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Last week we discussed the impact of the Fed’s move on pricing strategy. We also started with the assumption that organizations are likely in the latter stages of dealing with this dilemma.

We learned that we (as individuals and organizations), go through several phases when a change (or major life event) occurs:

• Shock – We aren’t ready for the change; it’s a surprise.
• Fear – We are now afraid of what this may mean to our world; we are scared.
• Acceptance – We’ve come to accept that now this new set of conditions is going to remain
• Transformation – Now that we have accepted these changes, we have to adjust our perspective to fit this new reality.

Everybody goes through these phases at different speeds. And so does an organization.

I believe that most organizations have gone through the acceptance phase but are still struggling with the transformation stage. But this is exactly where we need to be heading – to explore a new way of pricing that is more dynamic than what we have historically relied upon.

In a recent article in Financial Brand, they discussed key strategies to optimize your pricing strategy in these times. It’s worth sharing:

Savvy financial institutions around the world are experimenting with unconventional inputs to create pricing models that allow them to stand out in their market and appeal to the customers they want to serve.

Here are just a few examples:

• In the United States, a midsize credit union rewards long-term customers with more favorable loan and deposit pricing. Customer loyalty creates value for the credit union, and giving special rates to these individuals strengthens the overall relationship.
• In Europe, a large retail bank calculates a relationship score by evaluating assets and liabilities across multiple customer accounts (retail, wealth, business, etc.). The resulting “value score” is used as a pricing attribute when they’re creating a rate sheet. We’ve also seen these scores used to impact fee waivers and cash back rewards.
• In the U.K., a large commercial bank incorporates climate data into how it prices loans secured by real estate. So, for example, if a property is located in a floodplain, the loan would be priced to reflect the increased risk of operating a business in that location.

By moving away from one-size-fits-all pricing models, these financial institutions are capturing business that works well for them at a price they — and their customers — find attractive.

Now these ideas may not be exactly what you are looking for. However, the idea is not to necessarily copy somebody else’s plan, but to create your own.

Coming out of this most recent season shows everyone how inflexible and obsolete our current pricing methodologies are. There is room for improvement.

Can you use this as a backdrop to building a new approach for your organization? Now’s the time.

Thanks for joining me today!

Psychologist have tried to help us make sense of the way we deal with change. There are many different models of thought. One popular philosophy posits that we go through several phases when a change (or major life event) occurs:

• Shock – We aren’t ready for the change; it’s a surprise.
• Fear – We are now afraid of what this may mean to our world; we are scared.
• Acceptance – We’ve come to accept that now this new set of conditions is going to remain.
• Transformation – Now that we have accepted these changes, we have to adjust our perspective to fit this new reality.

Everybody goes through these phases at different speeds. And so does an organization.

Organization Changes in Response to Industry Changes and Pricing

The past 12 months seem to be one of adjustment and transition. Starting last year, the Fed began moving up the interest rate. At first it was a shock. There were small increases where there hadn’t been any for years. It was still too early to understand. But then the spigot opened, and the Fed continued to increase rates to a level not seen in years.

Fear creeped in and most institutions early on started to pull back promotional programs. The worry was of the unknown – were these rates going to continue going up, level off, or go down? Will we be competitive? Can we take some extra profit on the deposits we are keeping at these very low rates, or do we ride the rates up with the market and increase our market share?

Or we do nothing.

Now What?

Today, I believe much of the industry is in the acceptance phase. There is an understanding of what is happening, and the short-term effect. Most institutions have adjusted rates to meet the new levels. But there still seems to be a “pulling back” and a relaxation on outbound marketing and promotion.

Without marketing, the organization will shrink and lose potential share. We have been playing defense. It’s now time to go on the offense.

Transformation – Now is the Time.

It’s time to get your organization out of the acceptance phase and into the transformation phase. Embrace a forward-facing look.

What does transformation look like to you? It could be many of the following:

• Adjusting pricing in line with new realities
• Building new products and categories that reflect current pricing and market demand
• Adjustment of staff focus to line up with changing consumer needs and new realities
• Add/subtraction of staff/personnel in conjunction with changes in workload and overall demand
• Protecting your market share with confident advertising messaging and aspirational positioning

Until you get into the transformation zone and move forward, everything will still feel like a crisis.

The biggest danger is being comfortable staying where you are (in the acceptance zone), “waiting to see what happens next.” Or, hoping things will go back to the way it was. It never does.

In the meantime, others may be eating your lunch.

The lifeblood of any business is the attraction of new users to its base. This is because there will always be a natural attrition taking place. People move, change circumstances, and unfortunately die. Regardless, if you’re not fully invested in developing new relationships to offset these changes, your organization will suffer. It will die.

What changes are you willing to make?

Remember the saying, “if we keep doing the things we’ve always done, we’ll get the results we’ve always gotten.” Nothing could be more true with appealing to a younger demographic. We talk to many institutions that have this goal yet they go about it the wrong way. Somehow, they believe that just by “marketing” (think advertising/communication) to that group, people will flock to their business.

It’s not that easy.

To appeal to the youthful demographic, you must be relevant, become part of their consideration set, and have credibility with these consumers.

What the young consumer wants – Technology

Younger generations want emerging technology seamlessly integrated into their daily banking experience. Furthermore, they’ve come to expect a consistent, user-friendly experience with any touchpoint they have with you. Many are also demanding flexibility that adapts to their lifestyle, from access to digital services as well as brick-and-mortar locations to multiple channels where users can communicate with the institution (in-app support, virtual assistants and more). Source Forbes, Financial Brand

A Digital First strategy resonates well with these users. Their world is digital, and you have to create the experience that fits with their desires, not yours.

According to Forbes, just adopting the technology won’t be enough. Digitizing experiences will not drive growth by itself—fine-tuning the digital experience through innovation, personalization and continuously new approaches will be necessary to keep younger audiences engaged.

What the young consumer wants – Advice

The young consumer finds the financial landscape challenging. They don’t understand it and know they need help. At the same time, their comfort with digital over human interaction may make them harder to connect with.

Develop programs such as webinars and seminars on topics in line with their interests. Encourage them to suggest areas that can be helpful. Build an ongoing repository of support in line with their general needs. Financial planning is a major issue that many young consumers need advice and encouragement.

What the young consumer wants – Relevancy and Respect

Every generation wants to be acknowledged for who they are and their uniqueness. It’s easy for an established institution to overlook this important component. If a new, younger consumer doesn’t feel comfortable in the relationship, they will move on.

Some of the simple, yet important elements of serving this segment is to ensure you have staff that represents this group. Having staff from this age group allows you to showcase that you value these groups and have trained staff that can handle their needs.

Create a team from the younger employees with the goal of evaluating and challenging all the current service practices and procedures. Things that have “been done a certain way for years” may no longer be relevant. And, will likely serve to push younger consumers away.

Remember it’s a journey.

A healthy organization is going to allow some flexibility as they bend and adjust to various societal and demographic changes. Staff should be as comfortable explaining what a savings account is used for to a young consumer and comparing investment options for an older consumer.

There is no one size fits all.

Last week we talked about what people wanted from their financial institution. As a refresher, this is the response that consumers gave. According to a study by Boston Consulting Group, the typical banking customer answers the following question in this manner:

“I want my bank (or credit union) to be more like:
Amazon……..37%
I know what I need by I’m open to some relevant automated feedback.

A Personal Shopper……..29%
I know I need something, I just don’t know where to start.

A Supermarket……..16%
I know what I need, and I know it will have it.

My Doctor/Dentist……..11%
I don’t enjoy going, but I know I need to go regularly for important help.

My Gym……..6%
I want it to be an important part of my regular routine.

Delivering on the Consumer’s Demands

You can’t be all things to all people so you must decide in advance the areas that you can actually deliver. As with any product or service, you need to know YOUR market and their specific demands. McDonalds does not try to sell Rib Eye steaks. It’s just not a fit.

Just because somebody may want the above, serving each segment is going to result in some compromises for some and benefits for others. Your goal is to be certain to “optimize” the choices in line with your capabilities.

The Survey Decoded>

I interpret the results above translated to the consumer behavior as follows:

The Amazon Shopper – They know what they want. To win their business, you will need to have a robust commitment to technology, a category-leading investment in Fin-tech. An organization like this is a “digital first” company with heavy investment in tools, talents and technology.

The Personal Shopper – This might be classified as a “high touch” or “personal banker” strategy. Contrary to the Amazon experience, more emphasis needs to be placed on the “people” side of the equation. That translates into more staff, consistent and in depth training on all facets of the finance equation. Employees must recognize how to read the consumer’s needs.

The Supermarket – These consumers are likely less concerned about their choices. They may be less brand loyal and are comfortable buying a CD from anyone. This is likely a price-oriented shopper and would require aggressive pricing strategies to maintain their business.

Doctor/Dentist – This is the loyal consumer that respects the relationships and wants to be serviced effectively when they do come in. More financial planning and investment counseling support may be in line with the expectations of this consumer.

My Gym – This could be a combination of many different approaches since this implies a regular focus on financial wellness. What could benefit this consumer? Financial training classes, events and other educational efforts to keep these consumers operating at their peak. The move toward in-branch coffee bars plays into this strategy.

Remember, you can’t be all things to all people. It’s best to understand your user base and/or the consumers you want to attract and build the right solution for them. Always keep in mind what the competitive landscape is going to be offering as well. The financial industry operates in a sea of sameness, so do your best to stand out in your own unique and relevant way.

Financial institutions have sought to personalize the banking experience since data first became available. In my first job in financial services about 35 years ago we began to incorporate personalization into our marketing and our planning.

Geographic Personalization

We used it at a basic level based with the information we had available. Our first major implementation of highly personalized marketing came in the form of our planning tools. We incorporated basic philosophies from the book, “The Clustering of America.” It had just been published and it used the best data at the time to create buying segments. The notion was that birds of a feather flock together, and that where you lived implied certain buying behaviors.

You might call them “personas” today. There were 40 different segments that we applied to our branch system and then built goals for each branch based on the market characteristics that each branch competed within. For instance, we’d expect an area with an older population to have higher demand for rate-sensitive savings product and younger populations demanding higher loan purchases in general.

With the growth of transactions increasing outside of the branch environment, how do you effectively target users and allocate the right opportunities to your company?

What People Want Today

According to a study by Boston Consulting Group, the typical banking customer answers the following question in this manner:

“I want my bank (or credit union) to be more like:
Amazon……..37%
I know what I need by I’m open to some relevant automated feedback.

A Personal Shopper……..29%
I know I need something, I just don’t know where to start.

A Supermarket……..16%
I know what I need, and I know it will have it.

My Doctor/Dentist……..11%
I don’t enjoy going, but I know I need to go regularly for important help.

My Gym……..6%
I want it to be an important part of my regular routine.

With such a wide range of buyer expectations, knowing which users personify the various mindsets is really the first step to creating some form of personalized service. What the use of delivering a hyper-personalized service to someone that doesn’t want it?

The Journey of Personalization

We know that banking services are saturated and hyper-competitive. Moving towards a more personalized experience is the goal to create higher engagement, lower attrition, stronger loyalty and becoming that “top of wallet” provider.

The path isn’t the same for everyone and yours should be created in line with your account-holders goals, and expectations, matched up against your ability to deliver the operational horsepower necessary when and where they need it.

Your decisions and actions are data dependent. Strive to know what your users want and need before creating a process that may actually push people away.

Assumptions can be dangerous.

I remember once receiving some information sent to me in Spanish from a large institution. I don’t speak Spanish, but they thought that since I have a “De” in my last name, I probably was. Their attempts to personalize actually resulted in a loss of credibility and a weaker relationship.