After a few tight years, the global banking industry is in recovery and for the first time in a long while things are looking up. Marketers within the banking industry are now looking for new opportunities and new markets to tap into.
In the years since the banking crisis hit, a number of trends emerged which have opened up doors for marketers and guided them towards marketing opportunities that did not exist five or ten years ago. Credit union and other financial institution marketers who want to grow their member base should focus on key areas and targets including:
- Millennials and Generation Z (or iGen)
- The Big Data boom
- Disruption and industry shake ups
Here are three of the current marketing opportunities banking marketers should take advantage of.
Leveraging customer data
In order to grow a member base and maintain their existing members, a bank or credit union must offer products and services that people want. A person’s banking needs will change over the years and, as we learned during the financial crisis, the banking landscape is fluid and the economic climate can dictate what financial services a consumer needs or wants.
While we doubt there are any marketers who just guess the needs of their members or what promotions and campaigns will be effective, there may be marketers who simply follow the lead of their competitors or stick to traditional products and marketing which may not be the best fit for their particular banking institution. In this day and age, there is no excuse for any banking marketer who is not taking advantage of the valuable customer data available to them. Banking institutions capture customer data and insights from many different sources including ATM logs, customer email and support center logs, social media.
Some banking institutions have already started analysing this data and are optimizing their products to better serve their members. Leveraging customer data will allow a banking institution’s product development team to become more customer focused and create products not available from their competitors. It will also allow sales and marketing to better manage which customer segments they target for certain products or services. Banking institutions that act upon the customer data available to them are more likely to see an increase in the overall number of high lifetime value members acquired by the institution and improved customer satisfaction rates – both a consequence of having members who are happy with services tailored to their needs.
Challenging the norm and targeting untapped markets
Possibly more than ever before, financial institutions are becoming more daring and challenging the notions of what traditional banking is supposed to be. The consumer climate is currently quite welcoming to these challenges and many consumers are interested to see what new or different banking options are available to them. On the other side of the equation, banking institutions are now more open to targeting markets that were previously considered high risk or low value and not worth an institution’s time.
Challenger banks have not fully taken off in North America yet but in Europe – particularly in the U.K. where a low consumer confidence in banking prevails – challenger banks have proven to be a modest success and are disrupting the banking landscape. For banking institutions or for institutions set to launch or relaunch, now may be the perfect time for them to apply the label “challenger bank”, take on the big guns in banking and go after the consumer segments that are marginalised or ignored by existing financial institutions. The biggest customer acquisition hurdle for challenger banks is consumer apathy towards changing banking providers. To negate this, challenger banks offer innovative customer incentives and interest rates which generally beat those on offer by large banking institutions. There are three key groups targeted by challenger banks:
- Students and Millennials – currently the Holy Grail in banking
- Small and medium size business owners
- Young or first time home buyers
Challenger banks consider themselves to be “finance and lifestyle” brands and offer support to consumers whose life situation is not deemed attractive by the big banking institutions. As consumers increasingly expect to be treated like individuals and not just commodities, the services and experiences offered by challenger banks is likely to increase in popularity over the coming years.
A Shared Financial Economy
Challenger banks are not the only institutions breaking the mold of traditional banking and targeting demographics not usually favoured by big banks. Many established financial institutions – including hedge funds – are setting up arms of their institution offering shared or peer-to-peer financial services.
Outside of banking, the best known examples of “shared economies” are Uber and AirBnB. Shared economies allow consumers to collaborate on the products and services they need. For consumers looking for banking services, a shared financial economy offers a bigger pool of options to choose from which is especially beneficial for consumers with financial restrictions which would prevent them from mainstream banking services. Technological advances and economic changes caused by the global recession have allowed the shared financial economy boom in recent years. The most common peer-to-peer financial services include:
- Borrowing for personal use
- Borrowing to set up a small business
- Borrowing for a mortgage or real estate purchase
- Borrowing to fund education
- Funding for one-off projects or entrepreneurial endeavours
- Currency buying or exchange services
- Insurance for businesses
Shared financial economies can work in a few different ways. Some individuals see peer-to-peer lending as a way to earn extra income. For investors, it can be a good way to get involved with a start-up company or new product and entrepreneurs without a proven record may only be able to receive investment through peer-to–peer funding. Peer-to-peer banking can be very financially and socially rewarding. Consumers are becoming less satisfied with large corporations and more social and fiscally responsible and many experts are heralding shared financial services as the future of banking. This form of banking is especially appealing to younger generations, which is why it’s in our list of top marketing opportunities for banking institutions to get in on now.
How Does Referral Marketing Fit In?
With the exception of leveraging customer data, the marketing opportunities above share some traits:
- They are very modern but have a limited proven track record
- They are quite niche
- They target a specific market – one that tends to skew young, is tech savvy and open to risks but tends to be marginalised by traditional financial services
- The institutions involved are also open to risk-taking behaviour
- Service providers are deliberately going after disenfranchised markets
It can take a while for businesses aimed at a small segment of people to take off. Traditional marketing like billboards and radio/TV ads may not reach the right consumers so marketers need to think outside the box. More and more research is indicating that referral marketing is the best way to promote a product or service to new markets and the best way to acquire high-value members or customers. Referral marketing has also proven to be a very successful customer acquisition tool within industries that have a small or specialized customer base.
Buyapowa has worked with many credit unions and banks down through the years, some of which achieved levels of success beyond their expectations. Financial institutions willing to make a bold marketing move and go after markets they previously ignored may see growth and customer satisfaction levels unattainable through traditional marketing campaigns.
For more information about referral marketing and how your financial institution could benefit, get in touch with one of our referral marketing experts today.