What can banks learn from the largest online retailer in the United States?
5 lessons from Amazon for banks.
About 20 years ago, e-commerce giant Amazon went public. Then its founder Jeff Bezos told shareholders that his main goal is to provide the best experience for the buyer. Over the years, the company has more than lived up to that promise. And Bezos attributes his multi-billion dollar success to one thing: customer satisfaction has always come first. For tech companies, customer needs are indeed more important than shareholder returns, which is not the case for the banking industry.
Nobody, of course, says that profit should not be a priority for banks. But they need to adopt a more customer-centric approach. This is what in the long term will give the desired result for both shareholders and clients of the bank. And in this matter, financial institutions can turn to the experience of Amazon.
The American e-commerce giant has focused on how to make the shopping experience as convenient as possible for consumers. It's about lightness. It's about knowing what customers want, how to meet their needs, and how to get it done as quickly as possible. Personalization solves these issues.
To illustrate the success of this tool, Amazon came up with a few numbers. According to the company, 35% of its revenue is generated through a referral system. Amazon's ability to anticipate customer needs leads to customer loyalty. So, in 2017, 44% of American families were users of the Amazon Prime loyalty program, and spent about $ 2,500 a year on purchases. This is approximately six times more than non-registered customers.
Of course, the idea that personalization affects loyalty and purchase volume is not exclusive to Amazon. When brands personalize customer experiences, they almost always create conditions for customers to buy and spend more.
Like Amazon, banks' success increasingly depends on relevant recommendations. Nowadays it is not enough to have a client using a deposit account for 10 years. The success of the bank and its income depend on the ability at some point to sell to such a client 2-3 additional banking products that he needs.
When brands personalize customer experiences, they almost always create conditions for customers to buy and spend more. Photo: Shopio
Demographics paint part of the customer profile, general touches. If you rely only on this information, the individuality of the client is lost. It is assumed that upon reaching a certain age or salary level, the client's behavior and financial needs change. But it is not always the case. The fact that a man is 30 years old does not mean that he is ready to buy a house on credit. He probably would like to receive other offers from his bank.
How people spend their money, and more importantly, their motivation while shopping, is critical when building a strategy for selling financial products. Unlike retail, timely financial solutions or help can even change someone's life. In return, the client, as a rule, remains loyal to this bank for a long time.
Customers stated that they would like to be served by these companies because their services are more convenient and personalized. Users are willing to provide technology companies with their personal information because they know they will get exactly what they need in return.
This is how banking should be. After all, if until now Amazon has not been interested in providing basic banking services, then this may change. The company has already entered the payments market with Amazon Pay and an independent merchant lending service at its site. Therefore, if customer demand continues to grow, Amazon could become a strong competitor for banks. If financial institutions haven't thought about it yet, now is the time.
5 lessons from Amazon for banks.
About 20 years ago, e-commerce giant Amazon went public. Then its founder Jeff Bezos told shareholders that his main goal is to provide the best experience for the buyer. Over the years, the company has more than lived up to that promise. And Bezos attributes his multi-billion dollar success to one thing: customer satisfaction has always come first. For tech companies, customer needs are indeed more important than shareholder returns, which is not the case for the banking industry.
Nobody, of course, says that profit should not be a priority for banks. But they need to adopt a more customer-centric approach. This is what in the long term will give the desired result for both shareholders and clients of the bank. And in this matter, financial institutions can turn to the experience of Amazon.
The American e-commerce giant has focused on how to make the shopping experience as convenient as possible for consumers. It's about lightness. It's about knowing what customers want, how to meet their needs, and how to get it done as quickly as possible. Personalization solves these issues.
Lesson 1: Acquaintance Breeds Loyalty
Amazon knows its customers, and this positively affects the process of communicating with them. When shoppers change their browsing or buying behavior, Amazon notices. The company uses its recommendation algorithm as a targeted marketing tool. It is based on purchase history, search behavior, and aggregated receipt data. Amazon uses this data to continually improve its service by offering relevant products at the right time and in the right place.To illustrate the success of this tool, Amazon came up with a few numbers. According to the company, 35% of its revenue is generated through a referral system. Amazon's ability to anticipate customer needs leads to customer loyalty. So, in 2017, 44% of American families were users of the Amazon Prime loyalty program, and spent about $ 2,500 a year on purchases. This is approximately six times more than non-registered customers.
Of course, the idea that personalization affects loyalty and purchase volume is not exclusive to Amazon. When brands personalize customer experiences, they almost always create conditions for customers to buy and spend more.
Like Amazon, banks' success increasingly depends on relevant recommendations. Nowadays it is not enough to have a client using a deposit account for 10 years. The success of the bank and its income depend on the ability at some point to sell to such a client 2-3 additional banking products that he needs.
Lesson 2: Demographics Are Not Everything
To this day, when communicating with customers, banks attach the most importance to demographic data. Of course, metrics like age, gender and income are important, especially in some markets. This data is necessary to know when selling certain banking products. For example, you need to know the age of those potentially interested in retirement accounts. However, not all products can be categorized into customer groups based on demographic data alone.When brands personalize customer experiences, they almost always create conditions for customers to buy and spend more. Photo: Shopio
Demographics paint part of the customer profile, general touches. If you rely only on this information, the individuality of the client is lost. It is assumed that upon reaching a certain age or salary level, the client's behavior and financial needs change. But it is not always the case. The fact that a man is 30 years old does not mean that he is ready to buy a house on credit. He probably would like to receive other offers from his bank.
Lesson 3: Banks Need More Purchasing Details
Banks believe that transaction data from customers 'bank statements are the most important indicators of their customers' purchasing habits and lifestyles. But tell me, please, how many times, looking at the history of transactions, you yourself could not remember what you spent 200 hryvnia on in a shopping center? Analyzing a check from an electronics store, will banks be able to say for sure what their client bought for UAH 20,000? Modern TV or multiple monitors? Based on this, is it worth offering him a loan for a small business owner or an installment plan for home renovations?Lesson 4: Personalization is Hidden in Purchase Data
Banks need to follow the example of Amazon to study customer purchase data. They need to know exactly what their customers are buying in order to understand their lifestyle, their priorities, and match that data with their financial needs. Like Amazon, banks must compare current purchases with past ones and analyze changes in spending. After all, this may indicate a change in interests, preferences or the beginning of a new life stage. Purchase data helps build behavioral profiles and more accurately reflects financial needs than demographic and transactional data.How people spend their money, and more importantly, their motivation while shopping, is critical when building a strategy for selling financial products. Unlike retail, timely financial solutions or help can even change someone's life. In return, the client, as a rule, remains loyal to this bank for a long time.
Lesson 5: If Banks Do Not Activate, Amazon Will Take Their Place
More than half of US bank executives say alternative market players and tech giants pose a threat to their businesses. And for good reason. Roughly one in three customers of banks and insurance companies are willing to ditch banking and open an account with companies like Amazon, Google, Apple and Facebook if they offered such services (according to a 2017 Accenture study).Customers stated that they would like to be served by these companies because their services are more convenient and personalized. Users are willing to provide technology companies with their personal information because they know they will get exactly what they need in return.
This is how banking should be. After all, if until now Amazon has not been interested in providing basic banking services, then this may change. The company has already entered the payments market with Amazon Pay and an independent merchant lending service at its site. Therefore, if customer demand continues to grow, Amazon could become a strong competitor for banks. If financial institutions haven't thought about it yet, now is the time.
