Financial Services: Thinking about new customer acquisition in the time of COVID
Dan Hoedeman VP Engagement
The COVID pandemic is giving this generation of business leaders, including those in the financial industry, the greatest challenge they have faced. For most companies, survival is paramount. For others, there is a growth opportunity.
The opportunity comes from the natural disruption we are living through. The unique dynamics of this situation open the door for growth for regional and smaller financial services companies and credit unions.
It is a time of irritations.
The safety and social distancing protocols are important, COVID is a serious virus that should be treated seriously, but a side effect is to make doing business frustrating and time consuming. Big banks have notices on their websites that are usually some version of: “Our phone, email, and branch wait times may be longer than usual due to COVID-19.*” And the experience is true to the warning. People are forced into appointments, long waits standing outside, and other experiences that would be deemed unacceptable in more normal times.
This is a particular threat to the Big Banks.
Which means it’s a particular opportunity to regional and smaller financial services companies.
Our proprietary research** shows that, for most people, the “Big Banks” are perceived as largely interchangeable, to the point that most people’s reason for staying with their bank is “I am already with them.” In other words, they’re there because of inertia.
Nothing breaks people out of inertia-driven brand choices like extremely frustrating brand interactions.***
Add to this two critical factors: firms’ ability to precision-market and the increasing ease of on-boarding new accounts. Together, these are the tools that allow challengers in the financial services space to take advantage of the situation and go hard after the 20% of customers with the best margin characteristics.
This wades into business strategy, and marketing, especially now, needs to get involved. It’s not just about linking up acquisition efforts with the best customers. It’s about taking the opportunity to reorient the company around the best customers.
Acquisition is where it all starts.
Historically, financial services companies have had very broad brands, very broad offerings, and very broad marketing. With the right portfolio mix, this works. You make money on some customers and lose a little money on others. Given the improved segmentation ability, though, why rely on this as a sort of natural law of financial services?
A successful challenger will identify and target a much tighter range of margin, specializing around things like affluence, life stage, and specific financial needs. This helps bring clarity to the organization—you know who you’re built for. It brings clarity to marketing—you know who you’re really trying to bring in. And it brings clarity to the brand because you know the experience you need to deliver to best serve your specialty.
This isn’t to say that you should only serve people within one area. The ideal is a settled set of profitable customers who stick with you for the long haul. The business must remain effective for a range of people. But we’re talking about specific reasons people would switch to you.
The opportunity now is to take advantage of existing disruption by adapting in a way that forces reappraisal of your firm from people who are feeling friction with their current institution.
Imagine the acquisition opportunities for a regional bank that leaned into, say, an emerging affluent segment of young small businesses and small business owners, and reoriented the entire customer experience around that idea. Perhaps, instead of managing social distancing by making customers make appointments and wait outside on the sidewalk bankers would visit them. Much less irritating, and quite ego-boosting, to have a personal visit. It can continue past COVID. It can become its own point of difference, its own campaign, even its own tagline (Remember “Pick Enterprise. We’ll pick you up.”?) Messaging focused on a service point of difference can be extremely effective).
As further motivation, the fintech companies will surely do something like this, digitally at least, even if the regional financial institutions won’t.
That’s a big threat. In addition to the frustration in visiting a bank, most retailers aren’t taking cash because of health concerns and it’s unclear when they will again. So the ATM is a lot less important. That makes the typical financial services moat—”we have a branch by your house and you already bank with us!”—a lot less meaningful.
Now is the time to act, to get ahead of the competition and take advantage of the natural disruption in the world. Now is the time to become a focused, profitable acquisition machine.
* Wells Fargo’s current online notice
** Proprietary quantitative and qualitative research study of currently banked people in urban, suburban, and rural Minnesota and North Dakota.
***In fact, our research showed, and this isn’t a surprise, that the number one reason for people to switch financial institutions was an exceptionally bad experience.