It’s easy to be swept along by the digital revolution. After all, it offers a wealth of opportunity the like of which you’ve probably never seen before: new ways of interacting with your customers, a chance to offer novel services and capabilities that put the customer back in control.
Recent research discussed in Harvard Business Review found that customers instinctively prefer familiar experiences. They don’t actually want to be delighted with “ever-fresher, ever-more appealing products”. Why? Because they make most of their purchase decisions automatically: “They look for what’s familiar and easy to buy.” The article cites examples of failed innovation that could well have had disastrous consequences for Instagram and PepsiCo. It also cites America’s Southwest Airlines, Vanguard and Ikea, with their long-lived competitive advantages, as exemplars of sustaining performance by delivering what customers want.
So, how do these companies achieve that? The article reveals that these companies have been going against conventional wisdom that says they must reinvent themselves from time to time to stay modern. They have instead been “pursuing largely unchanged strategies and branding” for the last two decades. It argues that this makes perfect sense, since customer retention is actually about “helping customers avoid having to make yet another choice”.
But what does this actually mean? It means offering customers familiar products and services, so that they purchase them automatically. If you offer customers something unfamiliar, they will need to reevaluate whether they need it and may decide to go elsewhere.
Being mindful of banking’s broad customer base
When you apply this thinking to the world of finance, firstly you see the media telling established banks that they must keep pace with the new fintech startups or risk becoming extinct. Yet, listening to the advice coming from HBR, established banks should actually focus on ensuring the innovations they deliver are relatively familiar so that customers can adopt them instinctively. Why? To help their customers “avoid having to make yet another choice” – a choice that may result in them moving elsewhere. After all, traditional banks have an established customer base. To keep customers loyal, banks must consider their needs and ensure technology driven innovations aren’t delivering something too big too soon.
What too big too soon means is different for different demographics. So, be mindful that your customers come from every demographic: from those born before the first TV broadcast, through to those who witnessed the birth of the internet and the mobile phone, to those who have never known the world without modern technology.
Avoid radical change
Radical change can be overwhelming for some, and risks driving attrition. Your customers need to be able to adopt new technologies at their own pace, one step at a time if needs be. Don’t suddenly make massive changes to your online or mobile apps. Instead, evolve them gradually so your customers can adapt easily and enjoy the digital customer journey.
You only have to look at First Direct – this approach has worked for it. First Direct was one of the first online banking platform providers to offer banking without branches when it opened in the late 1980s. Many thought its customers would quickly move to the new fintech challengers when the market opened up five years ago. They haven’t. Why not? First Direct hasn’t been adopting the latest and coolest technologies in a quest to keep pace – quite the opposite in fact. First Direct understands that its customers’ subconscious minds thrive on frictionless familiarity, so is careful not to innovate too much too soon.
With each change you make, be conscious of your customer segments and deliver to their needs. Test different options for your innovations with your customers to find out what works and what represents a step too far. After all, customers have more choice than ever before. Move at a gentle pace, so you don’t push your customers into making a conscious choice about who they bank with.
