This blog discusses how financial services can balance customer needs and products to achieve success in the future. It also emphasises the importance of ensuring positive outcomes for customers.In financial services, there are often two paths to strategy: customer-centricity or product-centricity.
A customer-centric approach focuses on meeting individual customer needs and providing the best customer experience. A product-centric approach focuses on creating innovative financial products to meet customers' changing needs.
Yet, some questions remain:
Which approach is more effective? Which will make you more competitive? Or could the answer be a blend of both?
What does it mean to be customer-centric?
Let's explore customer-centricity, a business approach focusing on customer needs and preferences.
This approach involves understanding customers' wants, concerns, and motivations to provide products and services that meet their needs. By knowing these factors, businesses can offer products and services that cater to customers' needs.
Recent research from EY1 has found that nearly half of consumers are willing to pay more for better experiences. This presents a valuable opportunity for businesses to improve customer satisfaction at every interaction point.
At EV, our survey of 2,000 UK adults found that 43% would switch banks for better digital tools2. This means almost half of adults in the UK are interested in changing banks for improved customer experience. The key factor driving this change is the desire for better digital tools. The survey highlights the importance of digital tools in enhancing the customer experience for banks in the UK.
Developing strong customer relationships and fostering a loyal customer base can provide valuable insights into your target audience. This understanding enables you to customise your products and services to better meet your customers' needs.
To prioritise your customers, you need to collect data and feedback from surveys, reviews, and direct conversations with them. This will help you better understand their preferences and requirements. By paying attention to your customers' feedback, you can enhance your products or services to meet their expectations.
So here are the five things it's important to action:
- Understand your audience
- Personalise every interaction
- Deliver a seamless, 360-degree, omnichannel experience
- Be open and transparent to build customer trust
- Embrace a culture of ongoing innovation through customer feedback.
Embracing a customer-centric approach is more than just a strategy. It’s a commitment that can deliver significant long-term rewards to businesses.
What about a product-centric approach?
Traditionally, financial services have embraced a product-centric approach, which champions the design and promotion of financial products or services. These products and services are designed to meet customer needs or comply with regulations, but they end up being reactive.
This approach offers a foundation for innovation and competitive product creation. Financial institutions can leverage their expertise to develop sophisticated products that quickly respond to emerging market trends.
According to industry research3, 75% of adults aged 18-34 look for easy-to-use digital tools when selecting financial product providers, compared to 58% of those over 55.
However, while offering a solid foundation for innovation and competitive product creation, the product-centric approach can pose certain risks. Financial institutions run the risk of creating solutions that may not resonate with their target audience by focusing solely on product development rather than understanding customer needs. This can lead to a disconnect between the offerings and customers' needs and preferences, potentially losing customer trust and loyalty.
Challenges of balancing both
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Finding a balance between developing innovative solutions and catering to customer needs is challenging for any business. In a highly competitive market, such as financial services, where competitors offer similar financial products and services, it’s even more crucial for businesses to create unique solutions that meet their customer needs head-on.
To achieve this, businesses must stay current with the latest technological trends and developments and adapt their products to meet customers' evolving demands. However, this requires significant resources and budget allocation, making it challenging for businesses to balance investing in product innovation and meeting customer needs.
Digital financial planning tool can help
With the help of technology, businesses can overcome these challenges, streamlining their operations and building stronger customer engagement. Which leads to sustainable growth and a culture of innovation that drives success. This is particularly evident in newer financial institutions that adopt a technology-first approach, enabling them to be more nimble and develop their technology quickly.
One such technological solution is implementing financial planning tools and calculations delivered via APIs across a variety of customer journeys. These help financial institutions offer personalised solutions to customers. They also enhance service quality and help customers reach their financial goals, driving product innovation and instilling confidence in their business potential.
Ultimately, it's all about balance
In summary, finding a balance between customer needs and product innovation is not just a strategy but a necessity for success in the financial services industry. A blend of both approaches can often be the most effective solution. Businesses prioritising customer satisfaction and adapting to changing customer needs and preferences can truly stand out in a competitive marketplace, building trust and loyalty among their customer base.
So what next?
For more information on our research about retirement savings in the UK, read The Unadvised Nation Report 2024.
Sources
1 EY Future Consumer Index, 2023
2 EV, the unadvised nation report 2024
3 Moneyhub, 2024, “Digitise or die”: a call to arms for building societies.
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