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In banking it pays to be disloyal

We know it costs more money to recruit a new customer than to cross-sell to an existing customer. We know also that a satisfied customer is a happy customer and good for some free word-of-mouth marketing to new prospects.

So why is it that financial services companies continue to cheat and penalise their most loyal customers at any and every available opportunity. How many times have you moved your cash to a high interest deposit account, only to discover at your next financial check-up that the account and its headline interest rate have been left to wither on the vine? Or – and this happened to me just today – discovered that the renewal premium on your buildings insurance is double that charged to new customers? Try it for yourself. Next time you get an automatic renewal notice from your insurer, let it lapse and then re-apply for exactly the same policy as a new customer. The price differential can be astounding.

Financial services companies used to rely on inertia to keep their customer base in check. But with the Internet making it relatively easy and quick to compare and contrast financial products, banks have to realise that customer lock-in is a thing of the past. Treating existing customers fairly and rewarding loyalty are novel concepts in financial services. The 21st century CRM strategy should aim to make this the rule, rather than the exception.

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Comments: (1)

A Finextra member
A Finextra member 18 March, 2008, 10:35Be the first to give this comment the thumbs up 0 likes

The financial services landscape will change very rapidly in the next few years and many of the current financial service providers will just be a memory - even the biggest will be easily eclipsed by the revolution coming. SEPA and other initiatives actually make it even easier for emerging providers who may actually provide the service customers want.

Why would a bright operator with a streamlined operation sell out or partner with a behemoth with too much luggage?

Paul Penrose

Paul Penrose

Head of Research

Finextra

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London

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Trends in Financial Services

A community to discuss the future of financial services and any other interesting trends, strategies, ideas, views.


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