Banking on Value? Try Six Sigma Marketing

We are about to see some very interesting strategies on the part of many commercial banks.  According to the Wall Street Journal, “Bank of America and other banks are preparing new fees on basic banking services as they try to replace revenue lost to regulatory rules, in a push that is expected to spell an end to free checking accounts for many Americans.”

Why this is so interesting is that for decades banks have been treating these free checking accounts as a commodity – undifferentiated as pieces of raw corn or pork bellies.  Now they want to put a price on the commodity that will greatly impact its value proposition.  In other words, for years the banking public has seen little value in checking services offered by banks.   Banks offered little compelling quality in checking and in the minds of the public that quality was worth what they paid for it – nothing.

Commercial banking has had a long and difficult time understanding and managing the value they offered their customers.  Remember the days when you would open an account at a bank and you would receive a toaster, a blanket, an umbrella?  That morphed into a more sophisticated approach where they offered computers and other electronics if you would sign on the dotted line.  Banks understood that the way they were marketing their products that there was nothing inherent in what they did as an institution that added value to their customers.  They had to import value from outside of the industry.

This drove them to treat checking services as a loss leader hoping to attract customers to the bank and then cross sell the customer other products that had fees associated with them.  Many banks adopted a sales philosophy and began to hire salespeople.  Banking schools added programs on selling and discussions such as “Is it easier to turn a banker into a salesperson or a salesperson into a banker” were seen in many banking journals.  Unfortunately, this didn’t work as many customers simply accepted the transaction nature of free checking and bought few other services.

Now the issue comes full circle where once free products with little worth in the eyes of the customer are going to carry a price.  Value is the relationship between the organization’s product or service quality and the price that buyers have to pay to obtain that quality.  See the problem?   Banks, more than likely, will resort to “bundling” where they package several products together and put a price on them.  Or they will more than likely require minimum deposit levels in other accounts to receive free checking or free ATM services.  Regardless of what they do, they will have an uphill battle providing customers with a compelling value – based reason to buy their products as opposed to the products of competitors.

This is the time to be a member owned institution like a credit union.  They have a real opportunity to sharpen their value propositions and attract many customers not convinced of the value they are going to receive from commercial banks.  To do so, they must understand both value and quality from the buyers’ perspective, not their own.  Traditionally they have done this better than commercial banks.  Now they have to step up their efforts.

Some commercial banks have improved on their customer focus but this is an industry ripe for Six Sigma Marketing – a disciplined fact-based approach for growing market share in targeted product/markets by providing superior value.  Market share is at stake as banks are faced with the seemingly contradictory situation of increasing their prices and growing their share, made even more difficult in an industry not known for its ability to create and deliver value.