Recessions affect businesses in all sectors; however, banks and other financial institutions are hit hardest when the economy is in turmoil. Economic hardship results in high-interest rates, inflation, and a lack of consumer spending and confidence. To stay afloat, banks need to convert and retain customers, which can increase profitability by 25% to 95%. Community building is the perfect way for banking businesses to stay competitive without a big marketing budget.
Let’s look at each element and real-world use cases of banks using community-building as a business strategy.
How Community Can Benefit The Banking Industry During A Recession
Customer Loyalty And Retention
Building a strong community of customers can help establish brand loyalty and increase customer retention. During a downturn, retaining existing customers is crucial for businesses to maintain revenue and weather the economic storm.
Building a strong community can also help businesses to foster a sense of connection and belonging with their customers. This emotional connection can create a positive customer experience and help to establish trust and credibility, which is especially important during a downturn, as customers may be more likely to switch to competitors who may offer a better value or a more positive experience.
By providing a supportive and inclusive community, businesses can differentiate themselves from their competitors and establish a loyal customer base that will stick with them through good times and bad. This can help businesses to remain resilient and bounce back after a downturn.
Increased Word-Of-Mouth Marketing
A strong community can also serve as a powerful marketing tool. Satisfied customers are often willing to share their experiences with friends, family, and social networks, which can help banks expand their reach and build their brand.
Furthermore, a strong community can serve as a source of customer referrals, as community members may recommend their bank to others in their network who need financial services. This can be a cost-effective way for banks to acquire new customers and grow their business, even during a recession.
A strong community can also provide a platform for banks to share their expertise, educate customers about financial literacy, and build trust with their community. This can help banks establish themselves as industry leaders and further solidify their position as a trusted and reliable source of financial services.
Customer Engagement
By engaging with their customers and understanding their needs, banks can develop new products and services that meet the evolving needs of their community. This can lead to increased revenue and a more diversified revenue stream better equipped to withstand economic downturns.
A strong community of banking customers can also provide valuable feedback and insights into industry trends and consumer behavior, which can help banks make informed decisions and stay ahead of the competition. In this way, community building can play a critical role in assisting banks in maintaining stability and profitability during economic downturns.
Resilience
In times of economic hardship, businesses with strong communities are better positioned to withstand downturns and come out stronger on the other side. Communities provide a source of support and encouragement for businesses, helping them to stay motivated and focused on their goals.
Overall, community building is an effective strategy for businesses to maintain and grow their customer base, even during challenging times. By fostering a sense of belonging and connection with customers, companies can build resilience and increase their chances of success.
Opportunities For Collaboration And Partnerships
By engaging with their customers and the wider community, banks can identify new business opportunities and form strategic partnerships that can help to drive growth and increase their reach. These partnerships can take many forms, such as joint marketing initiatives, co-branded products, and services, or cross-referral programs.
By working with other businesses in the community, banks can tap into new customer segments, expand their reach, and build a more diverse and resilient customer base. This can be especially valuable during a recession, as new partnerships and collaborations can help banks to offset the impact of declining economic activity and maintain their revenue and profitability.
Tips For Banks To Build And Strengthen Community Ties
Several banks have successfully used community building to gain and retain customers. US Bank has a strong reputation for supporting local communities through corporate responsibility initiatives. Their employees are encouraged to volunteer and support causes. This focus on community engagement has helped US Bank establish strong relationships with its customers and build a loyal customer base.
Building and strengthening community ties is crucial for banks to establish their presence and grow their customer base. To achieve this, banks can implement several effective strategies, such as hosting community events and workshops, supporting local causes and organizations, and offering personalized services and tailored financial solutions.
By hosting community events, banks can create a platform for customers and community members to connect and engage with each other while demonstrating their commitment to the community.
Supporting local causes and organizations helps banks build trust and credibility with their customers while positively impacting the community.
By offering personalized services and tailored financial solutions, banks can provide a unique and personalized customer experience that meets their customers’ specific needs and preferences. This level of personalized attention and care can help to build strong and lasting relationships with customers and establish a loyal customer base that will stick with the bank through good times and bad. Overall, these strategies can help banks to build and strengthen their ties with the community and achieve long-term success.
Conclusion
Community involvement is an excellent way for banking businesses to strengthen their ties with customers, employees, and other stakeholders. Thanks to customer retention and loyalty, increased word-of-mouth marketing, engagement, community partnerships, and resiliency, it can also be a boon for their bottom line.
In addition to community-building efforts, bankers must collect agile market data to stay ahead during the impending recession. Banking companies need to understand what drives their customer’s decision-making process, what obstacles they face, and how they can make their services more accessible for people to use.
Learn more about market research by reading our latest report, The Future of Banking: Mapping the Financial Customer Journey.
