Bank on shifting financial priorities

To say that purchasing priorities and consumer behavior have changed over the past few years would be a gross understatement. That’s why it is more important than ever to “stay tuned” to the customer… constantly evaluating who your best target customers really are, and the deeper benefits those consumers hope to satisfy through the purchase of a product or service. At CSS, we recognize those two issues (Targeting and Benefits Sought) as prerequisite to a sound marketing strategy.

That’s what led us into a wonderful dialogue with C. Britt Beemer, the chairman of America’s Research Group. (Many of you will recognize Mr. Beemer as the co-author of best-selling books like Predatory Marketing, It Takes a Prophet to Make a Profit, and most recently, The Customer Rules.) Every other month, America’s Research Group (ARG) surveys one thousand people (age 20 to 59) to gain insights about the shopping behaviors and purchasing intentions of consumers. Those findings are subsequently published in Consumer Mind Reader™ studies for the clients of ARG.

Recently, Mr. Beemer invited us to contribute a number of questions to the Mind Reader survey that might inform and enhance our Elm Street Economics advertiser workshop. We were happy to oblige.

We decided that one area of focus should be on banking. From the collapse of Lehman Brothers early in the recession to the Toxic Asset Relief Program (TARP) intended to help bail-out the banking industry, plenty of coverage has been given to financial institutions of all sizes during the recent recession. We wondered what affect all that news might have on everyday consumers (the folks who live down on Elm Street).

We started by asking, “Have you made any changes in the past year, with regard to where you bank or where you place your financial investments?” Almost 24% of respondents said they had made such a change.

Next, we asked, “Where would you be more likely to move your checking account?” While 34% of respondents said, “A National Bank,” an amazing 30% answered, “Credit Union.” Another 32% indicated they would move to either a “local (22%)” or “regional (10%)” bank.

When we asked, “Do you feel most banks are pretty secure, and therefore, a safe place for your money?”... 72.3% of respondents said, “Yes.” That might sound like a significant majority—and it is—but according to Mr. Beemer, historic numbers would be closer to 85%.

Given the dramatic headlines of the past several months, we asked, “Do you expect to see some bank failures in the area where you live?” 69% of consumers said, “No.” But nearly 16% said, “Yes,” and another 15% answered, “I don’t know.”

Finally, we asked participants, “How long do you expect the fallout from the mortgage crisis to affect banks?” Just over 24% said “Six months to a year.” 31% said “two years.” Another 30% said “Three to four years.” And more than 13% said “Five years or longer.”

Implications: Every business (and every industry) suffers from customer churn… but 24% turnover sounds very high to me in a category like financial services. I spoke with a banker I know this afternoon, and he agreed, saying that anything approaching 10% would sound very scary.

Speaking of churn, it would seem that bigger is not necessarily better in today’s financial environment. While 34% of respondents indicated they would move their checking account (a primary financial instrument) to a national bank, more than 60% favored a smaller institution (credit union, local, or regional bank). Is that because the customer is perceived to have a voice in the operation? Could it be the customer wants more one-on-one contact (and fewer automated or “telephone tree interactions”) with their financial institution?

Consumers have seen plenty of news coverage about the woes facing the banking and financial services sector. And it would appear that coverage is having an impact on consumer opinion. But those are just my thoughts about what the research suggests. Did other implications occur to you?

Mike Anderson