What bank leaders can learn from Wells Fargo

The Wells Fargo cross-selling scandal will affect more than just it and its customers. The scandal will affect the entire banking industry, which means banking leaders must be beware of simmering anger with banks and know what to do going forward.

There are already reports that other banks are being investigated by regulators. Stories have also emerged of employees at those banks saying the sales culture is just as intense there. That is, a culture that could produce the same over-reaching employees that worked at Wells Fargo.

Wells FargoConsumers have always had love-hate relationships with banks. To them, a bank is both important and irrelevant. Few enjoy going into a branch anymore, making branches into very expensive billboards. In fact, most people don’t even want to hear from their bank because any notice just means bad news. That’s what makes banking both low intensive and low involvement – except at that point of failure.

We’ve conducted proprietary research for banking clients and there is one constant throughout: At any given time, a customer has considered leaving that bank. It doesn’t matter the demographic involved. In fact, about 7% of the market is seriously thinking about changing their primary financial institution at any given time.

Therefore, will that percentage increase for Wells Fargo and will more people leave?

Probably not. The thought of switching feels too complex for many bank customers and, with the lack of differentiation among all banks, there is very little reason to switch.

How Wells Fargo affects all banks.

But here’s the thing. Rising distrust of the banking industry will rise and cross selling will be less accepted. This is akin to the financial crisis in 2008 because the general public blamed banks for that – and this can feel more personal.

If you think it’s difficult to reach those goals now, just hold tight through the rest of the year (and beyond).

So what are bank presidents to do? How do they keep high margins when faced with higher regulatory costs and low interest rates?

Consider this. Most customers do not switch because they don’t see any other bank as being much different. They see the banking industry as a whole, not a collection of its parts. It’s one big glob to them without any differentiating brands. The question asked is, “Will it be any different over there?”

Wells FargoDuring the recession, credit unions blew a perfect opportunity to steal market share from banks because anger was so high. Credit unions had the high ground but it only exploited it by using the same messaging about how they are not beholden to stakeholders.

That is not an emotional thought, just a logical one. It is hard for potential customers to see how no stockholders give them a personal advantage. Humans, by our very nature, generally only act when events directly affect us. The ones most likely to leave Wells Fargo, for instance, are the ones who were financially hurt by the scandal. Credit unions were just lumped into the banking industry as its little sibling. In the end, customers believed credit unions were also banks but with sign-up restrictions. So few of them joined up.

A similar situation is threatening to brew here, although not as severe but more pointed. The anger will result in weariness of banks doing any cross selling or accepting any new offer from a bank. (“They’re just going to screw me over!”) Want more customers to sign up for a credit card? Good luck.

Where the opportunity lies

But there is opportunity for the right bank (or credit union) to take advantage. Like in 2008, customers will see all banks in the Wells Fargo glow and will only prefer a new one that’s truly different and better.

The knee jerk reaction by most banks is to reassure customers (and, hopefully, new ones) that they have integrity and would never do that. Banks will say that there are safeguards in place to prevent any wrongdoing and that, we the banks, are always focused on you, the customer.

It won’t be believed or move the needle. No, instead a bank that takes ahold of the current opportunity must drop all the trite messaging that exists in the banking industry.

Wells FargoNow is the time to be truly different. A brand message that taps into the distrust and is truly emotional will win the day. Tone is key because banks never adopt an edgy tone that gets noticed.

In fact, tone can prompt the switch because the right one would align with the attitudes of the target audience. Telling them to switch because it’s time to take action would be a stronger message than what banks are promoting now.

To convince audiences to switch their primary financial institution is extremely hard. To get people to switch doing what they are doing now in any thing is nearly impossible.

But the door is ajar for the moment. The bank that steps in will become the leader.

Logistics – Parcel delivery market study

Logistics particularly as it relates to the consumer delivery business is a two horse race. FedEx and UPS have long duked it out, in effect, having a duopoly over an entire category. One might argue that the US Postal Service should be included in this group as well, but FedEx is one of the USPS’s biggest customers, co-opting its last mile delivery.

However, the industry is in a state of flux and all players, regardless of size, should take note.

The state of FedEx and UPS, the leaders of logistics

UPS Logo - LogisticsFedEx LogoBy all measurements, both FedEx and UPS continue to strengthen their market dominance. FedEx accounts for about $50 billion in revenue with UPS doing about $10 billion more. There are an ample number of customers to keep FedEx and UPS fat and happy for a while, with more and more consumers turning to online retail.

With that being said, what are these two saying about themselves to both preserve and attract new customers? First take a look at FedEx:

 

FedEx’s two main divisions, FedEx Express and FedEx Ground, are each on display here. FedEx is huge sponsor of the PGA and, during golf season, there are many ads like the first one. The ad touts the technology of FedEx Express with its app that can reroute packages to a local FedEx store, as if that is more convenient.

The second touts the price savings FedEx Ground customers could have over UPS Ground. While price is a sensitive issue for most businesses that ship a lot of products, it’s difficult to believe that the price differences between FedEx and UPS are all that significant, if they really exist at all. Each is going to do what it can to keep or get new business.

For UPS, it’s much of the same, ads trumpeting technology and cost savings. UPS played around with the idea of “What can Brown do for you,” which was a good segue into the idea of owning logistics. After all, isn’t what these delivery companies do, logistics?

What is lacking is any real reason to choose. Like many categories, the major players try to outmaneuver each other by claiming the very attributes that all players in the industry, regardless of size, possess. In fact, they are the bare minimum that any player must have. How can you be in the shipping business if you are not price competitive or have the technology deliver packages.

More over, both FedEx and UPS (especially UPS) try very hard to tell their stories from the perspective of the consumers who are receiving the package. Do consumers have much of a choice as to who actually ships the packages? That decision is often based upon price and when the consumer actually wants the item delivered.

Most typically, customers don’t have a choice between FedEx and UPS. The entity shipping the package makes that choice.

Being basically a duopoly affords both carriers the luxury of building larger and more sophisticated networks capable of delivering more shipments with each trying to outmaneuver the other. All the while each tries to woo more businesses to choose it over the other.

The FedEx and UPS brands both accomplish the same thing – getting stuff from one place to another. The FedEx brand feels a bit more sophisticated and harkens back to one of its old messages. “When it absolutely, positively has to be there overnight” is ultimately about piece of mind.

UPS feels more like the hard-working blue-collar challenger even though it actually ships more often than FedEx and has greater revenues.

Neither brand has proven over time to be superior to the other. They both work well and neither has really given customers a compelling and unique reason to choose one over the other.

Regional players are becoming more sophisticated and integrated

OnTrac LogoLaserShip LogoWhile FedEx and UPS continue to grow and optimize their networks, regional courier and LTL shippers are doing the same. Regional comDicom Logopanies like Dicom (Eastern Connection), LaserShip, GSO, OnTrac and even Pitt Ohio whois more of a LTL (less than truckload) once exclusively dealt with their own geographies. Now, those regional players are transporting parcels and freight that originated with another carrier. This model is not completely unlike the US Postal service delivering some packages the final mile for FedEx or UPS.

Regional players can ship most things quicker and less expensive than UPS and FedEx. The caveat is that, in most cases, the package must originate and arrive in the same coverage area in order to get these savings.

While these regional players present an alternative to the major players, they have a much more difficult climb. First, while they are known in certain circles and industries, what little awareness they have is limited to these niches. Their awareness pales in comparison to FedEx and UPS. Secondly, they all regurgitate FedEx and UPS sales messages – innovative technology and cost savings. Because of that, they have to prove some of the table stakes, such as timely delivery and size of delivery network.

When these regional players and their associated national networks act like FedEx and UPS, the best they can hope for is to be viewed as an equal. All their messaging does is reinforce the position of the market leaders. A company can’t gain share against a market leader by merely copying what the market leader says.

There is a unique advantage the regional players are not effectively exploiting. Each of these regional players should possess innate knowledge of their regional customers that is unique to the region in which they operate. The brand should always be from the perspective of the customer not the company itself and no regional player has positioned itself as that.

Local disruptors in the market

Uber Rush LogoMore companies are getting into the delivery business. Some with familiar names like Uber and others with not yet familiar names like Roadie. Using the same blueprint as Uber, these companies take a preexisting work force, drivers going from point a to point b, and pay them to move packages across town. (Or across the Roadie Logocountry, in the case of Roadie.)

None of these are being taken seriously as a competitor for traditional shoppers because they have not reached the needed critical mass. But the major players should take note, and they are.

While players like FedEx and UPS have an extensive driver and delivery network, they lack the driver density of the likes of Uber. Uber has the ability to pickup and deliver (on a local level) in real time, on-demand. Even the traditional bicycle courier can’t do that to the degree Uber or even Lyft can do it. FedEx and UPS can promise same-day delivery but Uber could be as close to instant as possible until we develop the coveted transporter.

A Major Development

Amazon has quickly ramped up its own delivery network, recently unveiling its new 767 plane with the words “Prime Air” written across the side.  Amazon claims having its own delivery network only augments its existing relationships with its current partners. But can Amazon be trusted?

TAmazon Logohe reality is that Amazon wants to own the entire supply chain. You don’t have to look much further than its expansion into private label products and cloud-based computing services to understand that. Amazon’s business is about getting stuff from one place to the other. Amazon doesn’t really make anything at all. Doesn’t that sound familiar?

The actual shipping part of delivering that stuff is expensive. It is good business for Amazon to want to control the costs of that. After all, it is by far the largest e-retailer in the US and is second in the world only to China’s massive Alibaba.

Ultimately, Amazon does not want to augment anything with its current delivery partners. It wants to replace them. And quickly and quietly, it is developing its own network to be able to do so. Its grocery delivery and same day Amazon Prime deliveries are prime examples of this. Amazon trucks deliver products ordered through Amazon.

What’s more is that the Amazon brand gives it permission to go down this road. In fact, its brand dictates the necessity for it to do so. But there is are two problems. First, severing the important relationships Amazon has with FedEx and particularly UPS could be problematic. Secondly, and more importantly, Amazon must convince other retailers to use it over FedEx or UPS.

The first issue is pretty cut and dried. Amazon will reach a point where it does not need FedEx or UPS but only for special circumstances. At this point, Amazon will be all in with its delivery model and there will be no turning back. It would be doubtful that either FedEx or UPS would welcome Amazon back anyway.

The second is much more difficult. Once Amazon gets really good at delivering its own stuff, it will reach out to other retailers who need delivery services. This will be a tough nut to crack because retailers will likely be hesitant to partner with a competitor that could use the delivery information as a competitive advantage. Amazon has become successful in part because it knows what to do with data and any additional data it can get on its competitors could hurt those competitors.

The opportunity

There still is real brand opportunity in this space. The natural default for most shippers is either FedEx or UPS and you can throw in USPS in there too. The reason those choices are always the default choice is simple. No one in the space has given anyone any reason to care. Reliability and price are really the only two things that matter at the end of the day and most, if not all of the players regardless of size, are reliable and are cost competitive. Cheaper options might take a bit longer but packages will still get there. Next day delivery will get there too but will be more expensive. In short, they all work.

Population health is an opportunity

Population health is a top concern, but it represents an opportunity

The Affordable Care Act has affected everything for hospitals, including the struggle to be financially successful.

Notably, however, it prompted the switch from a fee-for-service reimbursement model to a pay-for-performance one that emphasizes the value of the healthcare service.

This in turn has prompted hospitals to take population health more seriously because their reimbursements are now dependent on the success of outcomes. For that reason, hospital CEOs have listed population health as one of their greatest concerns.

Population healthHospital CEOs now need their hospital systems to be further integrated into their communities, working with local organizations and instituting programs that help population health. By doing so, hospitals earn more money based on the pay-for-performance reimbursement. Better population health means a better bottom line.

While many administrators see this as a hindrance, it can actually be an advantage for hospitals looking to steal market share from its competitors. It represents an opportunity to create preference.

Hospitals struggle to create preference

Traditionally, hospitals have grown organically. A new facility creates a new audience, whether if it’s at a new location or represents a new specialty. A system starts with a name usually associated with a location, a founder or a prominent contributor from the community.

Hospitals rarely see themselves as marketers who are creating for preference as much as they are seeking awareness. They also often consider the internal audience (physicians, staff, contributors) more than they do prospective patients. They take the care of their patients seriously, as they should, so they focus on acquiring talent, technology and new training.

But the changing landscape of healthcare, especially when it comes to reimbursement, has made investing in the hospital brand more important. There is now more competition, with greater regulatory oversight and technologies creating savvier patients.

Hospitals now have to think of themselves as a true brand, analyzing the competition, conducting market research and putting more dollars into their marketing. The competition has simply gotten too fierce. The world has also gotten more complex.

Population health is an opportunity

The regulations surrounding the Affordable Care Act can be confusing for the hospital, the patient and even insurance companies. Those are the ones forcing the pay for performance model because they don’t want to pay out as much money. Insurance companies also want to see better population health because it results in fewer claims.

The knee-jerk reaction is to promote the hospital’s various partnerships and programs to raise the community profile of the hospital. That’s all fine, well and good. But those alone don’t raise preference. They are simply the proof points to your brand promise.

Population healthThe danger is that hospitals will sport brands that are all about better health and caring medical professionals. But those aren’t the reasons to prefer one hospital to another. They are just definitions of a hospital.

Instead, the process of increasing preference is to find the emotional triggers that make those things – including the overall healthiness of a community – important to the prospective patient. Why are those important? What are the drivers for those patients so that they choose your hospital?

Creating preference

The key to gaining preference is to be early in a prospect’s decision tree. The earlier you are positioned, the greater your preference. The struggle for hospitals is that no one wants to think about a hospital. It spells danger, risk and potential death. Instead, you must be important enough to prospective patients that, when they need a hospital, they have already chosen you. Even if it’s subconsciously.

To accomplish that, hospitals must avoid the clichés and trite messaging that comes with most hospital branding. A few tips:

Understand your competition. To be a true choice, you have to be truly different and better in your messaging. If your main competition has messaging focused on caring and expertise, you have an opportunity. Audiences filter out those messages because all hospitals claim to care and have expertise. Those messages mean little.

Go deeper. Most marketing stops at the wants and needs, but those can be fulfilled by any number of healthcare providers. True preference is created when you understand the reasons why those wants and needs are important. That means uncovering the precepts that drive behavior and the self-identification those audiences treasure. Aligning your brand with that belief creates audiences who are incapable of choosing anyone else because they would, in effect, be choosing against themselves.

The opportunity with population health exists because hospitals can be more important to communities. They can position themselves differently. Improving population health offers a gateway to a meaningful brand that goes beyond traditional hospital marketing. It means the promises of your hospital have changed and now you have the proof points to show for it.

Your hospital is now in the results business. Think about that as a hospital brand.

Selling insurance when people don’t want it

Selling insurance has one of the single most difficult hurdles to overcome. How to convince audiences that they should buy something they believe they don’t need.

Selling insurance isn’t like selling something people want. Consumers want iPhones and a nice-looking car. They will gladly pony up for them.

Selling insuranceHowever, they don’t want to think about what insurance is protecting them from: Death, illness, fire, liability, etc.

Selling insurance includes another dilemma. People believe that insurance companies are simply out to take their money and will automatically fight any claims. Whether that’s belief is true or not, it is believed. We have conducted research in this industry and that belief is the single biggest hurdle for insurance sales reps.

What are the other selling insurance hurdles?

Without giving away findings that are preparatory to our clients, our research has borne out a few themes:

  • People, including white-collar professionals, believe insurance companies are unfeeling entities, which means claims of caring rarely resonate.
  • Fear-based messaging (“What happens when you die?”) is ignored because it’s seen as the start of a scam.
  • Policies are confusing, feeding into the belief of insurance companies being deceitful.

Here’s the catch. Agents, those chosen to sell insurance products, often feel the same way. They also believe that messages about caring are not believable. They are also sick of telling the same story. And they find working with insurance companies to be cumbersome.

This should not be a surprise to anyone in the industry. What is surprising is that too few in the industry do anything about it. Yet overcoming those hurdles is exactly what would increase market share.

Let’s address each hurdle.

Insurance companies are unfeeling entities:

This is the most difficult hurdle because few believe any company cares more about its customers than its bottom line. This belief is especially acute with insurance companies because insurance is a low involvement category until they have to use it. Then it is high involvement and highly personal.

An effective brand message is the best step. Any message must be aligned with that belief (insurance companies are unfeeling) and positioned against the competition.

Selling insuranceAsk yourself these questions: What is it that audiences seek in their lives? What are they truly seeking when considering insurance? What are they rebelling against if they are forced by an employer to seek a particular structure of insurance, such as a health savings account?

More importantly, the message should be about the customer, not you. You lose the audience’s attention the moment you begin talking about you (either in person or in an TV advertisement).

Selling insurance becomes even harder when the rep knows that all products are the same and the only effective tool is the personal relationship with the individual customer. This is one of the main reasons an insurance salesman is such a cliché. Customers need insurance, not someone pretending to be their newest best friend. Be expert and understanding.

Fear-based messaging is ignored:

So stop doing it. Advertising for life insurance is especially guilty of this, often asking the question, “What will your family do when you’re gone?” This might have worked decades ago when life insurance was a relatively new idea. At its best, protecting your family is a category benefit.

Today, audiences have become immune to that message and consider their own investments as savings against such an outcome.

Think about this. Thousands of messages come into our view every day. Even the logo on a pen is a message. Humans, though, have a filter. They only hear messages that are about them.

What insurance companies and agents must do is understand the emotional reason why someone would want to protect something with insurance. Not a rational reason. An emotional one. Too much messaging today is superficial and paper thin. (A better example for life insurance: “It’s what a good father would do.” A definition of who they are when they buy insurance.)

Policies are too confusing:

This is an industry-wide problem. Policies have variations on variations, papers upon papers, language that is too confusing. Even agents have trouble deciphering everything.

To potential customers, it looks like an attempt to intentionally confuse them so the fine print can’t be understood.

So much of the world seems complex, so we thirst for simplicity.

Simple is best. Make everything you do, including how you explain policies, as simple as possible. What is the final result? The details are usually ignored.

The most powerful way to clear the hurdles

The most effective way to address all of these issues, however, is through brand. So many  insurance companies get brand wrong. GEICO spends millions on a message – “15 minutes could save you 15%” – that isn’t believed. The result if market share stagnation. As an even worse example, Genworth Financial once said: “We’re big, safe and friendly.” Ugh.

Selling insuranceBrand is about the customer. Who they are when they use your brand. We are winners when we wear a Nike shoe because we “just do it.” Apple positioned itself against everyone else, saying that its customers “Think Different.”

Developing a brand like that is hard work. It takes in-depth research, leadership willing to slay sacred cows and an understanding that emotion works better than the rational.

Insurance companies and agents should take note. Because audiences right now believe you are out to get them. And get them good.

The wasted dollars of product naming

Brands should hold every business to a high standard of eliminating wasteful spending. For example, few industries are worse at spending money on foolish efforts than medical devices. Pick up any corporate brochure from a medical device manufacturer and here’s what you’ll see: Mountains and mountains of individual product brand names.

For some reason, companies are in love with giving every single product they manufacture its own unique brand name. That’s not product naming for any meaningful purpose. That’s reducing preference.

The medical device industry is a $150 billion industry in the US alone. Few industries would tolerate the sheer amount of money wasted in product naming. In fact, the value of a company lies not in its individual products, but in the company brand and its equities. When consumers buy products, they are purchasing the brand.

Product NamingBut medical device manufacturers have gone insane over spending countless dollars that actually hurt the value of the company. No matter if it is a stent, wire or an ICD, it will have some clever brand name that means little to anyone but the company’s own marketers. Doing so does nothing to help define the parent brand or the brands of other products.

Instead, the medical device parent brands are crowded into the same space. They all claim to be forward thinking, innovative and reliable. Yet millions of dollars and countless resources are spent marketing the individual products like they are their own entities. Even when they are using the same language.

That reduces the corporate brand into an afterthought.

Cleverness is the enemy

The overabundance of cleverness is certainly not unique to the medical device industry. Marketing executives, in general, are convinced that a name or theme will be remembered if it’s clever enough.

The opposite is exactly true, which means the money to market them is ill spent. If the name or theme is clever, then it is not believable because it feels like an advertising firm wrote it. It will sound like marketing.

Let’s use an example from the medical device industry. St. Jude Medical, through its acquisition of Thoratec, has a left ventricular assist device called HeartMate. Its meaning is clear. It assists the heart.

But it still sounds like marketing and made up. It has no emotional meaning. Considering the sheer litany of products with made-up names like HeartMate, it won’t be remembered because no one says “Nurse, give me the HeartMate.”

Think about this. These names do nothing to create preference or add to any financial or emotional investment in the company. Just because a device has a clever name does not mean that hospital administrators and doctors will prefer that product. So why do it?

Product naming as an inhibitor to switching

Stealing market share means you must convince your target audience that what you offer is something you do not already have. That’s the definition of a switching trigger.

Product NamingSwitching is often seen as difficult because it means adjusting to something new. It’s a change even if it is a minor one. That means you must reduce the hurdles to switching if you want to attract the customers of your competition.

With so many branded products that have no relation to each other, but operate individually from other products, doctors and hospital administrators are reluctant to switch to them.

The same holds true for any manufacturer. A litany of unique product names creates a hurdle to adoption because audiences are asked to learn something new. That is especially difficult when you consider the entire scope of products.

It is easier for audiences to switch is if they know they are buying the company brand name instead of the product. It is just simpler.

What to do?

The answer to that question should be obvious. Don’t overdo product naming when it comes to individual products. We live in a world in which simplicity and control rule, meaning it’s the customer who is in charge.

Product NamingMedtronic, the giant in this industry that actually does better than most, makes thousands of medical devices. Nobody can remember the sheer litany of branded product names.

A list of its endoscopic suturing accessories lists these products:

  • Endo Stitch Single-Stitch
  • Endo Stitch Tripe-Stitch
  • V-Loc Wound Closure
  • Surgitie Ligating Loop
  • Surgiwip Suture Ligature
  • Endo Slide Single Use Knot Pusher

It would be better if the names were:

  • Medtronic Single-Stitch
  • Medtronic Tripe-Stitch
  • Medtronic Wound Closure
  • Medtronic Ligating Loop
  • Medtronic Suture Ligature
  • Medtronic Single Use Knot Pusher

Now the company is actually investing in the parent brand and not just talking about it. And the sheer amount of wasteful spending has been reduced while market share increases. You’ve asked customers to choose the parent brand. That’s all any brand manager could want.