3 Questions Financial Institutions Must Answer to Survive the Era of Uncertainty

There are some unmistakable glimmers of hope on the horizon, but nearly every facet of life remains disrupted and uncertain. Our work, family, and personal lives bear little resemblance to what they did a year ago. The same goes for our financial lives.

As organizations that help people and businesses manage money and retain their livelihoods in the face of an ongoing recession, financial institutions have an enormous role to play over the next few months as the world looks to the future with a COVID vaccine and a life with less uncertainty.

To make a positive impact while securing their own futures, financial firms have a few key questions to consider as they confront the current environment of uncertainty.

How can we better understand and serve the needs of small business owners?

Small businesses are the life blood of any economy. Under today’s business conditions, with shutdowns and constantly changing regulations, they’re experiencing unbelievable uncertainty. It’s easy to group small business owners into one homogenous bucket, but each and every small business owner is unique and should be considered as such.

We’ve spent considerable time with small business owners. We know first-hand that they want their partners to “get them,” to understand what they are going through, and to build products and services that are for them—not just a consumer product or service that is retrofitted, or a corporate product that is “right-sized” for small businesses.

One approach to building B2B strategies that will work for financial institutions is through a segmentation approach called need state segmentation. In this methodology, we explore all possible occasions or needs that a business may be dealing with.

We go deeper than simply understanding that “Business Owner Joe” needs to complete payroll earlier and quicker. We explore that “occasion” and parse out multiple needs for that single occasion. We then find clusters of needs in the data, size them, and profile those clusters in order to build the right product or service for a given customer group, then develop communications strategies to reach each segment.

What can we do to increase and reward customer loyalty?

Across customer segments, there is a huge opportunity for financial institutions – particularly in America – to revisit how they reward customers’ loyalty. Financial firms can choose to develop new programs with customized services, or they can simply dial up their dollars-to-points ratio. But the only way to develop a truly compelling rewards and loyalty program is to put attractive offers in front of consumers and test them.

Many of our clients have a list of dozens of options, and every one of them has a champion within the organization who thinks theirs is the best one. In the near-term, it’s clear that travel rewards won’t be the highlight of anyone’s reward program. So what will drive usage and loyalty? To test properly, we need to create trade-offs – discrete choice, max diff, pairwise. All of these are solid trade-off methodologies, but none do well with an abundance of options.

That’s why our Marketing and Data Science team developed a way to test up to 125 options/attributes via max diff exercise we call Mega Max Diff. This technique produces results at the individual level for all attributes, similar to a standard max diff.  Each respondent sees a random subset of approximately 30 attributes with data from all the respondents incorporated into an imputation algorithm that uses Hierarchical Bayes modeling to borrow information from similar respondents to derive individual-level results for all attributes.

It’s a great example of how we’re leading in sophisticated analytics. The jargon-free bottom line for our clients:  we help them avoid blindly removing potentially game-changing attributes in their loyalty programs. We let the consumer do it themselves!

How can we segment customers by tech savviness and build better experiences for them?

Representing another wholesale change in customer behavior, the digital revolution was already upon us before the pandemic. Now it’s burning red hot. From mobile wallets to pay-over-time offerings, consumers have been thrust into digital tools faster than they had planned. Financial institutions need to understand how to support consumers at all levels of the tech adoption curve.

At a basic level, financial institutions should be conducting consumer segmentations focused on digital-savviness. However, when it comes to developing or enhancing products and services, user experience (UX) research also needs to at the top of their list.

Many organizations will claim that A/B testing on a site or platform can inform the optimal design. But finance is so important to consumers that making changes to the interface for testing purposes could be detrimental to the customer relationship. Instead, financial brands should conduct primary UX research, a digital approach to qualitative research that can be done accurately, thoroughly, quickly, and at scale. Building this feedback loop outside of your site or platform ensures you’re serving your customers, not alienating them.

In a time of ongoing uncertainty, financial services brands have a huge opportunity to make a positive impact, while building loyalty and creating game-changing products and services. The right kinds of research and insights can help them answer their most important questions.