By Kevin Steltz
Regulation drives commoditization.
Competitive pressure is rising in the banking industry. We all know it’s coming from outside sources, as companies in adjacent industries such as technology and media move into the space. But it’s also increasing from within, as banks fight one another for customers in heavily regulated, oversaturated markets. The result: stagnant growth, and a slow but seemingly inevitable commoditization of the industry’s primary services. These are the perfect conditions for choking out differentiation and sustained profitability.
Breadth of products and great service is no longer enough.
When banks and other financial services companies set out to define their position, value proposition, and primary point-of-difference they typically come up with something like:
“We’re big enough to offer a full range of services, but small enough to provide great customer service.”
Guess what? That’s what virtually every mid-size financial institution is trying to hang its hat on. And we get it. With such heavy regulation and stiff compliance standards in place, it’s almost impossible to carve out a unique position that’s capable of driving growth.
But it’s not impossible. In fact, it’s extremely probable. You just have to look outside of category conventions like features and benefits. Instead of focusing on what you sell, shift the thinking to why you truly matter to your customers.
What core human value does your organization share with your target audience?
Think in terms of value-based positioning.
As human beings, we use our values to determine our own sense of right and wrong, to make choices about who we are as individuals, and who we want to become. Because these values represent the guiding principles we use to navigate our lives, we either consciously or unconsciously gravitate towards brands that reflect those values.
Shared values are the foundation of meaningful brand/customer relationships. As a result, brands that position on a potent human value become antidotes for what their customers crave more of, or feel is missing in their lives.
For example, Harley-Davidson positions itself on the value of freedom, not gas mileage or digital instrument clusters. They do this because it’s far more powerful than features and benefits. It’s something their target craves more of—cue the guy going through a mid-life crisis.
Similarly, Dr. Pepper positions on individuality and Coca-Cola positions on happiness.
When a brand can fulfill a craving like this, their value to the customer and differentiation in the category have almost nothing to do with the product or service itself, and the brand becomes far more powerful and profitable.
This is especially important in commoditized and heavily regulated categories.
Skeptical? Then consider this: one essential difference between emotion and reason is that emotion leads to action, while reason leads to conclusion.
In other words, we make our choices based on emotion, then very quickly justify those choices with all the rational features and benefits. Why else would somebody buy a $100,000 luxury car, when all they really need is to get from point A to point B?
Still skeptical? Jim Stengel, ex-CMO of Proctor & Gamble and current adjunct professor at UCLA’s Anderson Graduate School of Management, set out to quantify this phenomenon. In his book Grow: How Ideals Power Growth and Profit at the World’s Largest Companies, he demonstrates how brands that position on ideals, like values, grow much faster—and over time, out-perform the S&P 500 by nearly 400%.
Banks have been struggling to create meaningful differentiation and growth in the marketplace. For many of them, the time is ripe to shift their growth strategies—from a reliance on frequently overlapping and easily copied marketing claims of better service—to core values that create unassailable long-term competitive advantage. It’s not an easy transition to make. It requires a new way of thinking, and an emphasis on how the bank’s insights, innovation and impact reflects its values. But ultimately, this is what will form the basis for market differentiation and profitable business growth.
Kevin Steltz leads brand and business strategy planning and operational alignment for financial services clients at BVK, a top-25 independent marketing and advertising agency based in Milwaukee, Wisc. Email: firstname.lastname@example.org.