Luring in new customers with high interest rates on savings accounts or by offering freebies is a well known and often used strategy for banks. It seems to make sense, but does it really? Perhaps banks would be better off rewarding their existing customers for staying loyal in these difficult times.

Take for instance the special offer from Credit Europe, a small Dutch bank that provides online savings accounts. Credit Europe, for a short period at the beginning of this year, offered higher interest rates to existing customers than it did for new customers.

The ‘bonus’ was targeted at all customers with an existing savings account. The difference wasn’t big: existing customers would get 4,15% while new customers got 4%; both rates had just come down from 4,5%.

‘Do something positive’
A spokesperson admits that the difference was small, but he stresses that it was primarily meant to make a point. “We wanted to do something positive for our loyal customers.”

The spokesperson didn’t really explain why the offer was only temporary. “We couldn’t sustain those interest rates any longer and had to drop them, like most banks.” Which of course doesn’t mean they couldn’t continue to differentiate between new and existing customers.

The representative did explain that they decided to focus on new customer groups. “We now target people that want to put their money away for 7 or 10 years. They receive extra high interest rates, but these are the same for new and existing customers.”

We notice a lot of companies tumbling over each other to lure in new customers with amazing offers, while leaving the backdoor open. In some cases, it’s even worth while to end a contract and sign a new one with the same company and get a lower price or better conditions. Which is strange because the only thing this does is create administrative overhead.

So does it make sense to provide special offers for existing customers instead, creating loyalty and possibly deepening the relationship with your customers? Will customers appreciate this, or will they still turn to a competing bank the moment they offer better rates? What do you think?