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Banks Can Prevent Customer Churn by Personalizing Interactions with SMS and Analytics

By Tracey E. Schelmetic
TMCnet Contributor

If you run a customer-focused organization, what's the most expensive process for you? Think about it. What costs your organization more than any other? Conventional wisdom (not to mention an army of analysts) says that it's customer churn, the process of losing customers to competitors, generally because of poor customer service, and having to replace them with new customers, an expensive process, as it costs far more to acquire a new customer than it does to keep an existing one.

So how do you stem the customer churn?

Business analytics company SAS (News - Alert), together with Professor Hugh Wilson of the Cranfield School of Management, recently completed a customer insight report that examined the issue from the perspective of banks, who today have more marketing communications channels open to customers than ever before, but are still, in many cases, failing to step customer churn and failing to capitalize on the large amount of data that they hold, according to bobsguide.com, a London-based financial IT solutions Web site. As it's pretty easy for consumers to change banks – one of the hallmarks of an industry prone to customer churn – banks need to find a better way.

Too many banks, found the report, rely on impersonal, one-way communications such as television advertising, newspapers and direct mail. The costs are high and the effort is largely wasted. By contrast, many banks have found new success by tailoring SMS – text messaging – to their marketing strategies.

“When it comes to below-the-line interactions, SMS is an effective communication channel,” writes bobsguide.com. “SMS is being used to deliver personalized service messages to account holders – such as balance details, or warning of significant events such as exceeding an overdraft limit. These interactions are, by their nature, very relevant. They’re also made directly with the account holder, giving the channel a very high hit rate. It’s possible that banks could double or treble their use of SMS for an even greater positive effect.”

Using the bank's enormous database of customer information based on previous transactions and interactions, SMS messages can be tailored to the customers' needs, namely type of accounts, choice of alerts, frequency preferences and even tone of communication. The result is a more personal, customized and two-way transaction (customers can respond to text messages by, for example, choosing to moving funds between accounts to respond to a low checking account threshold once alerted to the situation).

“By using business analytics, banks can bring together all of their customer data to understand which customers would be most likely to buy certain products and which channels would be most effective for reaching them, increasing the relevance of any DM campaign,” concludes the article.

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