Jeff For Banks

You call yourself a brand manager?

The Pennsylvania Turnpike’s Valley Forge rest stop is a common waypoint for me on my travels. This week, I stopped and bought a 12oz cup of coffee from the Starbucks kiosk… cost: $1.69. Curious, I moved 10 feet to my right and asked the helpful Burger King clerk the price of a 12oz cup of coffee… $1.15. I paid 32% more so my cup would say Starbucks on it. I must be a victim of a saturation ad campaign. Oh wait, I can’t recall ever seeing a Starbucks ad.
We make premium pricing decisions every day (see chart). For reasons that may be different by customer, we place a monetary value on a good or service that is greater than a similar replacement good or service. We do so even when it is difficult to justify paying the higher price, such as my coffee example. Sure, we rationalize by saying it tastes better, or some other reason. This reminds me when my daughter performed a soda taste test at the local swimming pool, pitting Coke, Pepsi, RC, and a generic brand against each other. The winner: generic brand. Without the labels, top-selling brands are difficult to pick out.
So why can’t we achieve premium pricing in community banking? Why do our lenders price aggressively to “get the deal done” or branch managers rely on rate promotions to grow deposits? A response I often receive is that money is a commodity, and one bank’s greenbacks are the same as another’s. But isn’t a cup of coffee also a commodity? And what about “superior customer service” or “access to decision makers” I keep hearing about in community bank strategy sessions?
I believe that a critical component missing in community banking is a brand. Resist it if you must, but people pay more for a Marriott Hotel room because it’s Marriott and more for a Mercedes because it’s Mercedes. Those brands stand for something that people are willing to pay for. What does your brand stand for?
I am on the faculty on the ABA School of Bank Marketing Management (aside: I am tardy submitting my lesson plan). These students are tough when it comes to instructor critiques. So before I receive my traditionally poor performance reviews and be perceived as having sour grapes, let me be tough on them. Marketing in community banks has not been successful in positioning the function with a strategic focus, pays far too much time dabbling in retail, and has not descended from 10,000 feet to the ground level in building the bank brand. Although I’m sure there are some, I cannot think of one community bank where customers feel they have to bank there regardless of price variations, like they do when they talk about going to Starbucks.
Not to lay all of this at the feet of marketing. Many, if not most, community banks are run by former lenders. The commercial lending function does not often call on marketing for assistance. They think marketing runs the ad budget. And as one CEO told me, “we don’t get business customers from running a billboard campaign.”
Fair enough. But can you get customers to pay more for your money than the competitors? Are you positioned as a trusted advisor? Are your lenders knowledgeable enough to advise? Do business customers rave about you to their contemporaries? Are you the “go-to” bank for education on small business balance sheet management?
My ABASBMM students are pretty bright, and they talk a good strategic marketing game. But what’s the point if they go back to their banks and run the next spring home equity campaign? I get frustrated when my company performs a costing study at a bank focused on commercial customers and the marketing department expends 80% of their time in retail banking endeavors, or is subordinate to the head of retail (both true stories). If your marketing department fits a similar mold and is not aligned with your bank’s strategy, or your bank does not have a strategy, it’s time for a change. Force the issue! Don’t wait for the former commercial lending CEO to take the initiative. The success of your brand, your bank, and your future depends on it.
– Jeff

3 thoughts on “You call yourself a brand manager?”

  1. This topic would make a great pre-conference post for the ABA SBMM blog. Are you using any of this argument to intro your SBMM session? If not, you should! -mz

  2. Mark,

    I like the idea of putting this post on the class blog. Is that something you would do? I would like to challenge bank marketers, much like I did here. Banking needs some fresh life!

    – Jeff

  3. I'd be happy to take the content and post it on the class blog next week with a link to your blog. I can't guarantee that there is or will be a lot of readership at this point but we'll see. – mz

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