While generations X and Y are the retail banking customers of the future, banks' most loyal customers are their oldest customers, according to a recent Maritz Poll which also found that X and Y consumers are the least loyal and the hardest to please.
In fact, more than half of generation Y (61%) and X (53%) consumers polled said they have considered changing or actually have changed their primary banking institution in the past two years, compared to only 20% of 'Silent Generation' and 37% of Baby Boomer consumers.
Customer experience model
"For the most part, the current customer experience model at banks caters to the Silent Generation and Boomers, who more frequently bank in-person at branches. But, younger generation customers are much more mobile and rely more heavily on online interactions," explained Thad Peterson, division vice president of financial sector strategy and solutions for Maritz.
The banks' most unstable relationships exist with younger customers because younger people often haven't yet settled into a stable financial pattern. As a result, Peterson argued that banks that want to build long-term relationships with generation X and Y customers should think about three basic steps:
- Attract generation X and Y in the first place
Locational convenience has always been the main tool for attracting new banking customers. That's no different with generations X and Y, but the definition of locational convenience is changing, and now includes online and mobile channels, with consumers expecting "anytime, anywhere" banking. Banks therefore need a strategy to attract and retain prospective customers who rarely step into a banking office or branch.
- Offer products that give young people roots
The products and services offered should provide younger consumers with "roots" at the bank, such as providing incentives for using online bill paying services, and offering debit card reward programmes.
- Treat them the way they want to be treated
Ensure that the customer experience is appropriate for generations X and Y, and that it is completely consistent at all major bank touch points.
Hard to please?
In general, the survey found that younger people can be more impatient, less tolerant, and much harder to please than their Baby Boomer and Silent Generation counterparts. Younger customers are more likely than older customers to find fault or have problems with their primary banking institutions. For example:
- 37% of generation Y and 36% of generation X believe they would get better customer service at a different bank, compared with only 24% of Baby Boomer and 16% of Silent Generation consumers;
- 22% of generation Y and 21% of generation X reported being upset in the past year about high fees, while only 14% of Baby Boomer and 6% of the Silent Generation reported the same;
- 18% of generation Y and 17% of generation X consumers reported being upset about a lack of ATM locations, compared with only 11% of Baby Boomer and 3% of Silent Generation consumers.
How to please the young
It is no longer uncommon practice for businesses to reach out via social media in an attempt to attract younger customers. Even companies such as American Express and Bank of America are using social media networks (such as Facebook) to try to connect with new generation Y customers.
However, Peterson advises companies against relying too heavily on social media as a way to initially reach younger customers: "This is much like standing in a corner passing out business cards at a cocktail party. If you don't have a genuine relationship with these consumers, all you are going to accomplish is to diminish the value of your brand to that individual."
Peterson's recommendations for reaching new generation X and Y customers include:
- Be the source for their first primary debit card. Generations X and Y are the debit card generations;
- Provide big incentives for them to migrate to online banking, for example with a significant reward for paying bills online;
- Make sure that front-line bank employees are treating generation X and Y the way they want to be treated, and that they can solve problems on the spot;
- Stay in tune with how younger customers want to connect (for example, online banking, bill paying, and mobile banking are three customer touchpoints that must be state-of-the-art and part of every bank's overall customer experience).