Cultivating Profit in a Low-Rate World

May 18, 2011 at 12:49 PM
In today’s soft rate environment, customers have gained the upper hand. In order for banks to generate revenue going forward, the earnings equation has to change – and banks need to generate new sources of revenue and learn how to compete more on the basis of value rather than price. Profitability will depend on a bank’s ability to earn premiums on its products and services – premiums over the prices charged by other providers in the market.
 
In order to be ready for this new reality, banks must focus on five strategic changes:
 
  1. Rationalize your customer strategy and focus on what really drives value for your customers – the quality of the customer experience.
  2. Be more things to fewer people. More finely tuned segmentation analytics will deliver more relevant and targeted value propositions.
  3. Make service excellence a priority for everyone in every job at the bank. From the greeting at the branch to the ease of navigating the website – create a pleasurable experience!
  4. Spend more to deliver the experience, spend less on things that add no value from the customer’s perspective. Banks must work hard to continue to lower the cost to delivery basic transactions and improve efficiency, not only because margins are slim, but also because more money must be invested to create experiences for which customers will pay a premium.
  5. Invest in people and hire as much for attitude as technical skills. As the role of branches and other customer-facing channels changes from order fulfillment to customer experience management, the skill sets and personalities of employees must also change.
 
In this year’s strategic plan process, bank managers should be sure to put one threat at the top of the Strengths-Weakness-Opportunities-Threats (SWOT) analysis list: doing nothing to increase the value provided to customers (and also getting paid for it).
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