|Consumers Come Home to Local Banks|
More than 2 million accounts shifted to local banks and credit unions in the first quarter of 2010. What’s motivating this trend, and how can you take advantage of the opportunity?
Pinnacle Financial Strategies
The economic collapse of late 2008 did more than plunge the U.S. into a difficult recession.
News coverage of mismanagement at many large financial institutions – and the subsequent government bailout of those companies – created a consumer “crisis of confidence” in the nation’s banking infrastructure that will have lasting repercussions for the marketplace.
Consumers across the country found it difficult to accept that these well-known banks were being rewarded with taxpayer dollars – after shattering the taxpayers’ faith in the system.
The belief that Wall Street and its “too big to fail” institutions received an unfair advantage remains deeply ingrained in many Americans.
Two years later, that frustration has not waned; in fact, for many it has led directly to action.
A recent survey by J.D. Power & Associates found that more than 66 percent of large bank customers were willing to switch to a locally owned bank. And a poll by Zogby International showed that some customers were doing more than just thinking about switching – 14 percent of those surveyed had actually moved money to a community bank or credit union.
In fact, FDIC records from the first quarter of 2010 reveal that more than 2 million accounts – worth about $5 billion – have been shifted to local banks and credit unions in recent months, according to the online campaign Move Your Money.
Clearly, there is an unprecedented opportunity for smart-thinking community banks and credit unions to take advantage of these trends and capture significant market share. The key for local banks and credit unions is to strengthen their community connections by building on their unique qualities … while adding the programs and products that today’s consumers seek.
Reclaiming The Leadership Role
To take advantage of this shift in consumer sentiment, local banks and credit unions must first make a dramatic change in mindset and behavior themselves – moving beyond their role as mere members of the community and re-establishing themselves as leaders of the community.
In the past, local FIs were the backbone of many a hometown – the engine of local economic development and the driver of community involvement and improvement. In recent years, that role has been diminished by large national banks that built branches on every available corner and led the way in product innovation and delivery.
As the events of the past two years have shown, however, the megabanks have not replaced local FIs as community icons. They may be omnipresent in terms of locations and advertising, but consumers no longer believe they share the values and commitments of the people who are their customers.
In other words, the community leadership role is vacant … and consumers are eager for local FIs to fill the void. To do so, local banks and credit unions must be willing to stand tall and be proud of their localness … proud of their unique cultures, comforting, familiar attributes and hometown loyalties. At the same time, local FIs must recognize that savvy consumers are eager for product innovation and desire more than just a place to keep their money.
By understanding how consumers think and feel about the concept of community, and what role those ideals play in their everyday lives, local FIs that are eager to regain the leadership mantle can create a new kind of “hometown bank” – one that is grounded in the values of the past but that appeals to the consumers of today.
Insight Into Community
In early 2010, Pinnacle Financial Strategies commissioned an in-depth study of retail bank customers across the United States to gain strategic insight into their feelings about community, and how those impressions could serve as the foundation for products and services that would enable community banks/credit unions to compete more effectively for their business. The research included in-depth interviews with consumers, as well as image and metaphor elicitation to determine participants’ personal sense of community, associations with the word “community” and impressions of banking in general and community banks in particular.
The results give us a much clearer picture of the value that consumers place on community and the role that community plays in their lives. For example:
Consumers associate community with knowing and interacting with others.
Participants described community as recognizing familiar faces, gathering with friends and family (even during chance meetings) at places around town and general social interaction.
• Consumers associate community with charitable works and moral goodness. Participants mentioned themes such as “doing the right thing,” “honesty,” “integrity” and “caring for others.” A strong proportion of participants mentioned charitable works, such as community fundraising events.
• Consumers describe communities as self-sustaining and highly interconnected. Participants remarked that patronizing independent businesses not only kept money in the community, but kept the business owners, and their wealth, in the community as well.
• Consumers associate community with feeling known, recognized and important. This is especially true of older consumers, but even young people appreciate the opportunity to make a difference in their local communities. Participants’ sense of community is strongly shaped by where and how they feel known, important and liked.
The results show that consumers’ associations with the concept of community are extremely positive. Many participants in the survey spoke longingly or admiringly of their sense of community – a place where they are safe, where they can trust people implicitly and where there is a commitment to moral behavior and good works.
Leading Versus Following
At first blush, these findings appear more common sense than ground-breaking. The details, however, provide us with clues that can help smart FIs stake out a leadership position by becoming an integral part of their local communities.
For example, many local bank officers give of their time to serve on non-profit boards, and the institutions themselves often provide funding for worthy causes. But our survey tells us that consumers want more – they want opportunities to gather with friends and acquaintances, and to be recognized and involved. And younger consumers, especially, want to be able to make a difference in their communities.
The key is interconnectedness. Executive involvement in local charities is important, but it doesn’t create a sense of community for customers/members as a whole. In other words, a smart community bank/credit union will expand its charitable activities beyond board seats and donations. By developing programs that connect members with one another for a common cause, they can lead the community, not merely be involved in it. Examples of this approach include a bank-sponsored blood drive or neighborhood beautification project, where community members can come together to support their own local institutions.
Now consider the impact when this type of active community involvement is supported by an innovative product. Pinnacle Financial Strategies’ new Giving Counts checking product – which can be customized by institution to enable customers/members to donate to local charities – can further solidify relationships with consumers by making it easy for them to support causes that improve their community.
There are many, many other ways to achieve this level of interconnectedness; the possibilities are endless, limited only by the creativity and commitment of the bank’s/credit union’s management team.
In our research, consumers mentioned a number of other concepts that they identify with community connectedness, including safety, recreation, family, loyalty, teamwork and inclusiveness. These themes provide local financial institutions with a framework for developing a complete branding program that continually encourages consumers to come together, reinforces a hometown feel and differentiates the local bank/credit union from the competition.
Everything the local bank does – from the decor and layout of the bank lobby and the type of products offered, to the images and text used in advertising – can drive this brand essence.
In addition to connectedness, our research showed that consumers also place a high value on three other major lifestyle issues – health and wellness, education and financial security.
These concerns are universal—to some degree, they are shared by just about all adult consumers. They are “what counts” in the lives of today’s bank customers.
Obviously, financial security is one area where most banks and credit unions excel. But smart institutions will also seek out ways to support customers or members in the areas of health, education and more. Imagine the loyalty engendered by a local bank or credit union that works hand-in-hand with consumers to help them pay for college or vocational training! Or that provides incentives for quitting smoking or losing weight.
As with the Giving Counts example above, these types of innovative products can deliver multiple benefits when combined with activities that bring people together. For example, a bank or credit union could sponsor a weekly wellness walk around its premises for customers/members who take advantage of an account offering geared to improving personal health. Together, innovative products and programs targeted to these important lifestyle issues can personalize and strengthen the relationship between consumers and their local banks or credit unions.
A Winning Combination
The events of the past two years have created a unique opportunity for local banks and credit unions to re-establish themselves as community leaders and re-engage the growing number of consumers who seek to increase their social and financial well-being. Our research clearly shows that consumers see local banks and credit unions as integral to their community’s strength and vitality, and that they recognize and appreciate the unique values that local FIs embody.
To today’s consumers, “community” is not just a word – it is the bedrock of a successful, healthy and happy life with family and friends, supported by stable institutions that have a meaningful impact on their lives.
Local FIs that can develop and market the products that truly meet the wants and needs of the people in their community – and that can do so while maintaining their hometown culture and values – will have a winning combination that will attract and retain consumers for years to come. These community banks and credit unions will position themselves as not just the local bank of choice, but as leaders in the industry.
For more information on our research project, contact Emmee Terry at 772-778-3105, ext, 23.
To find out more about products that can help your bank or credit union connect with the community more effectively, visit http://whatcounts.pinnstrat.com.
Pinnacle Financial Strategies provides products and services that help community banks and credit unions grow their retail deposit market share and improve profitability. We offer expert consultative guidance, customized and turnkey products and services, comprehensive training, ongoing performance support and unparalleled compliance expertise. The Pinnacle Financial Strategies approach to business builds on the existing strengths of community banks and credit unions in creating strong customer relationships.
The Executive Summary available at: http://www.nxtbook.com/nxtbooks/sb/ababj1210/index.php?startid=52