You Can't Buy a Customer's Love?

I recently attended the ABA Marketing Conference in San Antonio where a speaker from USAA said something similar to this post's title. Really? How do I explain the branding study by a client that identified Ally Bank as the most recognizable brand in their market?

As most readers know, Ally is the former bank-finance arm of General Motors (GMAC). They required a substantial capital infusion from Uncle Sam to keep them solvent during the financial crisis. I don't think they have many, if any branches. So how do they earn "most recognizable"? My money is on their ad budget. In other words, they bought their fame. Love? No. Head above the crowd? Looks like it.

This flies in the face of conventional wisdom spoken so eloquently by the USAA speaker. How could blast, one directional messaging still yield results in today's engagement world? And if money can buy customer love, what can community banks with limited ad budgets do to survive?

USAA is highly regarded in banking circles for their omni channel marketing approach. But I find it interesting that their representative took the position that budget heavy blast messaging was not effective at gaining customer loyalty.

Why? I'm a veteran and USAA insurance customer. I cannot recall speaking to a live person from the insurance or bank side. But I see plenty of TV ads during prime airtime, receive a couple of e-mails per month, and occasionally receive direct mail from them. Is this how to win my love? Perhaps. I'm not sure. But, according to their actions, they must think so.

But I do know most community banks cannot afford this path. We don't have the resources. So what are we to do?

Customers switch banks when something happens that compels them to do so. For each customer, it may be a slightly different "something"; a declined credit, difficulty sending a wire, accidentally bounced check, a bad experience with their banker. The key to be the bank they go to once "something" happens is to be on top of their mind when they decide to switch. Ally and, yes, USAA, do that through their ad budgets. You, on the other hand, must work harder and smarter to be that top of mind bank.

Traditional advertising can play a role. But actually knowing potential customers can go a long way. Do your employees, front line and support staff, participate in community organizations? Are they on LinkedIn and do they follow your bank's LinkedIn profile?

Does your bank blog, and interact with community members on the blog? Have you positioned your employees as subject matter experts on the blog, and host community based education sessions such as "How to Finance a Small Business"? Does your brand have personality, such as supporting the local sports team(s) by using Facebook post factoids on team athletes, and wearing team colors in your branches before a big game?

Whatever path you choose to combat big bank big ad budgets, ensure it is consistent, constant, integrated, interesting, relevant, and genuine.  USAA is thought to be best in class in omni channel engagement. You can be genuinely best in class. But you have to build the strategy and execute it.

What are you waiting for?

~ Jeff

Common Misperceptions: Community Banks are Beating the Behemoths

My firm constantly evaluates industry trends and happenings to formulate what we term our Industry Overview. Although a constant process involving hypothesis, research, and re-evaluation, we center our thinking annually to ensure we properly debate, debunk, and determine where our industry is moving.

As part of the process, our staff does a lot of research. Some of the research focuses on themes we hear multiple times over in client strategic planning sessions. One such theme was the right sizing of community banks' funding sources.

Since the dawn of the financial crisis in 2007, loan demand has fallen off of the cliff, and therefore community banks did not need their historically high amount of CD funding. As a result, we dropped rates to such a level that it wasn't attractive to traditional CD customers and they began parking money in liquid savings vehicles, such as the money market account.

Our deposit coffers swelled like a puffer fish. In many strategy sessions, senior management teams began to feel pretty good about their efforts in attracting core deposits, and how they are beating the big banks in deposit gathering.

Not so fast. As the chart below shows, although community FI deposit growth has been quite robust, with an emphasis on core deposit growth, the big banks (defined as top 25 US banks) are outpacing us. This is exemplified by Bank of New York/Mellon charging their largest depositors negative interest for the convenience of parking their cash in BNY's vaults.

Another theme we hear in community FI strategic planning sessions is how much better we are at serving small businesses. We provide access to decision makers, custom loan structures, and better service than our larger brethren, so the discussion goes.

But the chart below from recent Small Business Administration research, although using 2009 data, demonstrates a trend worth noting. In 2005, banks with greater than $50B in total assets accounted for 32% of small business loans, defined as loans less than $1 million. In 2009, that percent rose to 37%, although that is off 1% from the prior year.

All other asset sized FIs either held their market share or slightly declined. Does access to decision makers, custom loan structures, and better service result in more business? Intuitively it should. So why hasn't it?

How do we, as an industry, turn the competitive advantages we have over behemoth banks into real wins in the marketplace? I'd like to hear from you.

~ Jeff