses. Whether that’s the bricks-and-mortar experience, in-app or over-the-phone, down to how they experience your social content. And for some lucky customers, it’s also now about what added-value experiences they receive as perks or rewards from their banks, be it shopping benefits, experiences with the family, digital entertainment or free travel benefits.

Crucially, we don't all share the same passions and dreams, so brands must use the data they have at their fingertips to go beyond generic rewards, creating genuine excitement and engagement from their customers. Experiences create memories that money can’t buy. Most customers won’t remember you gave them a few points or a 2% discount for using your card, but they will remember when you gifted them free concert tickets to see their favourite artist or surprised them with a free ice cream when summer arrived.

Experiences push past the old transactional approach to loyalty and create a stronger connection between you and your customers that’s invaluable to creating emotional loyalty.

How do you know what your customers want?

Offering experiential rewards doesn’t have to be complicated. In fact, you already have all the data you need, you just need to use it and continue to enhance it. You know your customers’ spending habits, their interests, and what matters to them, so you can craft the perfect reward suite to match different personas.

• Do you have a frequent traveller? Reward them with hotel perks or activities to do when they arrive.

• What about a family-first customer? Offer them a free day out with the kids or a lazy Sunday afternoon movie.

• Or maybe you have a college student on your hands? Gift them takeaway vouchers, fashion credit, or free travel to discover the world. Maybe you’ve got a budding jobseeker? Help them upskill, look after their wellbeing or get a new haircut for the big interview.

The best part is you don’t have to do this alone. TLC specialise in helping financial services brands reward their customers with unforgettable experiences tailored to them. We are data-led, thanks to years of experience working with the world’s most ambitious brands to transform loyalty strategies and deliver rewarding results. We’re here to help you make your brand remarkable, engaging and increase longer-term customer value.

So, what are the ingredients for a successful loyalty strategy?

In short, the best loyalty strategies have characteristics that increase the value exchange for your customers in a personal way, while elevating your brand personality and purpose.

To do this, your strategy needs to embody what makes you unique. If your brand talks about ‘being there for every key life moment’, then your loyalty strategy must leverage that. How does your content, your customer interactions and the benefits you offer support your purpose? At TLC, our expertise lies in finding the sweet spot between what aligns with your brand storytelling and what connects with your customers’ passions and needs.

You can increase the value exchange in many ways. Firstly, by not making it all about transactions. If you can increase the volume of non-transactional reasons to engage and reward these actions, then engagement frequency will skyrocket. Consider moments like celebrating personal milestones, participating in a quiz, engaging socially or enriching personal information.

The more people engage, the more willingness there is to share data with you, and richer data empowers your ability to increase personalisation and relevance to each customer. In fact, 83% of consumers are willing to share their data to create a more personalised experience. At TLC, we call this the Virtuous Loyalty Data Loop. Knowing more about customers gives you permission to tap into more moments in a relevant and welcome way. If you know they have a newborn, offering some form of financial support, relevant content and perhaps a perk for the new parent would be very welcome – and when the time comes to open an account for their little one, you’ll certainly be top of mind.

But it’s not just about what you reward customers, but when. TLC believes in the importance of rewarding customers quickly once they’ve joined a program – within 60-90 days, they need to get a benefit that convinces them to stay engaged. Why? more than six out of 10 consumers agree that loyalty schemes are too hard to join and/or earning rewards is too difficult.

Importantly, like most relationships, you need to then keep things fresh and interesting. That means that your content, your messaging and your perks need to continue to deserve attention and engagement – the last thing you want is your customers getting bored. 58% of millennials say the biggest reason for leaving a loyalty program is because the rewards aren’t compelling or relevant enough (Statista).

Don’t underestimate the power of surprise and delight moments, either. As long as rewards are relevant to the individual, unexpected perks – like a free coffee or cinema tickets – create memorable moments that in turn, create a positive association with your brand.

If you achieve all this, you can turn passive customers into engaged loyalists, and perhaps even brand advocates.

But how can you afford to offer customers increased value at scale?

It’s the million-dollar question: how can you reward more customers or reward the customers you have more often? Simply put, it’s impossible if you continue to only offer financial rewards, as you’d quickly run out of budget. For many, the only solution is to offer lots, and lots, and lots of loyalty points, which simply accumulate for far too long before customers can swap them for a reward of any sort of value. Naturally, this leads to frustration, disengagement and abandonment of programs.

30 years ago, TLC pioneered an alternative solution – creating a unique reward ecosystem, allowing clients to unlock sustainable generosity for a fraction of the reward value. Today, we call this the Reward Value-Cost Paradox, meaning that our clients can now afford to reward all program members, more regularly and more generously.

We maintain a growing network of over 100,000 reward experiences worldwide, covering every category and consumer passion. We partner with major global experience brands, regional stars and smaller local businesses, offering choice to every customer, wherever they live and whatever their interests.

What does the future hold for banking loyalty?

Banks have two choices – stick with the stale transactional method to loyalty and watch customers leave or remain dormant, or they can build something more meaningful and unlock emotional loyalty.

Harnessing the power of experiential rewards creates an emotional connection with your consumers that in turn, reinforces a positive association with your brand. If the rewards continue to align with their passions and needs, the more they engage, the longer they stay and the more likely they are to consider your other products and services.

Leveraging the data you already have and harnessing more data through increased engagement with your program, allows you to truly personalise content and rewards to each customer. This is key to implementing a truly successful loyalty strategy. Delivering the right advice, experience or value at the right time, will transform your relationship with customers from being just a financial service to being an important partner in them getting much more from life. That’s certainly worth being loyal to.

Not sure where to begin? Take our 5 minute assessment⁠⁠⁠⁠⁠⁠⁠ to benchmark your loyalty strategy against the best in the business.

Get in touch with the team today to revitalise your strategy.