Lost in translation: what banks can’t learn from retail personalization

Bernard Wilson explores the differences between personalization in banking and retail. Read more on how granular transaction data may be the panacea for banks striving for a more personalized experience

By Bernard Wilson

I have been lucky enough to spend several years at the cutting edge of personalization in retail. However, the past twelve months working on similar challenges with Quantium’s global banking customers has drilled deep into my psyche the old aphorism: ‘The more you know, the more you realize you don’t know’. Retail was an early mover in personalization, and I suspect those with extensive experience in retail all felt that our learnings could be extrapolated to revolutionize customer interactions in other sectors like banking.

To a certain extent that holds true, and I still believe banking can learn a lot from retail when it comes evolving its customer-facing proposition to respond to changing expectations – especially its one-to-one customer experience. However, for all the lessons to be taken from retail, there may be as much value in understanding what to consciously leave behind.

Fewer campaigns, more conversations

Targeted marketing is about striking the right balance between immediate calls for action and fostering deeper customer relationships (with the added complexity that each generally supports the other).

Retail customers shop and browse frequently and, as a result, marketers have accustomed them to regular communications that push direct response. The most progressive retailers are conscious of the need for balance and operate this “campaign” activity under an overarching program which also includes communications designed to deepen customer relationships. But there is usually as much of a focus on the return of each campaign, in terms of delivering a sale, as there is on overall retention and growth.

In comparison, whilst banking customers transact on a regular basis, you probably think consciously about your bank less often than your retailers. Conversion has a different meaning for banks, and they have fewer products with which to entice (or bombard) you. To keep the engagement alive and interesting, they need to find different things to talk about. They need to engage in conversations with customers, rather than constantly campaigning for your dollar.

As an example, one of our clients has identified me as a frequent traveler, and recently communicated to me existing opportunities for holiday accommodation savings via a product I already have with them. Another simply advised me that they had passed on a recent cut in interest rates. Neither of these communications deliver conversion in the traditional sense, nor do they necessitate immediate action, but both were relevant and contributed to the growth of their relationships with me.

Less push, more pull

Retail personalization is reflective of the retail customer’s journey and focused on delivering a relevant customer experience across “push” marketing such as email, SMS, app, mail and extension into digital. In contrast, banking customers typically make more inbound contact with their brand than retail customers, most often in the form of requests for help via the three main “pull” channels of website or app, phone call, or physical branches. The biggest short-term opportunity is, therefore, to recognize and respond to each customer’s unique circumstances throughout all inbound channels. In a way, outbound “push” marketing in banking is another way to get people to those inbound channels where a bank can personalize every interaction. This distinction is very apparent if you reflect on the relative value of a tailored banking product email sent to you, as compared to the interest you have in your customized account view when you log-in.

The question of channel selection is also vital. In retail, finding the right channel is an opportunity for continued optimization. For banks, it is table stakes. In the same way that a retail customer expects their unique brand preferences to be known, in banking, they expect to be contacted by their preferred channel and to be recognized deeply within that channel regardless of whether they initiate the conversation.

To bring that to life, banks that know me, understand never to call me. But if they text or email me with clear instructions, I will usually follow them and be grateful.

Right time and real time

Timeliness is important in a personalized retail marketing strategy where the aim is to deliver the communication as close to the moment of consideration as possible to support conversion. So, whilst it is based on the customer’s clock, it’s more wired to business rhythms and an immediate outcome.

In banking, customers interact with products on a minute-by-minute basis, and in the case of events like fraud or overdrawn accounts, those minutes matter. Personalised conversations that relate to those interactions need to be instantaneous.

Pull interactions also offer a separate set of challenges to push interactions. Banks need to know the best conversation to have with a customer as soon as they call or arrive in a branch. This is no mean feat – banking customers motivations are truly real-time, changing by the moment

A broader picture

Data is the bedrock of personalization in banking, as it is in retail. Today’s customers expect brands across all sectors to use their data to engage with them as unique individuals. That value exchange can only be fulfilled through careful data curation and customer outcome-oriented analytics.

In retail, a rich customer profile capable of powering personalization is delivered through purchase history, both physical and digital, all the way down to a SKU level. Banks may not have access to the same retail product granularity, but customer transaction data may be its version of SKU data. For every customer, it is the key to unlocking an understanding of all their unique brand, category and location spending behaviors.

Once curated, transaction data can deliver an incredibly rich view of a customer’s life-stage, habits, passions and preferences. Banks can leverage this data to drive personalized experiences at scale, including supercharged predictive modelling but also more meaningful conversations with greater simplicity.

The gold standard is an ecosystem that spans this divide, leveraging both the granularity and the breadth of transaction data.

This ecosystem can support the interaction of genuine and lasting value, whether that be offers from highly relevant partners or affiliates, or opportunities to support financial wellbeing such as suggested budgets, savings targets, or spending comparisons with people in similar situations.

But just as is in retail, no matter how expansive your datasets, they are effectively meaningless unless properly cleansed, curated and accurately categorized.

Different, but same

Differences aside, the fundamental principle that does bridge the divide between banking and retail is that data and digital transformation alone won’t deliver on the potential of personalization opportunity. Without a complete realignment of people, process and technology around personalization goals, banks risk developing shiny new toys that are quickly outdone by competitors and, more importantly, obsolete in relation to customer expectations.

Finally, the opportunity is similar for both. The evolution of data and technology means that brands can pursue relentless relevance to immerse customers in their purpose in a highly personalized way. As a retailer as for a bank, the power of communicating what they stand for to each unique customer in the right channel at the right time is the path to a deeper customer relationship, delivering greater customer loyalty and ultimately business value.

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Q.Refinery. Quantium’s product for retail banking, transforms transaction data to an enterprise-grade structured data asset as the foundation for deeper personalization, enabling out-of-the-box enhanced targeting and supercharged predictive modelling.

Talk to one of our Banking and Wealth experts to learn more.

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