Seventy percent of Americans have never switched accounts. Think about that for a second. This means that you have one shot at capturing 70% of the market or you have lost them forever. You have to be their first account.
That's the bad news.
The good news is that a lot of that 70% want to switch institutions. In fact, one in every two Americans would switch for higher interest rates and two out of five would switch for lower fees.
So what's the hangup? They want to switch, but they just aren't doing it. The problem is that there is a pain associated with switching.
61% of consumers believe switching would be difficult and that belief keeps them sitting in their current account. The benefits of switching have to eclipse the perceived pain of switching. Of course, we're not the only industry that has to work to win over switchers. In fact, most relationship-centered services (as opposed to transactional) face this problem. Insurance companies, cable companies, and cell phone carriers all build campaigns designed to attract switchers. So, what can we learn from them?
Fifteen minutes could save you 15% or more on car insurance.
Sound familiar? Most of us recognize Geico's slogan. They address the perceived difficulty of switching at the end of every commercial. Not only is switching not a hassle, but there will be a reward at the end in the form of big savings. Of course, that might not be true as you could have the cheapest carrier already, but by addressing the perceived difficulty of switching, they at least open up consumers' minds to exploring other options.
A lesson for financial institutions is to (1) highlight how easy it is for consumers to switch and (2) give consumers the ability to look at how doing business with you would impact their situation. For example, provide an interest calculator on your site with your rates. This would allow consumers to see how their balance at the year-end might look with you as opposed to their current institution.
Audit your processes. How easy is it for consumers to find the right product or for them to create an account? Do you have a painless online account opening process?
Save more when you bundle...
Another phrase you've probably heard a million times from insurance companies. Cable companies are also jumping on this trend in an effort to be the communication provider for the home. Most cable providers now offer discounts on combining internet, landline, and cell phone plans. Or, you can get discounts by buying channel packages as opposed to a single channel.
Insurance companies do the same; offer discounts for signing up for both home and auto insurance. Even some cell carriers are offering free Netflix subscriptions with your plan. Not only does this entice switchers by sweetening the deal, but it deepens the relationship with the consumer. They lower the barrier to entry while raising the barrier to leave.
Cornerstone Advisors found that this trend is as strong when it comes to finances. When examining a potential Amazon account, they found that consumers would happily pay between a $5 - $10 monthly fee for a bundled account that included features like cell phone protection, ID theft protection, and roadside assistance.
You're in good hands...
One of the issues with relationship-based services is that the relationship can turn sour.
Don't believe me? Last year, we complained 879 Million times online and 52% of complaints are the result of a service issue. Or, perhaps they see all the deals being offered to new customers and wonder "Hey, where is my reward for loyalty?"
Consumers want to be rewarded for their loyalty, and they should be! A good example of rewarding loyalty in the insurance industry are perks like accident forgiveness or discounts for being incident free for X number of years.
Community institutions could mimic this tactic by offering consultative services to longtime members or customer celebration events.
Be the Only
We have coverage where it counts...
When the first iPhone launched, you could only get it with one carrier: AT&T. Consumers flocked to the carrier just because of the product they carried (their market share went from 14% to 29% in the span of two years). 4G, fiber internet, the best mobile app, all of which are technological exclusives that are used to attract consumers.
Being the only one to offer products consumers love or specific features can give your brand a competitive edge.
For financial institutions, it can be difficult to compete with the resources of the megabanks. Competing with them on a technological front will likely require partnering with Fintech. There is also a local angle that FIs can explore to create exclusivity, and that is an area that Megas will find difficult to replicate. A good example is the work done by Citizens Bank of Edmond.
You might have noticed that each of these sections opens with a marketing slogan. Insurance companies are excellent about packaging their competitive edge into a catchy slogan and then consistently and constantly sticking to that message. Remember Thomas Smith's lesson:
The 1st time people look at ad, they don’t see it.
The 2nd time, they don’t notice it.
The 3rd time, they are aware that it is there...
The 20th time prospects see the ad, they buy what it is offering.