Ten years ago, no marketing professional or banking business owner could have predicted how the banking business has evolved. Since most transactions today are electronic, in some countries Internet banking is starting to provide more revenue than branches. Even conversations on social networks took the lead as the primary criteria for whether customers trust your brand, aside from the growth of mobile banking in markets such as India. What are the challenges and how should/can marketers respond to them and move forward?
Why do customers choose a bank?
Historically, based on qualitative and quantitative research, three main reasons surface: Good service, convenience and the reputation/image of the bank.
Though all three may not have changed much, what has completely changed is the customer’s behavior and perception of the category.
Customers today expect to access the bank their way, as opposed to the fashion dictated by the financial institution of choice. As a result, online banking and smart branches are evolving. In BANK 2.0, author Bret King predicts that, sooner or later, branches will become obsolete, which is a reality business owners and marketers should acknowledge. The fact is, the game is rapidly changing, a statement highly emphasized by Gerry McGovern, author of Killer Web Content: “On the web and on mobile, the customer isn’t king – he is a dictator”.
Customer segmentation
There is no re-inventing the wheel here. If one follows the natural evolution of a human cycle, specific life stages emerge which, from a marketing perspective, must be catered to. These are as follows: Childhood, teenage/youth, students, new employees, executives, married people and high-end executives with significant incomes, concluding with retirees. The part that could act as a differentiator beyond the demographics is the psychographic aspect, as well as the CRM – how much you know about one given customer and how to manage that information? A key phrase here would be ‘the lifetime value of a customer’. Therefore, focus should be shifted toward retaining customers for a period of time that extends beyond establishing multiple relationships through the mere sale of products.
Innovation
Traditionally, the financial services industry in the Middle East region has been slow to innovate when compared to other industries due to compliance and regulatory obligations, in addition to the need to focus on security and privacy. Furthermore, the lack of a formal structure or process for innovation and the absence of dedicated funding also inhibit initiatives.
Evolution
Despite these limitations throughout our region, the industry reexamined its current structure after the 2008 crisis. As a result, novel initiatives were introduced, such as smart branches on a retail level, more social media related conversations, more independent and remote banking services, as well as a highly evolved systems formerly regarded as ‘alternative delivery channels’. These services, from ATMs to online-mobile banking, should be considered as primary delivery systems. Thus it becomes clear that numerous attempts in various degrees of innovation have been executed within this sector. Equally encouraging are the elements banks are factoring into the redesign of specific branches in aid of a smoother ‘customer experience’ within a friendlier environment.
Global insight
In an article written by Jim Marous on the November 5, 2013, titled: Bank Marketing Strategy, two key findings were published based on a study sponsored by EFMA and Infosys FINACLE – Innovation in Retail Banking: Simplify Technology to Innovate. The first insight found that more banks now have an innovation strategy: 60 percent had a formal strategy in 2013 versus 37 percent in 2009.The second insight found that investment in innovation is increasing. In 2009, more banks were decreasing innovation investment than increasing. However, today, 77 percent of banks say they are increasing investment versus five percent decreasing (personally, I am concerned about the definition of innovation investment in this study).
Customer perception of the banking category
Let’s face it, marketing for banks will never be similar to marketing for Starbucks, Victoria’s Secret, or other fun-oriented brands. There exists a pre-fixated customer perception of this entire category that generally conjures negative associations for being rigid, un-transparent, and unfriendly, which will not change overnight.
Where to go from here?
Bank marketers must realize that it is no longer possible to compete by just promoting retail products, since any novelty on this level can be copied overnight by the competition. However, there are opportunities for creating a better dialogue with customers on a corporate level as well as providing a plausible reason for why customers chose to deal with one and not the other, which is mainly due to ‘good service’. Creating an affinity with customers will be the result of numerous variables not solely specific to offering better interest rates or a long repayment period. On the contrary, it needs to stem from sustaining corporate dialogue while communicating with the customers in a clear and concise manner, instead of preaching. It also needs to be more transparent about operations as well as keeping all of the bank’s various access channels open. Bank marketers should start by positioning the customer and, although being customer centric is crucial, delivering key messages in a more emotional way may be more effective.
Moreover, business owners will continue to pressure marketers using limited budgets in addition to other constraints. As such, marketers will need to find new ways to justify their marketing ‘investment’, which is often viewed as an ‘expense’. They need to involve the business owners in their plans and manage expectations by agreeing on KPIs based on a combination of qualitative and quantitative data.
However, one of the two remaining key challenges to be addressed is the lack of differentiation, as little variety is to be had from a single source. In this particular case, digital banking could offer some future insight when considering a differentiation scheme. The second challenge remains the inability to create lifetime value for the customer resulting in lost opportunities on a personal level.
In summary, the times are changing for the banking sector, regionally and globally. Luckily for marketers in the Middle East, banks are still able to maintain significant profits compared to Europe and the USA, especially due to a cash influx awaiting investment opportunities.
You can bank on that!
