Smart Customer Retention Strategies for Community Banks

Every community bank wants new customers, but when it comes to keeping existing account holders happy, they should consider the lyrics to a well-known children’s song: “Make new friends, but keep the old; one is silver and the other gold.”

It typically costs community banks significantly more to acquire a new customer than to expand an existing relationship. Yet, many banks lose sight of this. 

“Banks need to understand that inertia isn’t loyalty,” says Kristin McCauley, president of Mills Marketing in Des Moines, Iowa.
“Most customers stay because it’s harder to change banks, not because they love their bank. Switching is painful.”

Here are several ways community banks can ensure they stay top of mind with existing customers.

Customer appreciation strategies that build brand loyalty

Doug D. Fish, president and chief executive of $1.5 billion-asset BTC Bank in Bethany, Missouri, offers several ways his community bank tries to make existing customers feel appreciated. 

The first is through customer appreciation lunches. The bank hosts these at branches within 25 communities in the spring or fall, and 200 to 650 people attend. Bank staff grill hamburgers and hot dogs, serve cookies and drinks and bring staff from other branches to run the bank that day so customers know the employees serving them. It doesn’t cost a lot, it’s simple and it shows appreciation, says Fish.

BTC Bank also hosts tailgate parties outside branches during high school football season. The bank pays for the food, and the local high school gets a meaningful donation. “Whoever has the home game, that’s where we go,” he says.

Additionally, BTC offers a Banner Club for customers age 50 and over who have a $5,000 minimum deposit balance or a minimum loan balance of $75,000. Members enjoy complimentary, distinctive personalized checks, free money orders, cashier’s checks and stop payments, an invitation to participate in multiple group trips throughout the year, and a special annual dinner.

While good service is the No. 1 way to keep customers happy, Fish says showering them with appreciation helps.

Using customer feedback to improve retention and engagement

Frost Bank in San Antonio sends daily digital email surveys to select customers and analyzes the data monthly, says Brad Bremer, portfolio manager for deposits, who handles customer retention for the $52.5 billion-asset community bank’s consumer banking business. The surveys ask specific questions but also allow customers to add details and context. 

The bank aggregates the feedback and uses it to improve products and services or fix potential customer service-related issues, Bremer says.

For example, Frost Bank learned from its surveys that many of its customers are paid in ways other than direct deposit, so waiving monthly fees only for direct deposit left a gap. The community bank now also waives monthly fees for Zelle credits and mobile deposits. Customers also asked for the ability to set savings goals through their online banking account, and the bank followed through. 

“For younger customers, budgeting tools and financial literacy are very important,” says Bremer.

Bank Five Nine in Oconomowoc, Wisconsin, has also implemented positive changes based on customer feedback. When the $2.6 billion-asset bank conducted an electronic survey to a wide group of customers, one takeaway was customers’ interest in having the ability to deposit cash in ATMs. This way, they didn’t have to make their deposits during normal banking hours. 

The community bank explored cash deposits and other topics more deeply in follow-up focus groups with select customers and, based on the results, made the decision to upgrade ATMs, says Jeff McCarthy, senior vice president of marketing. Several customers have since commented how grateful they are for the change, he adds.

“Banks need to understand that inertia isn’t loyalty. Most customers stay because it’s harder to change banks, not because they love their bank. Switching is painful.”

—Kristin McCauley, Mills Marketing

Strengthening customer loyalty through community engagement

Finally, community banks shouldn’t be afraid to toot their own horns. 

Ben Pankonin, cofounder and chief executive officer of Social Assurance, a provider of digital marketing and compliance solutions for financial institutions, often talks to twentysomethings about which banks have the best local impact. Sometimes, respondents name large, national companies that have only a small local presence. They do this because the megabanks heavily market themselves as active in the community for local credibility. 

Community banks should be letting their customers know how active they are in the community, specifically, not generally, Pankonin says. How does the bank participate in community events? What community-based nonprofits do they help? They should highlight the specific way their efforts affect individuals in the community and continue repeating those stories throughout the year, he says.

Being active on social media is a good way to highlight the bank’s community impact.

Bank Five Nine, for example, runs an ongoing monthly program on Facebook called Tim’s Treat, where Tim Schneider, the community bank’s chief executive, visits a small business customer at their place of business. Recently, he visited a local restaurant and gave out gift cards for patrons’ meals. Bank Five Nine posts photos of the outings and drops hints on Facebook throughout the month as to where the next event will be to boost customer engagement. 

“Loyalty is built over time,” says Dave Sutton, Bank Five Nine’s senior vice president of retail banking. “It’s the result of many different experiences that evoke positive feelings.”

---