KQ Article

How do consumers feel about this industry? What do they really want from us? The Collaborative gets some answers.

 It’s the question we’ve been focused on all year: How can banks and credit unions survive — and thrive — in the new banking environment? To find answers, the 2011 Deluxe Collaborative knew it would have to understand what consumers really feel about financial institutions: regulations, products, processes. Warts and all.

We spent four weeks with more than 100 consumers to get a reading. We learned that to thrive, this industry must revisit its current approach to:

• Targeting: who and how we market
• Products: their role in the value chain
• Charging: establishing revenue streams without alienating customers
• Language: adopting phrases that signal positive change

Who, how to target
We found that people generally fall into one of two mindsets regarding what they want from their financial institution:

1. Barrier elimination: “I want my money when I want it, how I want it and for free.” These consumers want financial institutions to simply “hold” their money, with simple, fee-free access.
2. Goal achievement: “I’m willing to pay for help in better managing my money.” These consumers have goals they want to achieve and are interested in deeper relationships with their financial institutions.

Does your messaging and positioning appeal to what consumers want most from you? Equally important, can you back this up with what you offer?

The role of product
A focus group exercise confirmed our findings above on product design. During the exercise, group members were shown two products: a traditional bank account and a new account designed to help them achieve their goals. This second product gave customers flexibility to choose a financial goal that closely resembled theirs, while incorporating controls they could manage. Although admitting hey would leave their current institution if charged for their existing account, these consumers overwhelmingly agreed that the new product provided value that they would pay for.

How to charge
Traditional revenue sources continue to vanish due to new regulations, while consumers simultaneously expect more banking services to be free.

We trained them well, because many banking products have been provided at no charge for a long time, and it’s a tough sell to start charging for them. You cannot change from “free” to “fee” without adding some kind of value.

We asked our focus groups to react to a variety of pricing scenarios. We forced them into a world that required them to pay for banking in some way, either with time or money. We learned that consumers are willing to pay if they see new value. They were also open to new pricing scenarios such as annual banking subscriptions, reduced pricing by viewing ads, and flexible costs based on account selections.
Surprisingly, participants rated viewing local ads as the most preferable pricing scenario. Although the younger participants were more open to new pricing scenarios, many older participants were also willing to consider their use.

What to say
Language has been a recurring theme across our Collaboratives. So have the challenges of dealing with the banking jargon that sneaks into our conversations if we’re not careful.
Too often, customers and members view our terminology and phrasing as exclusionary, confusing and even downright deceitful. Here are examples of miscommunication that can occur during a typical interaction:

We say: “Free debit card with liability protection.”
Customer hears: “I need liability coverage for my debit card, because something bad could happen.”

We say: “No fee for four ATM transactions.”
Member hears: “Why do I only get four free ATM transactions? It’s my money!”

This industry now has the opportunity to refine its language to not only signal changes to customers, but to signal to employees that we intend to do business differently. What if our language emphasized solutions over products? What if we expressed “free” as “unlimited” instead? What if “features” became “tools?” As you challenge the role of your existing products and charging approaches, use the consumer perspective as a guide for what to say and how to say it.

The Institute: the way forward
It is a challenging time for our industry. But the new requirements associated with targeting, products, charging and language also present excellent opportunities. Now is the time to clarify your promise to customers and members; to target new accountholders more profitably; and to use the power of language to market and communicate more effectively.

The Collaborative’s efforts to better understand today’s banking challenges led us to develop The Institute: a member-based organization designed to help financial industry executives drive the right change and develop profitable strategies.

Unlike other consulting resources, The Institute is fueled by insight from ethnographic, segment-specific research conducted in partnership with financial institutions. The Institute can help you define how you deliver value to consumers, drive implementation and start you on a path to improved profitability.

Learn how to become a member of The Institute at deluxeknowledgeexchange.com/theinstitute

_{© 2010 Heather Vaughan}