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06/21/2012

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First, let me say that I respect Randy a great deal. He is obviously someone who has both the experience and smarts that have been battle tested. This is true of many others I’ve come in contact over the years. Yet, when it comes to Branches many experts seem stuck in the 1990s and / or are simply unwilling to accept the changing world.

Let me explain. There is nothing magical about a branch --- it is, after all, just a channel for sales & service. From this lens, the question facing Bankers should be centered on the following
1. How can my FI (Bank or Credit Union) best position itself as THE most helpful partner for customers?
2. How can my FI eliminate the barriers / friction when customers want to transact and/or engage? Better yet, how can we encourage meaningful interaction that leads to the betterment of the customers’ financial lives?
3. How can we position my FI so that our customers believe they are getting the best value?

Notice something that should be obvious – all of the above 3 items are related to meeting the needs / wants of the customer! Solving these three questions will generate insights needed to develop
1. Channel strategy (branch, atm, foreign atms, online, mobile, call center, etc.) including how best to serve different customer segments
2. Customer segments that need / want different types of products & services (and are willing to pay for such at different levels)
3. Product strategy including bundling / pricing
4. Marketing plan that is very specific for each customer segment and that moves to differentiate the FI from 15,000 others in the country

Importantly, notice that Branches are just a very small component of the overall puzzle. Not until the entire strategy is developed, can a Community Bank or Credit Union begin any further investment in branches.

A few notes on branches:
Community Banks and Credit Unions – particularly the smaller institutions with assets < $1 billion – have NO hope of competing with the larger Banks (and 20 or so $1b+ Credit Unions) based on branch design, location, and convenience. No amount of shiny / blinking lights, colorful or catchy names and logos, no amount of coffee / donuts / yoga or toasters will change this fact.

Second, we all recognize that Branches have become secondary channel for sales & service. Regardless of how quickly or slowly, it is indisputable that online & mobile are quickly taking the #1 and #2 spot as THE channel for most Retail Banking activity. So, with this information, why fight the consumer (ie your customer) on what they want? Why not simply adjust?

Great Post Mark-We are in a transition period so both sides have a point; yes people still like branches but they are not going to them as often. Once the transition period ends the branch will go the way of the dinosaur no matter how nice, slick and clutter free we make them. Why bother going into a branch to talk to employees with IPads when we can do all the banking we need to on our own IPads without getting out of bed?

Serge is correct; community banks and credit unions should develop holistic delivery strategies before spending a penny on branches, but the same goes for all other delivery channels, including technology. While branches now take second place to technology in terms of clicks and processing, they retain first place in three critical areas:

1. Developing new customer relationships. 90% + new relationships are created in the branch.
2. Delivering a strong differentiating brand experience. See JD Power study where 31% of consumers state branch image is a huge PFI decision driver.
3. Helping community banks and credit unions compete with mega banks. Community banks and credit unions cannot match or keep pace with mega bank technology budgets or out-spend them in terms of marketing. But, branches provide the visceral on-the-ground/in-the-community connection between institutions and target market segments that is needed to compete and win market share—built on people-to-people relationships backed by technology.

The challenge today is fully integrating the physical and virtual experience. Companies like Microsoft understand this and are putting significant effort into helping the financial industry understand how to bring technology into the branch and link the brand experience across all delivery channels. The driving reason for this interest? A recent industry study indicates that 15% of all technology spending over the next three years will be on branch technologies.

Will consumers do their banking on an IPad from bed as Henry suggests? Some will. By extension, what percentage will also choose to go grocery shopping, talk with their investment advisor or attend a local football game in the same way? Why do people flock to Apple Store’s Genius Bar to learn how to use their technologies when they could view a tutorial online? We are just learning about the psychology of physical vs. virtual experiences and where bank relationship building and service delivery fits in. The trick is to avoid the “Hype Cycle” around technologies or branching and look to perfect the most productive experiences in terms of customer acquisition, development, and retention.

The debate about branches vs. technology will continue for many years as we learn the real truth about what consumers really want. The wining institutions will be those who leverage the advantages of each delivery channel and evolve with their target markets’ preferences.

As a side note, Randy and WMG are recognized for more than just their exceptional branding and branch development work. They are also well known as marketing and delivery strategists. While Randy’s presentation focused on just one delivery channel, WMG has a proven track record for community banks and credit unions creating holistic delivery strategies that help them compete and win.


Paul Seibert, CMC EHS

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Mark Arnold is an acclaimed speaker, brand expert and strategic planner helping businesses such as credit unions and banks achieve their goals with strategic marketing insights and energized training.