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Customer retention in financial institutions (banks)

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  1. Introduction
  2. Importance of loyalty
    1. The cost of a new customer acquisition is high
    2. An informed clientele
  3. Implementation of the loyalty program
    1. The use of modern technologies
    2. New technologies
    3. The customer segmentation
    4. Example of CRM tool loyalty in a bank
  4. Communicate, innovate and customize
    1. Internet and viral marketing
    2. Cross-selling and negotiating
  5. A new approach to the credit card
    1. Loyalty cards
    2. Other benefits
    3. Packages and club customers
  6. The limitations of loyalty programs
    1. Complex and expensive tools
    2. The turn over in the retail banks
    3. The volatility of the good customer
    4. The risk of trivializing
    5. The image of the bank
  7. Conclusion

The customer loyalty program was first implemented by American Airlines in the United States in the year 1981. Today, virtually all airlines have adopted the customer loyalty program and is currently followed by other business sectors.

Ever since the initiation of the customer loyalty program in 1981 over 50% of consumers in the US, France and Germany became a part of the loyalty program by the year 2000.

For a long time, retail banking did not propose tariff discounts and other customer-oriented services. Indeed, banking customers were more stable when compared to the customers belonging to the retailing segment. Having said this, it is important to note that even banks experience customer hopping (fluctuation). Up to 5% of banking customers are un-predictable due to their hopping habits.

[...] The turn over in the retail banks Banks must continually rebuild the relationship with their banking customer proximity, which changes about every 5 years (function or location). The volatility of the good customer A good customer is a profitable customer, but it is difficult to determine the profitability of a customer over a period of time owing to market risks and uncertain events. In addition, banks are making great efforts to win the right customers. The phenomenon of bank hopping is often difficult to detect. [...]


[...] Banks seek to quantify the contribution of each customer in terms of profitability. A few customers are retained according to the present value and future potential. Two measures of profitability are the life cycle of customers and their present value. A customer is profitable if the revenue generated throughout the business relationship is greater than its cost of management and must therefore estimate these revenues. The test case must be weighed against other criteria such as profession, age and banking history. [...]

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