Rising Interest Rates, Competition and Bank Profits

Financial marketing strategies to maintain strong customer relationships in a rising deposit rate environment.

Amidst a strong economy and low unemployment rates, it wasn’t a surprise when the Federal Reserve recently raised the federal funds rate again. As this rate goes up, of course, it has a ripple effect on other interest rates, including those for consumer deposit accounts. That means an increasingly competitive environment for your financial institution, with consumers more likely to shop around, and account retention — not to mention profitability — at risk.

The Effect of Rising Interest Rates on Banks

You know how important interest rates can be to your customer acquisition and retention goals. It’s no secret that when interest rates rise, banks attract more deposits — and more competition for customers. According to a recent survey, nearly 64 percent of bankers saw deposit competition increase last year, and 77 percent expect the competition to grow during the next 12 months. As a financial marketer, this news may require a shift in your overall marketing strategy to ensure you retain your best customers.

Historically, convenient local branches, in-person relationships and traditional marketing tactics have been effective customer retention tools. With the current decline in branches and the increase in online banks and digital tools, the competition for customers is even stronger.

Additionally, the abundance of media channels makes it easier for consumers to shop for the best rates. In a competitive rising interest rate climate, customer engagement — and strong customer relationships — are more critical than ever.

Financial Marketing Deposit Strategies for a Rising Rate Environment

A well-prepared strategy, along with an understanding of your customers, your competition and market trends, are key elements to effectively win the battle for customers (and profits) in a rising rate environment. Use this knowledge to inform your tactics and strategies — like the ones below — to keep your financial marketing messaging on track.

Communicate consistently through multiple channels.

When interest rates rise, customers may be tempted to shop around for the best rates. And the abundance of digital and online tools has made shopping online easier than ever. Research shows that as many as 60 percent of bank customers research online before they buy.

To keep your brand top of mind, it’s essential to use of all your communication channels and platforms to stay in touch with customers regularly. Be sure your financial marketing strategy includes a presence on the channels your customers prefer. In addition, make sure that your bank’s website and mobile app are easy to access and contain up-to-date information. For instance:

  • Run popups or promotional callouts on your website or app showing your deposit account interest rates
  • Send email alerts when those rates increase
  • Post social media messages with quick tips or fast facts about your deposit products — or showcase product highlights with a whiteboard video or infographic
  • Send personalized letters or emails to remind customers how they benefit by maintaining a relationship with your organization

Educate with content.

While the communications above can be informational, they are likely to have a promotional focus. But educating your customers about the implications of rising interest rates on their finances offers an opportunity to communicate without selling. This helps position your brand as a helpful resource, building trust and loyalty.

Consider centering some of your content marketing efforts around deposit products, conveying the idea that rising rates can make your customers’ money work even harder — and you’re here to help that happen. When developing value-added content like this, keep in mind common consumer goals and how deposit products can help achieve those objectives. Use these ideas as a guide to creating newsletter articles, web pages, social media posts and other forms of content marketing.

For example, if the goal is saving for retirement, you might explain the difference between traditional and Roth IRAs. If it’s building an emergency fund, you might discuss money market accounts. Or you could provide tips on saving for a home improvement project or a bucket list vacation. Be sure to include soft references to how your product options align with your customers’ goals.

Use data to guide marketing campaigns.

You can take value-added content and, in fact, all of your marketing efforts up a notch by leveraging your data. With data analytics, you can deliver targeted, highly-relevant messaging to specific audience segments.

For example, research shows millennials are savers. So identify the millennials in your customer base and target them with a marketing campaign that positions your CDs as an attractive way to save for a car or house down payment. You can also review transaction patterns to identify which customers will be in the market for certain deposit products, which households have a high potential for opening new deposit accounts, and which customers are most likely to be lured away by higher rates. Then create marketing campaigns accordingly.

You can also use your data to include personalized content in your marketing messages. For instance, show how much more a customer could earn by placing a certain deposit amount in your money market account versus an average savings account. Use the customer’s own deposit account balance as a basis for the calculations.

Beef up customer service.

Much of the competition for deposit accounts comes from online banks. But those digital-only banks typically have fewer resources than brick-and-mortar financial institutions. Take advantage of this opportunity by providing a great customer experience across all your channels, including digital tools that make it easy to access and manage accounts in multiple ways. Listen to feedback from customers as well as internal teams so you better understand your customers’ pain points and what they want from you.

Another tip for delivering top-notch service: Adopt an enterprise-wide, customer-first approach. Educate all departments in your organization so consumers have a consistent experience with whomever they interact. For example, keep staff up-to-date on new products and services. Help your front-line employees connect better with customers by ensuring they understand and can discuss your organization’s deposit products and answer questions. Teach them to use an educational, benefits-focused approach to invite customers to try new products and services. After all, customers with more than one product or service are less likely to jump ship.

Winning the Competition for Bank Deposits in a Rising Rate Environment

Rising interest rates may breed competition, but they also provide new opportunities for customer engagement, retention and, ultimately, higher profits for your financial institution. By understanding what your customers want and delivering a better experience than your rivals, you’ll be well positioned to enjoy strong customer relationships and generate revenue.

If you need a plan for engaging customers in today’s rising interest rate environment, our experienced financial marketing team has the tools to help you take on the competition and win. Take advantage of CCG’s 40 years of experience in financial services marketing, that includes marketing strategy, creative and deployment, and data analytics — from upfront segmentation to assessing results. Learn more about our financial marketing solutions. Then schedule a free consultation with CCG Financial Strategist Greg Sultan or call 800.525.0313 for assistance.