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Are You Winning?

Lately I’ve seen a lot of posts bemoaning the lack of innovation in the bank and credit union industries.  I do agree that companies such as industry outsiders Apple, Google, Square and BankSimple seem to be leading the industry disruptions.  But there are companies, such as Ally, TD Bank and USAA, that are also innovation driven.

One thing that I’ve noticed about these three companies is, they all seem to be customer-centric.  While every bank and credit union talks about their great service, these three seem to back it up.  USAA and TD Bank especially seem to offer products that allow their customers to bank the way that is most comfortable to them.  Unlike their peers, these institutions don’t follow the crowd.  They lead the crowd and let everyone else pay catch up.

This follow the crowd mentality has always been something that has bothered me.  Especially when you realize that following everyone else is what brought us to this crisis in our industry.  But I think there are other issues at play here.  In the past, bankers were the ones that controlled the flow of money.  Without much work on their part, bankers could just wait for customers to come to them with requests.  Now, with disruptive technology, one does not have to rely on a bank to get access to capital.

I believe this “wait and see” approach is one reason there has been a lack of innovation in banking.  Here’s one example: everyone tends to agree that mobile banking will play an integral part in the future of banking.  But I’ve seen comments on blogs where executives were reluctant to offer mobile alerts because it will reduce NSF fees, so they were just holding off on mobile altogether.  Not very customer-centric is it?  Never mind that offering mobile alerts could drive up customer acquisitions and increase income.  They’re more focused on the “potential” loss of fee income.  But as competitors begin to offer mobile, they reluctantly look to add the service.

Now, the biggest reason for the lack of innovation?  That would be fear.  Particularly, the fear of losing entrenched power.  If you think about it, most bank and credit union executives view IT as a cost center.  Therefore, they don’t look at it as a competitive advantage.  Also, they don’t understand it, and really don’t want to understand it either.

Over the last few years, there have been articles about the purpose of physical branches changing.  Branch traffic has been steadily declining for years.  This means that the opportunities for cross-selling have gone down also.  But online usage is trending up.  Which means online account openings, bill pay, mobile, and other online services are also trending up.  Also, customer acquisitions are cheaper online.

So in order to survive, the people that currently have the power have to deal with those IT people.  Which means they’d have to give up power.  But more importantly, if the branch isn’t as important and online is, what will their future purpose be?  They don’t know that much about online banking, but they know a whole lot about branch banking.  Better to keep their head in ground and ignore the change that is happening around them.  Just maintain the status quo at all costs.

We all know that people that ignore change and try to stay the same are just spectators.  Spectators aren’t in the game.  If you’re not in the game, that means you can’t possibly be winning.  Which means you’re losing.

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It’s Service, Not Sales

The other day, a co-worker and I were discussing our opinions on the shifting focus onto sales in the banking industry. We both felt that the industry seems to care less and less about servicing the customer. My co-worker, who is a trainer for branch staff, gave me an example from one of her training sessions.

A trainee was lamenting about how annuities sucked. She said they were very difficult to sell because very few customers had that much in an account. The chances of a customer having $10,000 available to open one were miniscule.

My trainer friend asked her what was the first car she got at 16. The trainee looked confused, but answered with something like a late model Honda Civic. My friend then said, asking your typical customer to open an annuity is like you being able to go out and buy a BMW 700 series at age 16.

She went on to say that you can’t expect a DDA customer to pull $10,000 out of thin air. You have to take the time to build a financial relationship with your customers. You always hear that you have to sell sticky products to your customers. Typically, this is direct deposit, online banking, bill pay and e-statements.

After listening to my friend, I no longer feel that these are sticky products. If all you have is a DDA relationship, the customer could easily go across the street to a competitor. Believe me; it’s really not that hard to change your direct deposit and online banking information. If your new bank uses the same bill payer as your current bank, they may even be able to transfer your information over.

My friend told me that her old branch is reaping the rewards from her work years ago. When she sat down with a new customer, she opened the checking account and setup the other “sticky” services. Also, she would talk to them about opening a savings account, even if they didn’t have the minimum amount.

She explained that yes, they would get a $4 monthly fee, but she’d set it up so that each pay period, $25-$100 (whatever the customer was comfortable with) would be deposited into their account. This way, after a couple of months, they would have the minimum balance and begin building an emergency fund.

After 6 months to a year, she would sit down with them again and suggest moving some of the money to a CD so that they could get a better rate. They would still have some money for emergencies, but also be building more wealth. Within a couple of years, she’d refer them to our investment group. During all this, she’d be building a personal relationship with all her customers, plus getting more referrals as they told their friends.

After our conversation, it hit me that a savings account is the stickiest product that we have. It’s also the foundation for building a relationship with our customers. It all starts with servicing the customer and having their best financial interest in mind. As my friend said, it’s a lot easier to sell that $10,000 annuity when you service the customer and help them save that amount to being with.

What If You Were Goodyear?

March 13, 2008 5 comments

Here in NASCAR country, Tony Stewart’s rant about Goodyear’s tires was all over the news. In this particular tirade, he blasted Goodyear for the hard tire combination used in Atlanta.

“That’s the most pathetic racing tire I’ve ever been on in my career. They exited out of Formula One. They exited out of IRL. They exited out of CART. They exited out of World of Outlaws. And there’s a reason for that: because Goodyear can’t build a tire that’s worth a crap,” said Stewart.

Normally, Tony would have been generally ignored. This time, other racers, such as Dale Earnhart Jr and Jeff Gordon made similar comments, though with a lighter tone.

Goodyear issued a response to Stewart’s criticism and explained that after earlier tire testing, they had no performance problems. Also, there were no complaints from the previous day’s race. However, the tire used in the race on Sunday wasn’t the same as what was tested last year.

Just a few years ago, Goodyear Firestone went through similar scrutiny with the tires they supplied for Ford Explorers. I believe a settlement was reached in that instance. So, this is the second time within 10 years that the quality of Goodyear a tire company has been brought into the public eye.

It seems that most banks’ and credit unions’ biggest differentiator is superior service. What would you do if one of your biggest customers publicly complained about the quality of service you provided? In Goodyear’s case, drivers had complained before. It just all came to a head recently.

How would you handle a large customer that finally got fed up? I have seen some gross errors made and it usually boils down to basic operations procedures. Sometimes, instead of focusing on sales, you need to make sure people can pass Banking 101.

Customers mainly want you to just not mess up. Situations like giving a customer access to a million dollar account that they said wasn’t theirs is just wrong. Sometimes, you can’t just fix a situation. You have to look at what caused the situation to begin with and fix that also. Also, listen to the complaints you may be getting. By digging a little, you could help make everyone’s experience a lot better and live up to that superior service.

Update: Ron Shevlin’s post is a perfect example of customers not wanting their FI to mess up.

5 Things Bankers Can Learn From Nintendo

November 26, 2007 Leave a comment

Growing up, I was really into video games. I have very fond memories of my TRS-80 home computer. It is my interest in video games that helped determine my current career path. Watching Nintendo’s current success with both the DS and Wii (I have both) has been very interesting. I’ve noticed some things that banks and credit unions could pick up in this heated race for the game system market.

1. Following the crowd can be expensive

Microsoft’s Xbox 360 and Sony’s PlayStation 3 (PS3) both have the latest and greatest in technology. Sony is even trying to push their Blu-Ray technology with the PS3. Putting this new technology into their systems has driven up costs tremendously. Nintendo, on the other hand, decided to go with older technology and were able to offer a system at half the cost of both systems. This, and the fact that only Nintendo had a game bundled, was one of the reasons the Wii is outselling both the Xbox 360 and PS3 combined.

For FIs, this would be similar to following the crowd with offering just .125 less on a loan, or giving away an iPod Nano instead of an iPod Shuffle. Me too products do nothing to differentiate you from your competitors. You’ll mainly get the most fickle customers.

2. The loudest customers don’t represent all your customers

Microsoft and Sony both geared their systems toward the hard core gamers. These customers wanted a faster system with better graphics that offered more realism. Nintendo decided to offer new game play, with the introduction of the Wii remote and nunchuk. Hard core gamers weren’t too enthused with this. Now, the Wii is the video game system darling.

For FIs, this would be similar to launching new products such as internet banking. There may be vocal customers that hate the new system because it doesn’t do things the old way. The majority of your customers may be so pleased with the new system that you could see an increase in usage.

3. Create new niches

Microsoft and Sony both launched systems geared towards the same market, 10-35 y/o males. Nintendo, widely viewed as a company for kids, went after the Non-gamer market. Given that this niche is larger, Nintendo seems to have made the correct bet. Grandparents, who have never played a video game in their life, have enthusiastically taken to the Wii. I’ve seen this first hand with my mother-in-law and uncles.

For FIs, this could mean targeting kids from age 4-12. A lot of banks do not actively market to kids. Think about it, you could offer them a special savings account, and then market a student checking account later in their life. Building the foundation can lead to a long, profitable relationship.

4. Go for profit. Not market share, then profit

The Xbox and PS3, after the price drops, now cost as low as $280 and $400, respectively. They are both losing money on the hardware sales but expect to make money on the increased market share and software sales. In contrast, the Wii costs $250 and Nintendo makes a profit on each one that is sold. On top of that, they also have income from software sales.

For FIs, you could market more profitable products or even offer services that save you in costs. An example would be E-Statements. Yes, customers can view their statement through online banking, but do they have the option to not receive a paper statement at all? If you take all the costs associated with handling paper statements and compare it to E-Statements, I think you’ll be surprised. You can’t just look at the postage costs. How much does it cost to print the statement, buy the envelopes, maintenance the machine that stuffs the envelopes, pay the workers to handle to the statements, handle returned mail, etc.

5. Nothing beats word of mouth marketing

The last time I went into the electronics section of Wal-Mart and Target, I could easily find a Xbox 360 and a PS3. All the Wiis were sold out. It seems that the new game play has brought fun back into family time. One of my aunts has asked about what she needs to buy when she gets a Wii. Her husband wants me to bring mine to his sister’s house when we see the family at Christmas. Needless to say, playing the Wii was a big hit at Thanksgiving.

For FIs, what are you doing to get your customers excited about their financial relationship? In our area, SunTrust offered a checking account where they give you $50 or donate $100 to the charity of your choice. A local church’s members opened 40 accounts and had the $4000 donated to the church for a new bus. Typically, I’d expect to see this from a credit union, but it seems that the bankers are picking up a trick or two.

Categories: Marketing, Sales, Strategy

Importance of Quality Tellers

Tellers tend to be the first point of contact for a bank/credit union customer. Unfortunately, teller positions are becoming harder and harder to fill. They tend to have the highest turnover and the lowest pay. As financial institutions steadily move towards a sales environment, tellers are being asked to do more and more. Because they have the most customer contact, tellers are the ones that are primarily asked with up-selling products.

Banks and credit unions are finding that they need to adapt to this new sales environment. Higher pay, benefits and training are becoming necessary to keep quality tellers. Some banks, such as LaSalle Bank, are considering requiring an associates degree instead of a high school diploma. Community colleges, such as Central Piedmont Community College and College of DuPage have started programs that train new tellers to help fill this need. Banks and credit unions that do not make changes in how they obtain and keep tellers will find themselves far behind the ones that do. More discussion can be found here and here.

Categories: Sales

Are You Selling or Phishing?

July 18, 2007 2 comments

Over on InfoWorld, Roger Grimes talked about his experience when his bank called to offer him a new service. After going through the sales spiel, the sales rep then asked him to confirm his account information, billing address and SSN. Understandably, he refused to give out the information, but asked if the sales rep would tell him the information and he would confirm it. This wasn’t an option and the sales rep couldn’t access his account nor complete the upgrade without his confirmation..

How many of you have given out personal information on a sales call? I know I have in the past. Now, I tend to hang up before they even get to the sales pitch. Even more so since I got burned with a “debt reduction offer.”

Does your financial institution follow this same process during phone sales? For me, it doesn’t exactly inspire confidence when the sales rep can’t pull up my information and they’re the one that called me. In Mr. Grimes’ case, either the sales process is broken, or the sales rep needs more training. Regardless, an experience like that can leave a very bad taste in a customer’s mouth.

Categories: Sales