Does investing in customer experience improvements really create an economic return or a competitive advantage? Before you can answer that question, you must answer two others:
- How much will it cost to be the industry leader in customer experience?
- What competencies or capabilities will be required to achieve and maintain that leadership position?
In their book “The Discipline of Market Leaders,” authors Michael Treacy and Fred Wiersema posited that industry leaders excel in one of three disciplines—product leadership, customer intimacy, or operational excellence—while maintaining competitive positions in the other two.
Here’s the issue: Only the largest banks genuinely have the resources (i.e., money, technology, and people) to be among the leaders in customer experience. Research by KBW shows the top four largest banks will annually spend $30 billion collectively on technology investment, most of it to improve the customer experience. And it’s working as these four mega banks are getting more than their fair share of consumers switching their primary banking relationship, especially for those under 40 years old.
Unfortunately, smaller institutions don’t have that kind of money to invest. Their reliance on third-party vendors for technology means they probably don’t have the capabilities or competencies to be the customer experience leader.
For the majority of institutions, competing on customer intimacy isn’t viable as well. About three years ago, J.D. Power & Associates found that larger banks (mega banks and large regionals) were ranked higher in customer satisfaction than community financial institutions. It was the first time ever that the larger banks had led in this key metric. The larger banks haven’t given up this preferred position and are not likely to as more and more customer intimacy will be measured by the digital relationship with a financial institution than a relationship with an individual banker or two..
That leaves product leadership. This is where community financial institutions can have the upper hand over the larger banks. A review of the actual product benefits of the mega banks’ consumer checking accounts provide in terms of value isn’t that impressive. Their accounts are as ordinary as the checking accounts at most other financial institutions. Plus, their checking line-ups are complicated and confusing with significant product overlap and terms, conditions and pricing that is not straightforward.
So, why not take a different approach? Be a leader when it comes to products, especially checking products.
If you want your community-based institution to compete with the megabanks, you must make an effort to accessorize your checking account with value-added services that consumers already purchase, use, and want.
Trust us, this works. It’s time for you to be present in the lives of modern consumers. Start by downloading our latest white paper, Accessorizing the Checking Account: Improving the Bank/Customer Value Equation, then let us know how we can help.