By Karen Wheeler, UK Country Manager at Affinion, Affinion

Karen Wheeler

Customer engagement has never been more important in the financial services sector. Traditional banking institutions find themselves under increasing threat from agile challenger banks with their digital-first, customer-centric attitudes. The range of financial services on offer, spearheaded by innovative fintech start-ups, and the ease of switching thanks to regulatory changes, means that consumers have more choice than ever before.

According to the 2016 World Retail Banking Report, nearly two-thirds of customers globally said they are using products or services from fintech firms, and nearly 55% would be more likely to refer their fintech provider than their bank (38%). Only half (55%) are likely to stay with their current bank for the next six months.

So,in a time of dwindling loyalty and enhanced competition, customer engagement, the vital pull factor that keeps consumers coming back for more, is absolutely crucial. Its importance, however, is being ignored – misunderstood, even. With that in mind, we were keen to explore the psychological journey that consumers go on when building relationships with companies, partnering with Oxford Brookes marketing and consumer psychology professor Janine Dermody to conduct research in the financial services, telecommunications and retail sectors around this issue.

Currently, customer engagement is a relatively new concept, which means there is limited definition and understanding. Our customer engagement study, which involved a survey of more than 18,400 people globally, outlines why understanding customer engagement better could significantly improve customer relationships. For the first time, it also puts forward a model for measuring and mapping customer engagement – invaluable for marketing departments the world over.

A lack of awareness and understanding around customer engagement is, I believe, a major sticking point. All too often marketers fall back on above the line advertising to draw in new customers, without thinking about their existing customer base and how to make them more engaged. Our research provides the missing link – a step-by-step academic overview of the customer journey and an overview of how factors such as age, gender and geography impact on how engaged a customer is.

What it reveals about demographics

The study revealed some startling results in terms of who is, and who is not, engaged. The survey of 18,000 people across 13 countries asked questions about people’s relationships with their bank, mobile phone provider and retailer. A score was given to rank how engaged people are, and the results unlock the core traits that make up an engaged customer. Top of the list overall? The male, the married and the millennial.

The research revealed that customer engagement with banks is higher than mobile phone providers, with an overall ‘Customer Engagement Score’ of 67 compared with 64. The retail industry came top with a score of 68.

The research revealed that millennials (25–34 years old) are the most engaged with their banks, with a score of 71. Older people reported less emotional attachment with their banks, in particular the 65+ age range which had a score of 63. The report also showed differences between married and single people, with married respondents reporting an engagement score of 68, compared with 65 in singletons.

A geographical index

In terms of regions, Turkish, Brazilian and American consumers were the most engaged with their banks. The lowest levels of engagement were seen in Denmark, Norway and Finland.

Interestingly, Brazil and Turkey consistently exceed the global metrics across all three industries, pointing towards the increasing presence and importance of emerging markets and their impact on growth of the global economy.

Brazil in particular was singled out in the report as having exceptionally high customer engagement at a national level. It is difficult to draw exact conclusions, but the 2016 Olympics may have been a contributing factor towards boosting spending across the board, as the feel-good effect encourages shoppers to not only put their hands in their pockets but to form relationships with favourite brands.

Another point of differentiation for Brazil, and for Turkey, is the huge amount of development and innovation happening in the technology arena in these countries. Evidence suggests that tech-savvy consumers are happier for it, again encouraging not only spend but enhanced brand connections.

The model

The customer engagement model developed by Oxford Brookes shows a pathway from initial awareness of a brand or business, through to first becoming a customer, to building a relationship, increasing that engagement, and finally to the ultimate goal: becoming a loyal customer. It is the first model of its kind to map this relationship, and its credibility is not only derived from the rigorous testing undertaken, but also the robustness of the data-set underpinning it.

What the model reveals is that the initial interactions that take place between a customer and business, including financial institutions, takes place on a rational level. Who is offering the best interest rates on savings? Does this bank offer a mobile app? When moving along the journey towards repeat transactions, the decisions become much more emotional. Who has given me the best service? Who do I feel represents me best? Where do I want my hard-earned money to be spent?

A customer’s path to making a purchasing decision is complex, and it is clear from our research that companies that understand the role customer emotion plays in the engagement journey can build deeper relationships which are more likely to develop into feelings of loyalty and advocacy. When deciding on a strategy to achieve loyal customers, then, rational and emotional behaviours must both be brought to bear.

The consumer backlash against the number of branch closures across the country by the big four banks and Santander – an estimated 1,700 have closed since 2011 – demonstrates the risks of ignoring the emotional in the quest for the rational. It shows how a practical attempt to cost-cut and compete with the nimble digital-only competitors has backfired emotionally with customers, particularly the older generation, feeling let down and hence more likely to switch.

Our research also indicates that the more products and services a company has with its customers, the more engaged they are likely to be. With businesses now able to interact with their customers across an unprecedented number of channels, the potential to increase engagement is high. However, what is also clear is that it isn’t just the number of products that build engagement, but the value the products can bring to customers’ lives. Customers are more likely to be engaged with services that make things easier, quicker or offer reassurance in important areas of their lives. It seems when it comes to customer engagement, more really is more.

What it means for marketers

This is the first study to chronicle the evolution of a customer’s relationship with a brand from first involvement to a feeling of engagement and brand loyalty. We will be using this research to continue helping businesses move customers from brand ignorance to brand advocacy.This is especially important as the research also showed that customers with the highest levels of engagement said that they would always recommend a company to their friends and family. This has even greater importance when you consider that half of the respondents in our research who came out as advocates had originally chosen to do business with a company because their family or friends used it. Advocacy breeds advocacy. And, with that in mind, marketers should be working with existing customers to ensure that they become advocates fora business. It is an invaluable acquisition tool, and one that will boost a business’ bottom line.

As for marketing teams more widely, what this ground-breaking study provides is a blueprint to achieving the holy grail: a loyal customer. Customer engagement has long been an area where practitioners have had to act on gut and intuition, but now the science and psychology behind inspiring loyalty can be better understood, and need no longer be ignored.

Why does this matter? Because ultimately engaged customers interact more with the brands they have a connection with. They follow them on Facebook, recommend them to friends and return time and time again to buy products and services. The same principal applies with financial services, and it is one that makes good business sense to foster.