Customer Acquisition Models for Banks & Credit Unions

To determine the most effective process of acquiring new customers it's helpful to consider the customer journey. This journey begins when a consumer recognizes a need and is complete when a brand or company is chosen to satisfy that need. The customer journey can be broken up into three basic phases.

• Discovery: The consumer recognizes a need and begins to evaluate different options to satisfy that need.
• Consideration: Consumer actions (like research and visits to your website) indicate potential interest in your organization.
• Conversion: The consumer takes actions that make them a customer.

While this customer journey model can be used to describe any type of purchase, banks and credit unions face unique challenges during customer acquisition. Reliable banking is typically a service needed by all adults that earn and spend money. This need is generally recognized during the onset of adulthood and is heavily influenced by the ways parents or mentors take care of their banking needs. 

As banking innovations and digital technology offer ways to potentially make banking more convenient, traditional banks and credit unions have even more competition. In fact, over 80% of banking customers check their balance online. An effective customer acquisition process in the banking industry will require organizations to market the ways they are a better choice than the competition.

Creating a Customer Acquisition Model

Customer acquisition can be considered a type of marketing. It is the process by which potential customers recognize your brand and determine why your company will be the best choice to meet their needs. However, acquisition doesn't take place until after the recognition realized by your marketing strategy. In other words, marketing drives recognition while acquisition achieves conversion. By creating a customer acquisition model, you can determine the most effective way to acquire customers while maintaining your budget.

Consider your acquisition model as a roadmap that defines each step of the process you use to acquire new customers. It's important to evaluate the way your acquisition process has adapted to new technology and the competition that comes with it. When you use metrics to understand what techniques lead to the best results, you can fine-tune the process to improve the cost-effectiveness of acquiring new customers. 

Elements to Consider

Certain elements will advise the steps you take to acquire new customers. While they might change based on your unique organization, you can generally expect these elements to be a vital part of creating a successful customer acquisition model.

• Your Customer: By identifying your ideal customer, you can target those who are most likely to convert and who have the highest lifetime value. As a financial institution, you have the responsibility to understand the different banking needs of customers seeking investment opportunities, commercial banking options, and personal banking requirements. You'll also want to consider the different approaches various generations prefer to meet their banking needs.
• Your Business Model: Understanding what makes your bank or credit union stand out from local competitors and online banking options can help you increase your customer base with additional leads. For instance, if you stay on the cutting edge of technology, you have the ability to entice customers who might otherwise choose a fully online banking option. If your customer service makes you stand out in your area, it can be a crucial part of your acquisition process as well.
• Your Goals: Begin by defining the organizational goals of your bank or credit union. By understanding your target metrics, you can design your customer acquisition model to meet these goals.
• Your Customer Acquisition Cost: The cost of bringing in each new customer will be a crucial factor in the efficiency of your process. By identifying your specific costs, you can use your customer acquisition model to reduce your CAC.
• Existing Customers: Maintaining the satisfaction of loyal customers is essential to success in the banking industry. The average US adult has used the same primary checking account for more than 14 years. While younger account holders are more likely to switch, millennials kept accounts for nearly a decade. Ensure that your customer acquisition efforts don't result in the neglect of existing customers. 

Customer Acquisition Cost

The cost of your division's efforts to acquire a single customer is referred to as customer acquisition cost (CAC). These costs may include marketing costs, events, and advertising. Typically, CAC is calculated when utilizing a specific acquisition method for a set window of time. The formula for calculating CAC is simple. You need to divide your marketing costs by the number of customers acquired during the set time period. However, this formula fails to take into consideration the cost of wages for the marketing team or software used to complete the campaign. Furthermore, CAC can vary widely across industries, depending on the cost of products and services, the length of time a customer is typically retained, and the complexity of the customer onboarding process.

Part of the job of your customer acquisition model is to reduce CAC. While some industries cut CAC by changing marketing techniques or targeting a more precise customer base, banks and credit unions are more likely to reach success through focusing on the onboarding process. Consider what customers expect from their bank. These needs include security, convenience, and ease of access. The act of moving to a new bank requires changing accounts, canceling associated cards, rerouting direct deposits, and altering bill collections set on autopay. By reducing the time and potential stress associated with these requirements, you can make it easy for consumers to enjoy the benefits of banking with your institution.

Your Customer Acquisition Strategy

Effective customer acquisition is essential to the growth and success of any company. Banks and credit unions not only face competition from local competitors, they are also up against Fintech and digital banking models that claim to increase convenience. To improve your conversion rates, it's important to map out a long-term customer acquisition strategy. Consider how these elements work to make a successful customer acquisition process. 

• Sustainability: A successful customer acquisition model utilizes investments and methods that work for long periods of time. This means the marketing efforts, onboarding methods, and staff requirements must be practical to uphold for the foreseeable future.
• Flexibility: Like other industries, technology growth heavily affects the way bank customers prefer to do business. As consumer preferences change and banking technology become increasingly necessary, your customer acquisition strategy should have the flexibility to adapt to these changes.
• Targeted Marketing: While most consumers need banking services, these services can vary widely. Customer acquisition is a process that lets a specific consumer know you can meet their needs. Even if you take care of clients with all types of accounts it's important to target customers based on specific market segments. For instance, you wouldn't target a personal banking customer with corporate loan information.
• Diversification: When it comes to offering multiple products to existing customers, banks and credit unions are in a great position. Consider the way a customer with a personal bank account might be interested in investment options, a savings account, or a business loan for a startup. Your customer acquisition strategy shouldn't be limited to new customers.

Optimize Your Customer Acquisition Model for Growth

It's no surprise that banks and credit unions face unique challenges when it comes to customer acquisition. Whether consumers depend on their financial institution for personal banking, commercial accounts, investments, or other services, they feel comfortable with an organization that they know and trust. While this can be great news for your retainment rates, it can make the acquisition of new customers more difficult. With the growth of technology and innovations in banking, many customers are looking to alternate options for increased convenience and reduced time spent on banking tasks. Your customer acquisition model can help you navigate these challenges and find ways to increase growth.

Cotribute helps community banks and credit unions find new ways to grow and compete with digital-first neo-banks. By creating a digital UX platform designed to work with your unique brand and integrate with existing platforms, we help financial institutions reduce the time it takes to open an account to 5 minutes, increase conversion rates by 60%, and decrease the cost of operations by nearly half. If you're ready to accelerate your digital strategy in a way that makes you a competitor in today's financial marketplace, schedule your demo today.