Increasing the profitability of your customers with data

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Financial institutions today are facing tremendous pressure to drive revenue in the midst of increasing competition and evolving consumer expectations.

As the push towards digital transformation continues to shake up the industry, we are seeing a shift in what customers expect from their financial institutions.

In the same way customers can use mobile apps to order take-out from a café down the street or purchase a new pair of shoes, customers are demanding the same level of convenience when it comes to managing their finances.

Times are changing

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Not only are today’s customers demanding more from their financial institutions, but also they have more options than ever before.

A ballooning segment of financial technology (fintech) companies are exploiting niche opportunities within the finance sector and luring customers away from their banks.

This is leading to an increase in customer churn and added pressure on banks’ margins as they reduce fees or increase incentives to remain competitive.

Competition is putting pressure on your margins

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The well-regarded 80/20 business principle states that 80 percent of your business’s profit is driven by 20 percent of your customers.

If customer loyalty is so fleeting nowadays, can you afford to rely on a just 20 percent of customers for your long-term success?

As customer loyalty is no longer a guarantee in today’s environment, financial institutions will need to be more strategic about maximizing their profit per customer—and that starts with getting to know them better.

Increasing profitability beyond your top customers

Did you know?

97%of financial institutions

are looking to achieve a

single customer view

52%of financial institutions

use their data to better

serve their customers

47%of financial institutions

say a lack of trust in data

leads to lost customer

revenue

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Looking to data to increase profitability

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To acquire new customers, it’s important to first understand what your most profitable customers look like. With your existing data, you can probably determine the average monthly balance in their savings accounts or the shopping categories on which they spend the most money. However, this information is difficult to see when looking for prospective clients.

That’s where data enrichment comes in. By appending demographic, behavioral, household, life event, and financial information to your existing customer records, you can paint a more complete picture of your most profitable customers—and start to look for others like them.

Goal 1: Acquire new, profitable customers

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Do you know how many of your customers use more than one of your services or products? It’s a simple question, but many financial institutions are not always able to provide a straight answer. Silos between databases and even between business units have created an environment in which information is scattered, duplicated, and non-conformed.

In order to cross-sell into your existing customers, you need to gain better insight into them. To do that, you’ll need to invest in the right tools that can integrate disparate datasets and perform profiling, discovery, and analysis. By integrating records from across the business, you’ll be able to identify customer histories across your portfolio of products—and recommend products and services they might not have previously considered.

Goal 2: Cross-sell profitably to existing customers

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You want to delight all your customers, of course, but you might also want to make your most profitable customers feel special. By offering differentiated service to your top customers, such as VIP access to event tickets or upgraded seats on their next airline purchase, you’ll drive engagement and their continued loyalty.

To do that, you’ll first need to understand who your top customers are. Using the right tools to create a single customer view will give you insight into the customers who use products from across your business—likely your most loyal segment. By pulling together disparate databases, you can analyze their purchasing habits and even add enriched data to understand the types of differentiated incentives that might appeal to them.

Goal 3: Provide differentiated service to high-value customers

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Not all of your customers are actually contributing to your bottom line. Sometimes, in fact, they can be costing you money when factoring in your overhead and operation costs. You’d hate to lose a customer, so the best scenario would be to move them to more profitable products.

While you likely already know which products drive the most revenue, forcing customers into products they don’t want is a bad experience for both of you. The way forward? Identify the customers who are costing you money first. Then, determine the right messaging that would position your other products in a more advantageous light based on what you already know about them. Leveraging enrichment data is particularly helpful when tailoring customer messages.

Goal 4: Migrate low-profit customers to more sustainable products and services

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If you’re like most financial institutions, you abide by a one-size-fits-all pricing model that’s largely based on market forces and first-hand experience. Stop making pricing decision based on guesswork and start leveraging your data to drive those decisions.

With enough data (and the right tools to gather and present the information), you can begin to understand trends in your adoption rates and build pricing models for your products and services to optimize your revenue. Do you have products that are more seasonal than others? What about products that have seen sales trailing off? By adjusting prices for these products up or down, you can help to drive additional sales.

Goal 5: Make pricing determinations that will make products more profitable

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Increasing the profitability of your customers starts with getting to know them better. And to do that, you’ll need access to high-quality, trustworthy data.

We help our financial services clients use their data as a strategic asset every day. Learn how Experian Pandora can help you gain deeper insight into your customers and drive greater profits.

We’re here to help.

Learn more!