Personal Loyalty Vs. Banks - Aimia

Transcription

1 AIMIA FINANCIAL SERVICES LOYALTY LENS LOYALTY VS. TENURE: A GUIDE FOR FINANCIAL SERVICES PROVIDERS

2 1 / Aimia Financial Services Loyalty Lens INTRODUCTION ABOUT THE AIMIA GLOBAL LOYALTY LENS The Aimia Financial Services Loyalty Lens is the first report in a series of industry findings based on the Aimia Global Loyalty Lens research. The 2015 Aimia Global Loyalty Lens, launched in September on aimia.com, identifies a golden moment for marketers around the world, as consumers led by millennials and Generation Z share data more openly with companies. While there are many differences among geographies and demographic groups, most consumers are willing to share personal information with trusted brands. Marketers that respond to this new culture of openness with relevant and personalized messages will be recognized and rewarded. Aimia s Global Loyalty Lens surveyed over 20,000 respondents in 11 countries. Results were aggregated demographically and on a country-by-country basis. For comparison purposes, countries were combined into two groupings: (See Methodology). LEADER NATIONS Australia, Canada, France, Germany, Italy, Spain, United Kingdom (UK), United States (US) DISRUPTOR NATIONS Brazil, India, United Arab Emirates (UAE)

3 Aimia Financial Services Loyalty Lens / 2 LOYALTY VS. TENURE: A GUIDE FOR FINANCIAL SERVICES PROVIDERS Powerful digital payments platforms and non-traditional financial services providers are bearing down hard on banks and credit card issuers. Customers are beginning to look at their financial services providers with a critical eye, as seen in Aimia s latest Global Loyalty Lens. The 2015 survey of over 20,000 respondents in 11 countries shows a worrying decline in customer loyalty to banks and credit card issuers. What should be a golden moment for marketers around the world, as consumers willingly share more personal information with companies is at risk of being ignored by banks as they mistake customer tenure for loyalty. Credit card providers have operated for years in a highly competitive space and offer strong incentives to secure loyalty. Historically banking relationships have been shielded from intense competitive pressures due to the challenges of switching providers but that is now changing. Customer relationships with banks are now more flexible and portable. Driven by lower switching costs, customers are more willing than ever to consider alternative providers. According to the Capgemini World Retail Banking Report, consumers in all worldwide markets increasingly describe themselves as unlikely to stay with their current, primary bank. In North America, the likely defection rate more than tripled year-over-year, nearly doubled in Western Europe, and increased more than 50% in the Middle East and Africa. New threats, such as disintermediation from mobile payment schemes likes Apple Pay, as well as rejuvenated digital pioneers like PayPal stand ready to capitalize on any missteps. Supermarkets have also entered the banking sector, and are seeing strong results trading on brand trust, consumer loyalty and rich loyalty program data, to win financial services business. When customers are more open to change and there is a greater opportunity to switch providers than ever before, financial services firms must raise the bar and ensure that they are earning true loyalty, not just building client tenure.

4 3 / Aimia Financial Services Loyalty Lens WHY FINANCIAL SERVICES LOYALTY IS UNDER PRESSURE Until recently, financial services providers could easily predict the loyalty of their customers. Credit card issuers have faced intense competition for years and have designed incentive and reward programs to combat this threat. Banks, on the other hand, were insulated from mass defections by customer inertia, backed by the complexities involved with changing a web of deposit and payment relationships. Banks could comfortably rely on a predictable customer base and had to do relatively little to ensure that a deposit account today would be a deposit account tomorrow. However credit card issuers have focused on keeping the attention of fickle consumers through better offers. Following those prescribed paths would keep an institution competitive and healthy. These assumptions are under pressure. Credit card issuers are losing ground in the tricky battle to maintain consumer engagement and interest. Banks are being challenged by lower barriers to switching, led by the Current Account Switch Service introduced in September 2013 in the UK, which allows consumers to switch banks within seven working days. On the surface, consumers worldwide reported strong loyalty to banks. When asked to choose between 15 sectors, including supermarkets, tech brands, mobile network providers and restaurant chains, a high proportion of consumers choose banks as the number one category they are most loyal to. In India and France more consumers choose banks as their top category than any other sectors listed. In all other countries banks occupy second or third place with one major exception: Italy. Italian consumers are sending an early warning shot that things are changing, as banks drop precipitously in consumer loyalty rankings. Italian consumers rated banks second of 15 sectors for loyalty in 2014, but in 2015 banks have fallen all the way to eighth place. Just 4% of Italian consumers said they were most loyal to banks above all other industries, down from 9% in Banks This is by far the worst year-over-year result for financial services firms in any nation in the Aimia Loyalty Lens. Additionally, the finding is well below the average result of 16% among all European nations in the survey. Italian banks were hit early and hard by the global financial collapse, as well as, more recent European debt crises, and it appears that adjustments have not satisfied the depositor base.

5 Aimia Financial Services Loyalty Lens / 4 Credit card issuers worldwide have long understood that they are on soft footing. Only 3% of survey respondents internationally placed their credit card relationships as the number one category to which they are most loyal. Overall consumers put credit card companies at 11th place out of the 15 sectors. These already fickle relationships are further deteriorating. Just 11% of US consumers said that they were loyal enough to credit card companies to consider them in their top three relationships for loyalty, with 3% saying it is their number one category. That figure is down from 19% in In Australia and Germany, year-over-year declines in loyalty now mean that less than 10% of consumers in each country feel a primary loyalty relationship with credit card companies. Canada offers one bright spot for the industry, with the second highest marks for credit card loyalty, with a stable 15% of consumers year over year considering credit card loyalty a top-three priority % % 3% of US consumers ranked them as their number one category for loyalty, down from 6% in 2014 Australia and Germany have both seen year over year declines resulting in 2% or less in each country citing the credit card <2% <2% category as the one they are most loyal to Banks have historically viewed loyalty and tenure as the same thing. Until recently, consumers were happy to agree with them. When asked why they are loyal to banks, familiarity was the strongest performer in virtually every worldwide market in both 2014 and I have been with them for many years was the top reason for consumer loyalty to banks in every country but the UAE. In that nation, consumers value a good reputation above all else, although longevity still rates in the top three for consumers in the UAE. The second-place result in most markets was a statement of apathy: I can t be bothered to change. HOWEVER, THE REASON GIVEN FOR THEIR LOYALTY IS EITHER INERTIA OR APATHY 26% I have been with them for many years 9% I can t be bothered to change

6 5 / Aimia Financial Services Loyalty Lens UNDERSTANDING TRUE LOYALTY Longevity only matters when switching is difficult or there is no compelling reason to move. In the UK, seven-day switching has empowered easier account migration, and in response, banks are offering increasingly rich incentives to establish and maintain accounts. The result? The nation s top four banks each lost tens of thousands of net customers in When market conditions change, facile definitions of loyalty are tested. Banks in the UK counted on tenure to protect them. That decision is now proving costly. Credit card issuers face a different challenge. They already know they must do more than deliver stability and familiarity in order to earn and keep loyalty. Consumers in eight of the 11 survey markets cited they reward my loyalty as the top reason to be loyal to a credit card issuer. The response has been to provide ongoing incentives and rewards in exchange for loyalty, which in turn reinforces the expectation that loyalty is connected with rewards. In all Leader nations, apart from the US, the hassle of changing providers was a top three reason to remain loyal to a credit card company. But consumers are already armed with the tools they need to quickly bounce between credit cards, so this degree of hassle is not difficult to overcome.

7 Aimia Financial Services Loyalty Lens / 6 MAINTAINING RELEVANCE EQUATES TO STRONGER RELATIONSHIPS Financial services firms must look beyond reward programs which can be easily countered by rivals. Alongside the offer of rewards, they should focus on delivering insightful messages and offers which are targeted to the unique needs of each individual. And they already have two powerful assets at their disposal which are being under-utilized in this important loyalty effort. The first is consumer trust. Despite years of turmoil in global financial markets, consumers are still fundamentally confident in the trustworthiness of banks. When asked about their comfort level with a variety of companies handling their personal data, consumers in most nations said they trusted their place of work most. However Handling customer data supermarkets and financial services firms alternated in the second- and third-place positions in nine of the 11 markets. That is a powerful position. It also feeds directly into the second great advantage 2 enjoyed by financial services firms: their access to consumer data. Although regulatory restrictions play an important role in limiting the use of transactional data for marketing purposes, banks and credit card 3 companies still have a wealth of options within legal and consumer preference parameters. Aimia s Global Loyalty Lens research uncovers another compelling truth: Eight in 10 consumers around the world are willing to share key pieces of personal information with brands. Yet businesses are failing to respond. Only 8% of consumers feel as though they are actually receiving better offers from companies as a result of sharing their details. The good news is that eight in ten consumers around the world are willing to share key pieces of personal information with brands

8 7 / Aimia Financial Services Loyalty Lens The combination of growing consumer willingness to share more data, and the deep well of both trust and insight that financial services firms have built up, creates a golden moment for the industry. Providers can trade on trust, data and willingness to share, to deliver more compelling and powerful reasons for customers to stay loyal to them. The trouble is that they are making poor use of the opportunity. Consumers consistently give financial services firms average ratings for relevant messaging. For both types of financial services firms, fewer than 10% of consumers in both Leader and Disruptor nations said that they were loyal because the bank or credit card company understands their specific needs. When asked to rate the relevance of messages they receive from financial services firms, only 18% of bank consumers in Leader nations scored them 9 or 10 out of % fewer than 10% of consumers in both Leader and Disruptor nations said that they were loyal because the bank or credit card company understands their specific needs 18% rated the relevance of communication from their bank a 9 or 10 out of 10 19% Credit cards did only marginally better at 19% rating the relevance of their communications 9 or 10 out of 10 The picture is only slightly better for credit card companies, credited by 19% of consumers in Leader nations for relevant communications. However, while consumers in Spain and the US are historically the most satisfied with communications from credit card issuers, both showed the greatest decline in relevance scores between 2014 and Given the tremendous advantage financial services firms enjoy with access to data built upon a trusted relationship, these low results show dramatic need for improvement. Disruptor markets have higher scores for relevance in both sectors, where banks earned approval from 35% of consumers for highly relevant communications, and credit card companies were well-rated by 38% of respondents. These markets have fast-growing middle classes, which typically leads to greater innovation among companies. Consumers also tend to be more receptive to messaging due to lower degrees of cynicism.

9 Aimia Financial Services Loyalty Lens / 8 WHAT GLOBAL CONSUMERS SAY ABOUT FINANCIAL SERVICES LOYALTY Credit card issuers have been closely aligned with the loyalty movement for some time. Affinity and loyalty-based credit cards are popular products, so it is no surprise that credit card loyalty programs rated highly. In Leader nations, credit card loyalty programs were fifth most popular among 15 industry sectors. Only supermarkets, department stores, fuel vendors, and pharmacies have a higher consumer share of loyalty program members. However that strong showing is masking a bigger long-term industry challenge because program membership is down substantially in key markets. In 2015, 32% of US consumers belonged to credit card loyalty programs, a decrease of 16% compared to the previous year. In Australia, membership dropped from 28% to 22% year over-year, and Germany s weak 9% in 2015 represents a precipitous drop from 17% in The lack of relevant messaging means consumers don t fear losing a trusted connection by terminating their loyalty credit card relationship. In Disruptor nations, credit card loyalty programs are more popular, ranking third among 15 industry sectors. Particularly in the cases of Brazil and India. This is due to strong credit card tie-ins with airline loyalty programs where, due to the size and geography of the two nations, the emerging middle class is heavily dependent on air travel. Banking loyalty programs are even more popular than credit card loyalty programs in Disruptor nations, ranking second. India leads all worldwide markets, with 43% of consumers involved in a banking loyalty program, and Brazil is not far behind with 39%. In Leader nations, most banking loyalty programs have historically been driven through their credit card offerings. The challenge for these banks today is to take advantage of their customer data by building a 360 degree view of their customers to deliver bespoke programs to appeal to the different customer segments. They have the opportunity to do this with customers willingness to share data and to receive meaningful and relevant offers from brands they trust. NEW PRINCIPLES FOR FINANCIAL SERVICES LOYALTY Digital technology, mobile payments, and a globally competitive landscape are all changing the way consumers interact with financial services firms. Banks can no longer assume that a long relationship means it s a healthy one. Credit card issuers are facing increased margin pressures and can no longer afford to buy loyalty with richer rewards. The industry has a golden opportunity to turn the deep insights and substantial goodwill of customers into powerful, relevant communications that inspire and enrich customers beyond the balance sheet. Consumers are signaling their trust in the financial services firms they choose, while also indicating that their preferred providers are coming up short in understanding what truly motivates them. Making these data-driven connections with each customer is the heart of sustainable loyalty, and should be a top goal for financial services marketers in 2016 and beyond.

10 9 / Aimia Financial Services Loyalty Lens AIMIA GLOBAL LOYALTY LENS METHODOLOGY Aimia s Global Loyalty Lens surveyed 20,168 respondents in 11 international markets: Canada, United States, United Kingdom, Spain, Italy, Germany, France, Australia, India, and the Middle East. In all markets, apart from the UAE, Brazil and India, the sample sizes are nationally representative. Because of the online nature of the survey, there is some bias towards younger, higher income groups in the UAE, Brazilian and Indian markets. We asked for their opinions, experiences, and feelings about loyalty and reward programs across three industry sectors and 15 industry sub-sectors. The industry sectors were retail, travel and financial services. The sub-sectors were supermarkets and grocery stores; department stores; petrol and gas stations; pharmacies and beauty retailers; credit card providers; airlines; restaurants and other food, including coffee; banks; hotels; mobile/cell and network providers; fixed line, broadband and cable TV providers; home improvement retailers; technology brands; car manufacturers, and other transportation (trains, etc.). HOW AVERAGES WERE CALCULATED The data was collected and averaged for each country. Countries were then aggregated into two groupings: Leaders and Disruptors. The eight countries in the Leader group were Australia, Canada, France, Germany, Italy, Spain, the United Kingdom (UK), and the United States (US). The three countries studied in the Disruptors group were Brazil, India, and the United Arab Emirates (UAE).To calculate the averages for Leaders and Disruptors groups, each country was given equal weighting towards the group s total.

11 Aimia Financial Services Loyalty Lens / 10 ABOUT AIMIA Aimia Inc. (TSX: AIM) is a data-driven marketing and loyalty analytics company. We provide our clients with the customer insights they need to make smarter business decisions and build relevant, rewarding and long-term one-to-one relationships, evolving the value exchange to the mutual benefit of both our clients and consumers. With close to 4,000 employees in 20 countries, Aimia partners with groups of companies (coalitions) and individual companies to help generate, collect and analyze customer data and build actionable insights. We do this through our own coalition loyalty programs such as Aeroplan in Canada and Nectar in the UK, and through provision of loyalty strategy, program development, implementation and management services underpinned by leading products and technology platforms such as the Aimia Loyalty Platform and Smart Button, and through our analytics and insights business, including Intelligent Shopper Solutions. In other markets, we own stakes in loyalty programs, such as Club Premier in Mexico, Air Miles Middle East and Think Big, a partnership with Air Asia and Tune Group. Our clients are diverse, and we have industry-leading expertise in the fast-moving consumer goods, retail, financial services, and travel and airline industries globally to deliver against their unique needs. For a full list of our partnerships and investments, and more information about Aimia, visit aimia.com.

12 MAKING BUSINESS