Cheaper is the last refuge of the marketer unable to invent a better product and tell a better story.
Then a week ago, Ted Thames of Gonzo Banker, in a post similarly called The Power of Price, said something very nearly the opposite:
The leap from seeing the advertising to signing up online and buying the product is a long jump. Without the aggressive pricing, nothing happens.
Thames’ post is a thought-provoking counter-point to Godin’s pithy advice from seven months earlier, primarily arguing that for bankers it all comes down to a lower priced product, whether it’s a free checking account or a no-fee CD.
Godin, meanwhile, who is revered among marketing professionals, argues that it works better to create something indispensable rather than something cheap, but does he really know what it takes for a bank to do well? As a marketing guru, Godin consistently argues in favor of creating something special rather than commoditizing. In the same post, Godin writes:
The goal, no matter what you sell, is to be seen as irreplaceable, essential and priceless… Of course, the realization of what it takes to create value might break your heart, because it means you have to specialize, take risks, create art, leave a positive impact and adopt generosity in all you do.
It’s hard to imagine a bank taking Godin to heart and deciding to “create art,” but Thames might not necessarily disagree. He credits two banks in particular – Capital One and Ally Bank – for crafting a more compelling brand than their competitors, and for creating smart advertising. Thames writes that a bank’s marketing person should be upper management and advises investing in quality marketing.
Ultimately, though, Thames thinks it’s price that closes the deal: “Creativity and message design can gain customer attention long enough to deliver the price punch.”
Both Godin and Thames are worth listening to. We know that a superior user experience, particularly in online banking, can both attract customers and make them more loyal. But so can a free checking account.
The Banker is wrong! There is a growing reliance by market analysts to look at the net interest margin (NIM) when evaluating a bank. In todays world of ever decreasing interest rates and increased competitive pressure the NIM of many banks is shrinking. This puts increased pressure on the bank to find alternate sources of income, hence the disappearance of free checking.
You cannot give margin over to customers on one hand and create a new fee to make up the difference on the other. This is banking madness and in my experience this type of behaviour is normally caused by silo thinking within the bank. The retail deposit team sees a decrease in revenue so they generate a fee. The retail credit team see a loss of market share and panic by reducing their margin in hopes of stopping the bleeding.
When I walk thorough a bank I see no end of operational improvements, reductions in capital expenditures, new business opportunities, and smarter ways of working that could easily be realized if the bank just took the time to look at itself and how it treats its customers across all of its silos. There are other ways to generate revenue and produce operational savings without creating new fees and laying off staff.
The best customer is the one that is wowed by your service and is concerned about the car or the house and not the car or the house loan. There are so many of these customers out there that just need to be wowed, by not only a marketing message, but a real life positive interaction with a bank. Fix you bank, set realistic rates, and wow your customers and let the shoppers walk away. I agree that cheaper is a crutch for bad bankers that have not figured out how to differentiate themselves.