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How to Build Remarkable Bank Products

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by Price
September 15, 2017

By Mark Gibson & Kevin Halsey

Build remarkable products to fuel superior growth.

Achieving product differentiation in banking is challenging. For starters, consumers don’t perceive they are buying banking products, but rather opening accounts or taking out a loan. Many bankers concede that a checking account is a checking account—and most banks operate on the same three core systems.

As a result, only a few institutions come to mind when you think of product innovation in the financial space—such as Capital One, Quicken, and American Express. What each of these firms has found is that carefully researched, crafted, and marketed “remarkable products” can attract attention and generate superior household growth in an increasingly crowded and competitive marketplace.

So, what is a remarkable product? Why are they important for your institution, and how can you design and build them to fuel your growth?

What makes a product “remarkable?”

Most products in a given category are pretty similar. Slight modifications to products are often highlighted as “new and improved!” But consumers are hip to that trick and pretty much ignore minor improvements in features.

A product becomes “remarkable” when it is perceived as being so different and addresses the consumer’s needs so well that it stands out distinctly from competing products. These relevant differences can be on a variety of dimensions, like:

  • Speed
  • Ease
  • Design
  • Accessibility
  • Price

Important to the consumer. Different from competitors. In banking, that first element is a lot easier than the second.

But do you remember the jolt to the industry when Bank of America introduced Keep the Change? Or when USAA was first to launch mobile deposit? How about Capital One’s Spark Business Card that offers “unlimited 2% cash back on every purchase every day?” Or Quicken’s Rocket Mortgage, which totally eliminates the paper application and provides a credit decision in minutes instead of days?

All of these products were remarkable when they were introduced, and they made a meaningful impact in the marketplace.

Why are remarkable products so important?

Remarkable products do two important things:

  1. They cut through the competitive clutter.
  2. They motivate more people to take action faster.

When you combine these two benefits, your marketing dollars work much harder as a result. Because the money you spend on promoting a remarkable product will generate many times more new customers and product purchases—and much higher balances and revenue—than it would for an unremarkable product.

In other words, this multiplier effect can translate into significantly higher marketing ROI and revenue growth for your company.

Building remarkable products.

The opportunity to build great products isn’t reserved just for national banks and large credit card providers. Community banks have done it too, producing noteworthy results in the process.

These results include:

  • Increases in sales volume and average opening balances of over 25%
  • Deeper customer relationships, leading to improved retention and increased fee income
  • More net new households
  • Increased marketplace awareness of the bank brand

While banks of all sizes can build remarkable products, the process requires the deployment of new skills and fresh thinking that challenges the conventional wisdom of most financial institutions. It takes time. And it starts well before brainstorming the product details.

The process for advanced product design begins by asking two important questions: 1) Who do we want to bank? 2) Why should they bank with us?

Who do we want to bank?

Different customers want different things from their financial institutions. That’s why, to be remarkable, you have to know exactly who it is you want to attract. Only then can you reach and convert them.

To determine the who part, you need to answer the following questions:

  • Who does the bank serve well today?
  • What are the bank’s most profitable segments?
  • Where are the opportunities to improve profitability?
  • Is there market opportunity in the bank’s footprint?
  • What segments are large and growing?
  • Does the bank have the capabilities to serve them?
  • What gaps do you have and are you able to address them?

Getting the right answers to these questions is important. That’s why advanced product design uses insights from data. This doesn’t require investment in big data analytics—and the analytical process doesn’t have to be a massive effort, tying up valuable resources. In fact, much of the data needed is well within reach at most banks. Below is an example of some of the data points that most community banks have or can readily access.

Why should they bank with us?

More specifically, what will it take to be perceived as remarkable to the segment you’re targeting? According to Merriam-Webster, remarkable is “worthy of being or likely to be noticed especially as being uncommon or extraordinary.”

It’s one thing to guess what makes your bank “likely to get noticed” and “uncommon,” and another thing to know it.

To know it, research is required. And using the right framework can help.

An effective value-proposition research framework begins by identifying the most important banking elements that your target customers want and need from their banking relationship. The best-in-class institutions understand which functional and emotional elements are most important to the target segment—and align their offerings and communications to these. Below is a sample of the elements that matter to small businesses.

Identifying these elements is no guarantee that you’ll ignite customer interest and action. Remember, to be remarkable, you must also be “uncommon” or “extraordinary.”

Determining how this is done is the heart of developing your remarkable product. The matrix below identifies the institutions you compete against for your target segment and what they are good at. It also identifies “white space” among key elements—where there is an opportunity to be unique.

A conversation about whether or not your institution can effectively claim that white space is where the possibility of becoming remarkable is born.


Stop before you give away the bank.

In financial services, improving the competitiveness of products often focuses on pricing benefits.  While it is critical to establish price points that can make products attractive, price is far from the only weapon in the arsenal. In fact, in a business characterized by thin margins, competing on price can easily result in decreased profitability.

Building competitive value propositions with enough of a benefit to attract new customers or new money should ideally result in broader profit margins, as customers become willing to pay for more obvious and relevant value.

Still, price matters. Pricing often plays a significant role in attracting the consumers’ attention and motivating them to take action quickly. Pricing strategies require fresh thinking about the value of a customer or household, not just a product. And a deep understanding of customer value will inform product bundling, sales approaches, onboarding, and cross-selling strategies.

Once you’ve designed and built your remarkable product, you need to support it with sufficient sales and marketing resources to optimize its success.

Combining these product development and marketing techniques will demonstrate to your executive management the clear linkage between customer insight, marketing prowess, and revenue growth.

Mark Gibson is senior consultant at Capital Performance Group, a strategic consulting firm that provides advisory, planning, analytic, and project management services to the financial services industry. Email: mgibson@capitalperform.com. LinkedIn.

Kevin Halsey is also a consultant at Capital Performance Group. Email: khalsey@capitalperform.com.

 

Hear more about advanced product design from Mark Gibson and Mary Beth Sullivan when they present at the ABA Bank Marketing Conference, September 24-26, 2017. We look forward to seeing you in New Orleans!