Today’s Bank Market
By Tom Dougherty
12 November 2020
Grabbing Bank Market Share
The bank market has changed
It has been many years since small independent banks and thrifts dominated the banking market. Besides credit unions, the banking landscape has merged into a few mega-banks.
It does not matter the region. East Coast, West Coast, North, South, or Midwest. The names remain the same. Only the order of market share changes. Wells Fargo, Chase, Bank of America, or Truist Financial own the market.
The Super Regionals like Fifth Third and TD Bank own share too. Some might even be market leaders in specific locals. But who owns WHAT is immaterial for this article.
There are exceptions to this bank market share hierarchy. But I don’t care much about them. If defensive details come to mind, what I have to say is not for you. This article is for banks or credit unions wanting to grow. I lump them together because the battles they face are similar. And their tactics are identical.
”This article is for banks or credit unions wanting to grow”
The bank market promise
Everyone is selling the same thing. And I am not talking about financial services. Every bank and credit union, regardless of size, offers the same products. You can open a savings account, secure a loan, access an ATM, and use a mobile app. And all of the interest rates — both charged and earned — are close enough to be almost exact.
All banks and credit unions offer the same products and services. There was a time when convenience was essential. Today, every bank branch is on your mobile devices. And you find a teller at every ATM. What can you promise?
Not much is left. And it seems like a good deal of effort to switch banks. As a result, the market remains stagnant.
Open a new branch
Growth in the early days of banking seemed to correlate with opening a new branch. In the pre-mobile days, that local branch could seem attractive. Folks deposited payroll checks and took out cash. A trip to the bank was as much a part of living as buying bread and getting milk delivered.
If this milk delivery sounds like ancient times, it is. But so is that model of banking. Sure, a few customers will switch. But is it worth the investment in expensive real estate?
”Every bank and credit union, regardless of size, offers the same products”
The customer service lies
The customer service message is ubiquitous. Customer service promises fill the market. And the idea of local is just another way of saying excellent service. Who doesn’t promise great service? How can it be positioned against anything else? What bank markets itself as unfriendly? What does convenient mean in the world of mobile?
Local and regional banks believe being a local entity is a marketing advantage. And it might be. But if the largest bank in your market is one of the mega-banks, hasn’t the market already voted on that idea?
If customers believed that local was better, we would have no Walmart, Target, CVS, or Walgreens. Home Depot and Lowes would lose to local hardware stores.
Being local is not enough. There is a place for it but not a large space. You need more.
There was a time when credit unions served specific markets. Companies with a large enough employee base looked for ways to benefit their workers. The idea of a cooperative financial institution made sense.
With everyone pulling together, an underserved population received preferential treatment. As a non-profit, credit unions were able to pay higher returns on deposits and charged more favorable rates on loans.
Most still offer better rates. Credit unions still own charters that focus on the underserved. But times change. The large-scale blue-collar factories that birthed these institutions have changed. Factories have closed, and workers moved on.
There were white color credit unions too. Public school teachers banded together and created credit unions. Here in NC, tobacco companies’ employees formed the same.
“If customers believed that local was better, we would have no Walmart, Target, CVS, or Walgreens”
What changed? Bank positioning?
Society changed. Financial opportunity grew. And as factories closed, credit unions sought new members. Many expanded their charters, and membership became less selective. Some changed their names and defined themselves by location rather than company membership.
With community charters, the credit union faced more significant challenges. Suddenly, captive membership eroded. So they looked to attract a wider audience.
Credit Unions are different from banks. But to the average bank customer, those differences are not enough to get them to switch.
How do you grow market share today?
Two words for you to remember: expansion and acquisition. Banks and credit unions grow by opening new branches and acquiring other banks.
But this creates a false sense of importance. Marketing departments look at increases in customers (or in the case of credit unions— members) as proof of their value proposition. But buying new customers is not the same as organic growth even if that growth matches increases in population or is the byproduct of expansion.
“Credit Unions are different from banks. But to the average bank customer, those differences are not enough to get them to switch.”
Here are some questions to ask yourself
Why should a prospective customer or member open a new account with you? How is that different than the reasons why they would open an account at another bank? How would an outsider answer that question? If everyone claims to put the customer first, then how competitive is it to claim that value? Look around at the choices in your market. Think about your competition’s positioning. Does anyone claim to put the customer last? Are any banks promising higher fees? Are competitors claiming to be inconvenient? Which of your competitors claim to have unfriendly and uncaring employees?
Does claiming to be a local bank matter
How about the claim of being local? Is the Bank of America’s headquarters Charlotte NC an issue? Do most people care? In research we conducted on the bank market, customers of Chase, Citi, B of A, and all the mega-banks consider their preferred branch to be a local branch.
Can you differentiate yourself through mobile banking?
How would you do that? Everyone has it. It’s the system their customers know. No matter how intuitive your mobile app is, it appears more complicated than the one the customer now uses. Plus, they have no idea how simple and interactive yours is until they are a customer.
“Think about your competition’s positioning. Does anyone claim to put the customer last? Are any banks promising higher fees?”
What’s the answer?
You create answers after you find the right problem. You are asking the wrong questions. It would be as if you built a home and put it on the market, and you made it of straw. So you advertised it as a straw house. With all the apparent advantages, straw walls provide—benefits like flammable, bug-infested, and leaky.
It’s just sad that the real estate market prefers brick and wood over straw. Maybe you should have asked them why they believed it was the best building material. But marketing is more challenging than that.
Service Industries have bigger problems
You can create a disposable mop called Swiffer WetJet. It may shift the market from sponge mops because it is an innovation. And the cost of retooling a competitor’s factory is a massive expense. Plus, you may have patented the device itself.
Services don’t have those competitive advantages. Anyone can copy your service. Competitors will quickly copy any advances in a change of service. They will copy it if it is valuable.
Your bank positioning challenges are harder
The bank market asks more of you. It’s harder to be successful. The challenges in growth facing banks and credit unions are more complicated than packaged goods. That might be why P&G never diversified into banking. It might be why General Motors spun off Ally Bank. Selling an SUV is less challenging than selling a service. Online was a fleeting anomaly.
Think about your prospect more broadly. What are potential customers aspiring to become? What holds them back? How do they feel about the world in which they live? What do they believe is true?
“But failure to own a bigger brand idea is certain stagnation. It spells your end. Because someone will eventually figure it out.”
Stop thinking like a bank
But answer those questions outside of the financial and banking world. Discover what your prospects covet. Find the WHY, not the what.
Brands that steal market share salute more than a benefit. They salute the powerful belief shared by the prospect and customer. You should refer to this discovery as a myth. Or you might become too attached to it.
Once you uncover the gravitational mythology, you proclaim it to everyone. You sell the reason, not the activity.
Bank marketing success demands dispassion
It’s hard to put aside your institution’s beliefs. And it is difficult to challenge hard-wired assumptions. It is hard to look at anything objectively because where ever you look — there you are.
But failure to own a bigger brand idea is certain stagnation. It spells your end. Because someone will eventually figure it out, and if others solve the riddle, you pay the price.
One thing is sure in all markets and not just the bank market. The world moves toward economies with certain deliberateness. There’s not a wall strong enough to save you from a rising tide.Call me. We can talk.
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