Dance with the customer who brought you
Why financial institutions are focusing on customer loyalty over new business acquisition
Financial institutions spend thousands to tens of thousands of dollars every year on getting new consumers (an average acquisition cost of $200 per new consumer). However, in recent years, consumer habits have changed for a multitude of reasons, and financial institutions are starting to follow a new trend of focusing more time—and money—on building relationships with existing customers or members. Why is this trend changing for financial institutions, and how can you capitalize on it to increase revenue?
Focusing on Existing Consumers for Revenue
Our recent article, Ultimate Guide to Member Retention in a Tough Market, discusses the fact that it costs five times as much to attract a new customer than it does to retain current ones. That figure alone should be enough to convince credit unions to put more time and budget into building member loyalty. Aside from the cost of attracting a new consumer, increasing customer retention by just 5% can grow a company’s revenue by more than 25%.
The more trust a customer has in a financial institution, the more likely they are to add additional services to their existing relationship. In fact, current customers spend 67% more on average than those who are new to your business. This is certainly the case in retail but also with financial institutions, which are more likely to upsell existing customers on both interest income and non-interest income products so long as they have built trust with them.
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