Financial Services Marketers, Stop Buying Customers
Financial services marketers keep customers the same way they attracted them. So if they bought the customers with financial incentives, they’ve attracted ones who “wait for the deal,” rather than those who want quality, convenience or realization of financial aspirations.
So says an article by Mark Gibson that was published last week in The Financial Brand. He adds:
“Using financial incentives may get people to switch banks, but this risky marketing strategy often does little more than undermine your profitability.”
Financial Services Marketers Must Develop a Strong Brand and Value Proposition
Gibson repeatedly cites the Procter and Gamble saying about financial services marketers keeping customers the same way they attracted them. If they offer incentives, they’ll have to keep doing so.
“It’s important to remember that, in each category, there are competitors who resist discounting and price promotions. These brands tend to have better reputations, perceived higher quality products/services, and fatter profit margins. These companies have staked their brand on other attributes besides price — e.g., quality, design, style or convenience. Apple and Starbucks come to mind, but so does Bank of America, which recently got rid of its ‘almost free checking’ and has (so far) resisted paying new clients to switch.”
The Downsides of Financially Incentivizing Customers
Gibson says this about “promotions built around financial incentives”:
- The customer did not choose you for intrinsic reasons; i.e., your brand is more convenient, higher quality or aspirational;
- You “bought” the customers, which means that either you need to retain the customers with price, or a competitor will take them away with a richer offer; and
- Because of these two implications, a customer attracted by cash offers is less loyal than a customer attracted by more fundamental brand-based reasons and, therefore, these customers tend to be less profitable over time.
What do you think, marketers?
Please respond in the comments section below.
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