Jeff Judy

Jeff's Thoughts - January 14, 2015

Are You Blinded By Shiny New Customers?

New customers are a wonderful thing. It is certainly worth devoting resources, and a systematic approach, to their pursuit.

Existing customers, of course, pay the bills and provide the resources you need to go after those new customers. Do they need the same level of attention, and the same handling, as those new prospects?

Probably not. But there is also a good chance that you could do more to maintain your current customers, and that you could do it without a huge investment of additional time and money.

Be honest. Where does making the call to that promising prospective customer fall, in daily priorities, in comparison with making a "touching base" call to an existing customer?

Do you only contact current customers when you need information, or when you have to inform them of some change or development? Good intentions are wonderful, but what is the actual practice at your institution?

Human nature and the pressures of growth both suggest that the shiny new prospects probably get a lot more attention, and more accommodation on terms and fees, than do customers already on the books.

After all, as a consumer, you know you can often get a "deal", a sort of signing bonus, when you switch phone companies, or TV or Internet services. Many consumers eventually realize that they don't get much for remaining loyal to their service providers, so they switch again, and again.

Could some of your customers find that being a new customer at another bank is better than being a loyal customer at your institution?

Careful thought and "doing the math" reveals that a small increment in your attention to current customers could be good for your business:

  1. It costs a lot less, in time and money, to maintain a relationship with a current customer than it does to create a new relationship with a new customer.
  2. Interactions with current customers can be personalized -- you know them -- in ways that you'll never match with new prospects, and that builds customer loyalty.
  3. Loyalty among current customers makes you less vulnerable on price competition, it reduces the pressure to match the terms offered by your dumbest competitor.

Too often, "loyalty" is discussed as almost a manipulation, a trick you play on the customer. For instance, get enough "wallet share", enough things to tie them to you, and it will just be too much trouble to leave.

But I still believe that a customer who likes you, who appreciates the effort you continue to make to ensure they feel welcomed and valued at your institution, is less likely to even bother looking at your rivals, or to go trolling for miniscule differences in rates.

When you slow down the revolving door -- new customers coming in, old customers leaving -- you reduce the pressure to get as many prospects through that door as possible. And that means you get to pick the best ones, leaving the dregs to your competition.

New customer acquisition is indeed important. But it can blind you to opportunities among customers you already have.

When you add up all the benefits, current customer retention and development is clearly a great investment for any financial institution.