Personalization: Everyone knows it is a key factor in generating loyalty - but how do you get there?

Retailers mostly get it right, especially in the online world. They are doing really well at tracking everything their customer does and personalising the service they offer in response. Banks, on the other hand, don't tend to be very good at personalization - and I think a lot of that comes down to the inability to really understand everything that customers do with the bank, and a lack of true interaction with them.

In theory, a bank is in a really good position to understand their customer and know what is important to them. Your bank, for example, will know if you travel a lot because of where your cards are used overseas. They might even be able to tell if you travel for business or pleasure, depending if you pay for your own flights and hotel. They might be able to tell if you do a lot of driving, if you buy a lot of petrol. They know what supermarket you use, if you shop online and who your mobile phone provider is. The might be able to tell when you renew your household insurance or your car insurance, or even things like if you're a member of the National Trust!

But all too often, that information doesn't get used. Banks don't have the systems in place to take a view of a customer across all activity and use that information to create 'intelligence'.

Imagine if they could though.

Imagine if my bank knows that I do a lot of driving so they tailor my gold account 'package' to that - with breakdown cover, windscreen insurance or a free winter check for example. But if the customer doesn't do a lot of driving, but instead travels overseas, their benefits package could include travel insurance, commission free currency, or access to airport lounges. The possibilities are huge, and I know some banks do try to do this, but it certainly isn't widespread.

For many banks, this is a long way away, but I think there are things they could do now that would help them get to know their customers better - by talking to them. Don't just offer a standard package of travel insurance, breakdown cover and phone insurance for your gold account holders - perhaps give them a choice for them to pick the benefits that would make a difference to them. Suddenly you know them a little bit better. Many banks encourage customers to tell them before they go overseas - but then the bank should use that information to sell currency exchange or travel insurance for example. If a customer sets up a new direct debit for home or car insurance, perhaps plan to contact them before the anniversary to offer your services.

I really believe that there are lots of things that banks can do to strengthen their relationships with customers, and the closer those relationships, the less likely it is that the customer would change banks, and the more likely it is that they will start coming to their bank for even more services.