Community Banks and Credit Unions Can Gain Market Share with 1.24M Households in Play

Community banks and credit unions have a lot of opportunity to grow their market share, according to our most recent benchmarks. Whether it’s through growing loyalty or demonstrating a better understanding of gender differentiation in bank marketing,  opportunity abounds.

In New Jersey and Pennsylvania, there has been a sharp rise in the amount of market share in play. A shocking 1.24 million households across New Jersey and Pennsylvania are currently looking for a new bank. Two-thirds of bank customers in this region are up for grabs. This represents enormous potential for the savvy community bank or credit union manager who takes the time to understand why they’re unhappy where they are – and of course, it represents a big risk for those institutions that will be losing more than their fair share of current customers.

The most important differentiator community banks and credit unions have is their ability to deliver an excellent customer experience. When bank customers feel valued, listened to, and cared about at their bank, not even better rates can pull them away. This isn’t just speculation – it’s backed up by the numbers. Just like today’s retail consumer and today’s traveler, today’s bank customer is willing to pay more for a better customer experience.

What Does Today’s Bank Customer Want?

Our benchmarks are a massive scientific study across several states in which we interview hundreds of thousands of consumers and businesses about the banking institutions they use, asking them to evaluate each of the banks and credit unions they use on 53 different metrics. Today’s bank customer:

  • Expects your community bank or credit union to have the best technology and be as innovative as big banks
  • To deliver a more personal and more customized experience in which they feel known, recognized, and valued
  • To have a consistent experience across all touchpoints

What Don’t Bank Customers Want?

Bank customers don’t want runaround. They expect your staff to know how to use all of your product. They don’t want to repeat themselves because they called in, then visited a branch. They don’t want to work with poorly trained staff who can’t answer their questions. Read more about avoiding customer flight in the winter 2019 edition of Banking Mid Atlantic.

You Can’t Take Advantage of the Opportunity without Knowing Where You Stand

Our latest benchmarks make one thing clear: There is a lot of opportunity for community banks and credit unions to grow, but it’s going to take not only delivering on customer experience but knowing where your bank stands in comparison to your competition. When you know what your customers and prospects think of your bank, you can make informed decisions to attract more loyal banking customers. Request your benchmarks now.

Finding Success as a Community Bank, Part 3: Personalization

 This is the final part of a three-part series on finding success as a community bank.

Read part one here.

Read part two here.

As a community bank or credit union, personalization is the strongest weapon in your arsenal, because large financial institutions can’t compare. They simply do not have the capability of providing an individualized experience, and this is exactly what customers are searching for. Our insights reinforce the fact that bank customers want to be recognized as individuals and seek in-person interaction in the local branch.

Be Available 

Recognize that customers want access to information immediately, and being able to reach a real person – without a long wait – is still important to them. Even though there is an increase in electronic banking, about 50% of bank customers in the Northeast US prefer to interact with their bank personally, over the phone or in the branch. Surprisingly to some, this 50% applies not just to the elderly:  more than 45% of millennials also prefer the in-person interaction. And more importantly, these numbers go way up for transactions that the customer deems as more important, such as applying for a loan, discussing investments, etc. So, while the number of branch visits are declining, the importance of those visits are far greater than ever before.

One of the biggest frustrations across all industries is the move toward impersonal communication, and this is often the only way larger companies can access their consumers. Complicated phone trees, constant pushing to online options, limited hours for live help, and automation are frustrating fails in customer service that community banks and credit unions can avoid. The easier a consumers can access a live representative, the better the relationship. 

Take Small Risks

Identify potential customers who, despite the risks, have specific qualities that make a small risk acceptable. (This might include children of long-standing clients, for example). Provide a specific benefit to them, such as a lower interest rate or longer payment terms, that will increase their appreciation and loyalty without creating an unmanageable risk. This personal touch is something that only community banks or credit unions can offer. But don’t stop there. The recent Benchmark results show that some community banks in the region have done a poor job of making a one-product customer (who comes in for a good CD rate, for instance) into a long-term loyal customer. There are a significant number of community banks (36%) that have decreased their long-term customer loyalty this year because of such programs. However, almost the same amount (34%) have increased their customer loyalty because they have been conscious of cross selling new products to these customers, and not too worried about slight increases in the PUSHY scores as long as their PROACTIVITY SCORES (tracked in the benchmarks) increase much more. [IF you would like to know how your customers see you on the PUSHY-PROACTIVE spectrum, please contact us as we already have results from every bank in the Northeast].

Incentivize Referrals

Look for way to incentivize referrals from current customers. This could be lower interest rates, credits applied to loan balances, waivers of certain fees, or any other benefit that is of real value to the customers. Community banks and credit unions can also go as far as to extend the reward to the new customer, encouraging a positive relationship from the very first moment. Again from the Benchmarks, we see that over 62% of loyal customers are willing to recommend their bank to friends and colleagues. The #1 reason that they have not:  the bank never asked.

These efforts are focused on one core goal: building strong, lasting relationships. The small banks and credit unions that succeed to the greatest degree know their customers, and their customers are equally familiar with the welcomed expectations. These companies are successful because they actively seek out specific customers, communicate regularly and intentionally, and make themselves available. It is more than simply a business decision to trust and reward customers, because this is your community. Personalizing services differentiates community banks, and it’s a tool that should remain in your arsenal.

Finding Success as a Community Bank, Part 1: Challenges and Opportunities

Small community banks and credit unions face rising pressure in today’s economy to compete with large, multinational banks. This challenge to remain relevant has existed for a long time, but it has become increasingly difficult to remain so in an expanding age of globalism and corporate consolidation. Understanding how to attract new customers, while simultaneously employing a multi-generational approach, is critical to continued success and sustainability. It is possible for small banks and credit unions to compete – and even thrive – in our current market, but it requires focus, purposeful action, and a recognition of their unique strengths and advantages.

Opportunities Abound

For community banks, competing against megabanks can be a daunting challenge, but there remains enormous opportunity. In 1990, the five largest banks controlled less than 10% of all bank assets. In the last 25 years, that share has jumped to 44%. Today, approximately half of all new accounts (two-thirds of which are opened by Millennials) are established with the largest four banks (JPMorgan Chase, Wells Fargo, Bank of America, and Citibank). However, according to our own benchmark studies, an average of 13% of those megabank customers – as high as 20% in some markets – prefer a community bank.

Success Factors for Community Banks and Credit Unions

One of the most important success factors is to offer flexible, customizable services that allow your customers to choose what they want and when they want it, regardless of their age, income, schedule, or relationships. This is not only true for the younger customers but is becoming a key driver of loyalty for Gen Xers and Baby Boomers. Despite Millennials opening new accounts with larger banks, many still want the personal touch: As of June 2017, over 45% of Millennials said they preferred in-branch interaction over electronic interaction with their banks.

Keep it Personal

Most consumers are still searching for a personalized banking option, and community banks that take the important steps to capitalize on that demand will thrive. Look at examples of successful organizations from other industries that are facing the same general issue: competing with large corporations. Find out what local restaurants are doing to compete with fast-food retailers. Discover why the local auto mechanic is so successful when a chain auto-repair shop is right around the corner. The basis of any functioning business is a good relationship with its customers.

Some trends may favor large, multi-national banks, but deliberate, personalized attention can not only even the playing field, but tip the balance in favor of a community bank or credit union. With an understanding of your competitive advantage as a small, local financial institution, you can capture plenty of loyal customers that will bring success. Contact us if you would like customized benchmark reports for your region.

Next month, we’ll continue our Community Bank Success series by exploring Community Bank and Credit Union Marketing.