Banking & Finance and Education & Workforce Development and Small Business

VOICES FROM THE INDUSTRY: Consumers rarely raise banks above commodity status

July 24, 2006

Toothpaste. Laundry bleach. Cat food. Banking services.

Despite the hopes of many bank executives, vast numbers of consumers rarely elevate their banks beyond everyday commodity status.

Through traditional advertising and marketing, many banks attempt to differenti ate themselves as the bank of choice or the bank that makes a difference. Repeat the tag line often enough and hopefully potential customers will start to believe it.

One fact underscores this unfortunate commodity service status: According to recent market research, the No. 1 reason people change banks is to secure free checking, not to obtain better services. Consumers simply don't want to pay a fee to manage money that is already theirs.

Additional trends confirm this unfortunate commodity status when consumers believe that a bank adds service value by giving away free CD players, vacation trips and even cars in exchange for new deposits and checking accounts.

Taking a step back, this common practice takes on a surreal air. What do these giveaways have to do with sound banking practices?

When consumers perceive banks as a low-value commodity service, this belief dilutes critical strategic opportunities for the bank, the customer and the local community. In terms of a commodity view, one doesn't typically think of "partnering" with a washing machine to obtain clean clothes.

There's a reason for this commodity perception. The typical bank experience remains for many a mixed event, necessary for day-to-day life, but generally unpleasant or irrelevant.

Too many consumers rarely think of a bank as a strategic personal resource to help plan for a college education, to aid a small business struggling to meet payroll, or to begin the process of real wealth creation. For too many, a bank is simply a place to park one's money.

In an era of major bank consolidation, credit score-driven transactions and loan decisions made in far-away places, many bank customers adopt a defensive "so what" posture. They know that they have to have a checking account or a line of credit to do business, but beyond that, what's the point? Obviously banks offer much more than that, so how do Indiana financial institutions transform themselves out of a commodity perception?

Be relevant

The majority of bank customers-whether personal or business-already allocated their funds long before the bank marketing message arrived in their mailbox. Offering perceived "shotgun" or "cookie cutter" banking services only emphasizes the out-of-touch commodity perception of banks.

Carefully matching services to needs, with a tone of invitation instead of a hard sales focus, demonstrates that a bank actually considers a customer or prospect something other than a number or a data field.

Be personal

Financial issues-whether personal or business-evoke a substantial amount of emotion, oftentimes anxiety-based. Bank customers have worked hard for their money, and they generally object to perceived one-size-fits-all companies nibbling around the edges of their hard-won funds.

Be remarkable

In an industry increasingly perceived as providers of a commodity service, simply being remarkable represents a dynamic gold mine. Taking a few extra seconds to truly help a confused or anxious customer creates a remarkable positive moment.

As research attests, those remarkable moments form the core of an effective word of mouth campaign-consumers will tell their friends and associates about the extraordinary personal service they received, which sets the stage for a bank's real growth.

Be consistent

Building a positive reputation takes time, even years. Trashing a reputation can take only seconds. Simply adopting a marketing label that touts great customer service doesn't cut it, as bank customers are savvy and intelligent.

Consistent and sustained positive practice builds a brand that is believable and one that brings customers back again and again.

Be responsive

As mentioned earlier, many people possess a certain degree of anxiety in how their money is handled. Banks represent human-run organizations, so the occasional mix-up or outright mistake may occur. Given the bank industry position as a commodity service, this situation offers a superb opportunity to stand out with quick and responsive resolution.

Further, applying for a loan (large or small) can be an anxious experience for customers. Adopting a solution-focused attitude that reduces anxiety will make your bank a stand out champion.

In an age of faceless mega-mergers, transforming banks from everyday commodities into life-enhancing partners will elevate our businesses, our communities and ultimately, our lives.



Hale is president and CEO of Symphony Bank in Indianapolis. Views expressed here are the writer's.
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