Competing for Customers, Community-Bank Style

competing community bank styleIn the battle for wooing banking customers, large banks are starting to lose out to community banks. It’s no longer the lowest interest rates that get people in the door; customers must be able to trust who they’re banking with. Banking is becoming significantly more competitive, with a customer base that desires an experience over a service, and larger banks are having a more difficult time adjusting.

Competitive rates don’t sell.

In a banking industry that now offers accessibility to consumers nationwide, competitive rates are no longer the biggest competitive advantage. When everyone offers competitive rates, the interest on loans or deposits are not as much of a driving force as they used to be.

Consumers seek financial partners.

Delivering on banking technology is a given, but community banks can leverage what has always been a bestseller: relationships. Community banks and credit unions can offer loans to consumers that big banks may not be able to offer. More than that, community banks and credit unions offer mutual trust. Customers are able to walk into a local branch and speak with a trusted adviser – possibly even a neighbor – about how to best invest an inheritance or whether to refinance their home.

Customer relationships are the winning ticket.

Community banks know the needs of their customers and can better serve them as a result. Cross-selling bank services to consumers that are already loyal significantly lowers customer-acquisition costs and boosts your reputation as a reliable banker. Consumers respond to convenience, but they also seek value in the services they are receiving. Tailoring services directly to consumers is how community banks stay relevant.

Stay true to your brand.

It can be tempting to copy the marketing strategy of larger banks, but that won’t maintain existing customers or attract new customers when there are so many options available. You need to find what makes your community bank unique and use that as your competitive edge. Seek out benefits, beyond low interest rates, that will peak the interests of consumers – and understand who you’re trying to connect with in your community.

Pricing structures, fees, and products must be relevant to those you serve, but you also must have a differentiator. Community banks can offer more personalized services that resonate with individual customers, luring them away from larger banks.

There is enormous opportunity for you to grow your community bank or credit union, but it starts with knowing what existing customers and prospects think of you compared to your competitors. Take action now and request our benchmark study for your region.

Community Banks: Big Bank Customers Are Waiting for Your Excellent Customer Service

One of the biggest myths out there is that community banks are always better at customer service than big banks. While this may be true in aggregate across the totality of the US, no community bank that I know of is competing on that level.  Every community bank competes on the local level, and the reality is that in over 75% of local markets that we cover in the Northeast, at least one big bank ranks in the top three in customer service. That means that in the vast majority of markets, community banks cannot say to local prospects that small banks always outshine the big guys.

Community banks may be more personal, more involved in the community, and more likely to know the people who bank with them, but if they’re not delivering on key service areas, they will struggle to compete with big banks in their community. In our latest New York benchmarks, more than 40 community banks across the state were rated lower in customer service by their own customers than any of the big banks in their market. So much for the service advantage.

Yet delivering on customer service should be low-hanging fruit for community banks as a way to compete with and take customers from the big banks, so if your community bank or credit union is getting bad marks on customer service, it’s an easy place to make rapid changes and retain the customers you have and attract new ones away from the big banks. Start with these three areas:

Improve Customer Service with Better Training

Employees who are knowledgeable about your bank’s products and services make banking customers feel confident that they are putting their money in good hands. Hire the best talent for your bank. You can teach banking, you cannot teach attitude or a true desire to help customers. Once you hire the right people, make sure your employees can answer questions, provide insight, and make recommendations that make sense for your customers, beyond just which checking account they should open. This sounds obvious, but both big and small banks often are not up to the task. In our latest survey, 38% of banked adults said their bank was not proactive enough in offering solutions. Customers are asking to be cross sold more! 

Improve Customer Service with Better Communication 

Not only do your customers and potential customers need to know that you’re capable of meeting all of their banking needs, but they need to know that you offer other financial services as well. From mortgages to retirement accounts, make sure your customers know you are more than just a place to have a Christmas savings account. In our latest survey, only about 50% of bank customers concentrate most of the banking with one bank, even though the vast majority say they want to consolidate. The two top reasons customers gave for not giving their primary bank all of their business were:

  • “I did not know they offered other products” and
  • “They never asked me.”

In several cases, well-meaning community banks were missing out on potential 25%-35% growth rates, simply by not being as proactive as their own customers were wanting.

All banks also need to make sure communications are effective in letting your target market know about your community involvement – one of the ways community banks and credit unions are able to set themselves apart from big banks. This is especially important in the commercial space since community involvement is a strong driver of consideration.

Improve Customer Service with Better Technology 

Being small and local doesn’t mean you can get away with not having the latest and greatest technology to make your banking services easy to access for your customers. From mobile banking to online check deposits, customers expect you to have all the conveniences of a big bank – and when you do, it levels the playing field and gives you an opportunity to draw dissatisfied customers away from big banks. Just because you are small does not mean you cannot compete in technology. Don’t believe it? Ask your customers. We did, and found that in almost every county in the Northeast, at least one community bank ranks in the top 3 in technology. Those community banks know that the key is not just the tools, but the servicing and training around the tools.

There is enormous opportunity to improve your ability to grow your community bank or credit union, but it starts with knowing what existing customers and prospects think of you compared to your competitors. Take action now and request our benchmark study for your region.

Finding Success as a Community Bank, Part 2: Marketing

Last month, we discussed the challenges that community banks and credit unions face – and even some of the opportunities they have – when competing against megabanks. One way to level the playing field is through marketing efforts. Community banks and credit unions can build a successful marketing strategy by understanding who to attract, how to reach them, and when to communicate.

Target Your Market

Understand and be able to articulate what you have to offer, then identify the types of people who are most likely to benefit from your customized programs. Market almost exclusively to your target demographic and advertise your specializations, while still recognizing that you will receive inquiries from people outside of this spectrum. Simply put, focus your marketing on the types of people who are most likely to bank with you.  In New York State, for instance, 46% of customers would prefer to bank with a “smaller bank or credit union.” (35% have no preference and only 19% actually prefer a bigger bank).

Craft Compelling Messages

As a community bank or credit union, your business revolves around more than direct deposits. Identify your selling points beyond the traditional banking needs, and advertise the larger financial picture. Create multiple messages focused exclusively on the unique elements you offer, and direct them to people who fit the profile of your most interested consumers.  According to the results of the Q2 2017 Bank Benchmarks across the tristate area, the #1 product currently being sought by commercial customers (small business, middle market, and large corporate) are retirement accounts (followed by insurance), and the #1 product for consumers are brokerage accounts (followed by checking accounts).  A message crafted around those specific needs will be much more salient to prospects than a general branding approach.

Communicate Regularly and Effectively

Establish an expectation of positive communication between your representatives and customers. Ask your customers which communication method is most preferable, then communicate via that medium. Have a purpose for each communication, but be willing to respond to whatever comes up in the discussion. Identify legitimate reasons for your managers and officers to communicate directly with your key customers. Consider using chat options for those who can’t visit a physical location.

Understanding your market is essential to a successful business strategy. You may not have the brand recognition of a larger bank, but there are services and products that can be offered that are unique to your business and location. With a focus on those you can serve best, you can attract a multitude of different customers.

Is Your Community Bank Missing Opportunities with Millennials?

Emerging generations are the largest in history – even larger than the baby boomers.

  • They have access to more money than any previous generations in history.
  • They value interpersonal interactions and relationships as much as any generation in history.
  • They prize social engagement and are suspicious of large corporations to an extent never seen in any previous generation.

Despite all of this, many are less likely to use community banks than their parents and grandparents. But that does not have to be the case. These younger generations represent an enormous opportunity for community banks to thrive and grow.

Imbalance in Being “Small,” “Neighborly,” and “Friendly”  and Demonstrated Financial Expertise

Generally, people don’t go to friends and neighbors for complicated investment and retirement advice. They go to people they consider to be experts. Exclusive focus on size and personality has established among community bank customers a strong degree of personal loyalty for basic deposits, but it has weakened some of those customers’ confidence in community banks as experts in more complex financial matters, creating a perception of community banks as places where good people take care of money, not where financial experts handle complicated, consultative financial conversations. Community bank customers store their money with good people; they discuss how to use their money with good bankers.

Failure to Embrace Active, Early Sales Practices and Opportunities

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