Bank leaders need to act fast to prepare for a tectonic shift in consumer psychology. 81% of US consumers think a recession is coming before the end of the year, a new CNBC survey has found.
While the looming recession rightly has many business leaders concerned, it’s important to recognize the enormous opportunity. Bank executives have a real chance to get ahead of their competitors and increase their market share.
But first, you need to ask yourself three things:
1. Do our customers enjoy our branch experience?
2. Is our digital offering stronger than our competitors?
3. What type of service will our customers want from in the recession?
Only by evolving rapidly and figuring out what customers will want during the recession can you win the banking revolution.
How to Attract Customers During a Recession
To drive account openings, loan originations and more, take advantage of these three tips:
1. Protect good costs
2. Reinvest in the customer banking experience
3. Upskill your staff
Tip 1: Protect good costs
Arguably one of the worst decisions banks make during times of economic downturn is to slash good costs and bad costs alike.
Put simply, a good cost is anything that adds value to your customer offering. For example, your Digital Waitlist technology, the lease for a popular branch or having lots of staff in-branch.
By contrast, a bad cost is something that detracts value from your customer offering–-leases for branches with low traffic or archaic exit-surveys.
Instinctively, you may want to cut costs across the board to save your banking costs. However, in cutting the good along with the bad, you’re only creating a larger problem further down the line. In fact, you’re unwittingly sending your financial institution into what’s become known as the “death spiral”.
How the death spiral works
By definition, the death spiral is the downward cycle by which organizations fall into financial trouble because they repeatedly reduce their goods, services and customer offerings and fall out of touch with the modern consumer.
For example, by understaffing your branches to reduce personnel costs, the wait time for service will inevitably increase. In turn, your customers may become fed up with this poorer branch experience. Eventually, they’ll close their account with your bank and go to a competitor offering a more pleasant branch experience.
Ultimately, the only way to avoid this vicious cycle is to protect your good costs. Make sure you’re not diminishing your customer offering to get through the recession.
Tip 2: Reinvest in the customer banking experience
It may seem counterintuitive to reinvest your savings during a recession but it’s a proven way to attract customers.
For instance, while many banks struggled to attract customers, Citigroup’s revenue grew in the six years following the 2008 recession. Economists have largely attributed this to their investment in quality services that enhance the customer experience.
In other words, by reinvesting in the customer experience, Citigroup managed to draw in new customers.
Research by consultancy firm Deloitte reinforces this idea. In the Next Consumer Recession Report, Deloitte discovered that organizations with a high reinvestment rate see much greater ROI results following a recession than their competitors.
The bottom line is that bank executives cannot afford to be overly cautious in the face of a recession. They need to constantly innovate to stay ahead of the game and ensure their customers remain loyal to them.
Tip 3: Upskill your staff
Increasing your operational efficiency, especially during a recession, is one of the smartest ways to bolster your margins.
Unfortunately, banks face one clear obstacle. Earlier this year, Workday found that 38% of businesses think a lack of workforce skills is their greatest blocker on digital transformation.
As such, it’s essential that bank executives focus on upskilling staff through additional training courses and skill development. It’s a cost-effective method that can bring about a real improvement in efficiency across your branches.
Similarly, in a recession, strategic hiring is more important than ever. Every hire needs to count. Make sure to thoroughly screen prospective employees for high-impact roles and low-impact roles alike to ensure you’re getting the most out of your teams.
Prepare for peak season with Qudini
Just like the recession, the holiday season is right around the corner. With solutions for Appointment Booking, Virtual Queuing, Event Booking, Click and Collect and more, Qudini can help you to prepare your business for the holiday season