Saturday, November 30, 2013

Banking Is Not Small Business Saturday

The holidays are upon us and the public relations blitz is on so we patronize small businesses for Christmas shopping. Why? Do small businesses have a unique value proposition that larger stores do not? Or are we relying on nostalgia and some David versus Goliath goodwill to drive us into the arms of local shops?

I have news for you. The latter is a failed business idea. For example, in my town, we have two relatively small lumber yards only because the NIMBY's kept Lowes out. If Lowes secured the necessary permits to open shop, bye bye small lumberyards. So the local owners think they perpetuated their business model by keeping out a competitor. How about offering something customers value greater than price, Mr. Lumberyard Owner?

Walk into a Lowes, and you are overwhelmed with the selection, and probably have difficulty finding somebody knowledgeable to help you with what you need for your project. If somebody does help you, there is often a line of people waiting for that worker's attention. Why doesn't the local owner differentiate there? But no. My wife refuses to go to one of the lumberyards because the workers' treat her like she doesn't know what she's talking about. In other words, they chose not to deliver something valued by customers. 

Are we that much different in community banking? Do we rely on some "feel-good" marketing message to drive customers to us instead of Wells Fargo? Do we hope that George Bailey will deliver us from irrelevance? Why should customers bank with you instead of the omni-present Bank of America? Because I got news for you... they haven't. The top 50 banks in the USA, less than 1% of all banks, boast 76% of all banking assets. 

The people have voted, and community banks are losing.

Why? Because we have difficulty answering the question "why bank with us"? Sure, we'll come up with some answer that says "service" or something intangible and, apparently based on the facts, unnoticeable. But have we really identified what differentiates or can differentiate us from the big boys, and built the systems, processes, and people around delivering on that promise?

Or do we keep telling ourselves in management meetings that we have better service than them, and then break into a loan committee meeting to lower our price or terms on a commercial real estate deal we're trying to win from PNC?

Don't rely on your own Small Business Saturday so customers bank with you because they are sympathetic for you.

So I ask you: why bank with you?

~ Jeff

Note: After penning this post I read an article about Small Business Saturday that said $68 of every $100 spent in local small businesses was re-spent in the community. For chain stores and online stores, that stat was $48 and $0, respectively. So there's a good part of the story to build on, in addition to creating a value proposition that customers care about. Also a good lesson for community financial institutions. How much deposit money is re-invested locally compared to the big boys? Don't forget about the in addition to...

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