Jeff Stephens

Warren Buffett on…Banking?

// August 17th, 2010 // No Comments » // Banking, Banking business strategy, Decommoditization, Entrepreneurial Lessons, Jeff Stephens, Non-technical innovation

Well, I don’t think Mr. Buffett was speaking specifically about banking when he made this comment, but boy oh boy does it ever apply.  Here’s my favorite new quote:

“Don’t try to be smarter than your competitors, because any competent competitor will be working just as hard to be smarter than you.  The trick is to have no competitors”

Warren Buffett

CEO, Berkshire Hathaway

Bankers tend to ask themselves “how can we make our bank better than the competition.” Entrepreneurs, rather, ask “how can we make our bank so different than it has no competition?” That’s a decommoditized company.

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Customer Expectations in Banking

// August 14th, 2010 // 2 Comments » // Banking, Banking business strategy, Banks, Credit Unions, Decommoditization, Jeff Stephens

Every bank and credit union’s customers/members have expectations–expectations for service, quality and other criteria you must meet.

The question is: who set the customer’s expectations for YOUR bank or credit union?

Did you set those expectations? Or did the industry do it for you?

The industry did. Tradition helped out. And convention sealed the deal. You had nothing to do with it.  Welcome to yet another massive downside of being a commodity financial services provider.

See, when you’re a commodity, you’re selling the same stuff as everyone else, and doing it in just about the same way. So, your customers/members have a point of reference; they have something to compare you to, because there are so many other banks or credit unions doing the same thing, and years of conditioning and experience with your competitors have created those expectations for them.

When you break out of being a commodity, you have no competition–nobody else does what you do. As a result, it’s much harder for customers/members to have expectations, because they’ve never experienced anything like you before: what you provide, or how you do it. They have no point of reference, nothing to compare you to.

When you’re no longer a commodity, you get to set the customer expectations yourself. Wouldn’t that be nice?

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#MoveYourMoney: Not As Good for Banks and Credit Unions As They Think It Is

// July 23rd, 2010 // 14 Comments » // Banking, Banking business strategy, Banks, Brands and Branding, Credit Unions

I suspect this might be a pretty unpopular perspective. I’m not trying to be a downer, rather a realist, entrepreneur and business strategist.

Over the last several months, the “move your money movement” has gotten a lot of attention, thanks to websites like http://moveyourmoney.info. On Twitter you’ll frequently see hashtags like #moveyourmoney and #banklocal.  More and more, I see links posted to articles all over the web talking about how credit unions and community banks are a great alternative to big banks.  Many seem to be hailing this as one of the best things to happen to community banks and credit unions.  Although I’m not studying market share numbers, it does seem rather undeniably true: consumers are moving their money from big banks to smaller, local banks and credit unions.

There’s just one problem. And it’s a big one, rendering this “movement” only mildly useful for any individual bank or credit union.

When a consumer opens an account at your bank or credit union because of #moveyourmoney, they are doing so because they DON’T want an account at a big bank. Furthermore, they’re opening an account at your bank or credit union simply because you are a smaller, local alternative…NOT a big bank.

Do you see the problem? They are not choosing you for who you are…they are choosing you for what you are NOT. And unfortunately, you are just one of thousands of banks and credit unions who are NOT big banks.  (Metaphor/Translation: “Honey, I’m not marrying you because I actually love YOU, you silly goose; I’m marrying you because you are NOT someone I hate…and you are available. Duh.”)

So what does this mean? It means that these new customers and members you’ve just acquired are not necessarily a good fit for you at all (just because they’re a bad fit for Chase doesn’t mean they’re a good fit for Acme Credit Union).  It means they will be just as fickle and transient as your other customers/members; just as price-sensitive and ready to “move their money” again when a better deal comes along.

You see, there’s one simple fact, and there’s unfortunately no way to get around it (not even with a grassroots effort like #moveyourmoney):

Long-term prosperity at your bank or credit union only happens when consumers proactively choose to bank with YOU for who YOU are:  because they feel you are the one and only fit for them, and they refuse to live without you.

The Bottom Line: If you are growing because of the “move your money” effect, you are the random and lucky recipient of a cultural shift outside your control…and you will become keenly aware of just how outside your control it truly is, once the effect starts wearing off. Instead, focus on attracting people who love YOU.

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What is your maximum potential market share?

// July 9th, 2010 // No Comments » // Banking, Banks, Credit Unions, Decommoditization

What is your bank or credit union’s maximum potential market share?  When you allow yourself to operate in a commoditized banking environment, the answer is pretty simple:

Size of market divided by # of competitors = your maximum market share

Unless you break the cycle of commoditization, your financial institution’s market share potential will never stray greatly from this simple calculation.  Download the free Decommoditization Manifesto, Part 1 to begin learning how you can break free from the commodity dynamic and earn yourself a disproportionate market share.

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Create something that can get criticized

// June 21st, 2010 // 2 Comments » // Banking, Books I'm reading, Innovation, Jeff Stephens, Non-technical innovation

I have long argued–to creatives, my clients and bankers and credit union folks at large–that it’s better to create something that some people will LOVE, others will HATE…than to create something that people are indifferent to.  That stands true whether you are creating an ad for the local newspaper, a brand for a new financial institution, or a presentation you will give at a conference.  You need to polarize people–if you leave anyone indifferent, you have wasted your time.

As I was reading Tribes: We Need You to Lead Us by Seth Godin the other day (a book that’s been on my list forever, and I’ve finally gotten to), I realized Seth had given me a new way to phrase my message: create something that can get criticized. Our whole business culture is based on the idea of not getting criticized–the idea that criticism is a bad thing, to be avoided.  The truth is that if you want to change the world (which I’m assuming you do–if not, you might want to unsubscribe from this blog), you WANT to get criticized. Because when you get criticized, it means you’ve created something WORTH reacting to.  Most ideas and work is so boring that nobody reacts, because it’s not worthy of a reaction.

What can you create today that will get criticized…and therefore noticed?

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The Decommoditization Manifesto, Part 1

// June 1st, 2010 // No Comments » // Banking, Brands and Branding, Creative Brand Communications, Decommoditization, Innovation, Non-technical innovation

As I was preparing for my presentation last week to the Marketing Association of Credit Unions called The Art of Decommoditization, I found myself asking, “why do I enjoy this topic so much?” I realized the answer is pretty simple: it’s the perfect convergence of everything I believe in, in banking, branding and marketing. It brings together a strong business strategy that becomes one with brand strategy, word of mouth marketing, experiential brand development and multi-sensory marketing. As such, I admit it’s kind of difficult to articulate at times. But I hope my audience at MAC got the message.

That’s probably why I really enjoyed writing the newest position paper on banking business strategy and branding we created for Creative Brand Communications. We called it “The Decommoditization Manifesto, Part 1” and it’s now available for free download when you register.

I’m happy to say it’s already getting great reviews and feedback. How many “parts” will there be? Not sure yet–we’ll have to see as it comes, but I’m thinking at least three parts if not more.

I hope you’ll download the position paper now, and enjoy!

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Why banking?

// March 19th, 2010 // 4 Comments » // Banking, Banks, Innovation

It’s funny. When people ask me what I do, I tell them I fancy myself as a banking industry innovation entrepreneur.  After a few seconds of furrowed brows and a couple “hmmm’s”, the question is always the same:  ”why banking?” (This is even more pronounced when we’re talking about Creative Brand Communications: “you focus on BANKING? Do you ever think you’ll expand your focus?”)

Since that question I get is so consistent, my answer has become equally so.  I think banking is a great industry to be an entrepreneur in, because:

• There are VERY few real entrepreneurs in banking. There are lots of people who started or own banks, but that doesn’t really make them entrepreneurial necessarily.
• The industry bar is quite low. There’s not a whole lot of real innovation happening.
• Banking is ripe for revolution. Many of the old guys holding the keys to the banking kingdom are very protectionist, doing whatever is possible to resist change.
• Banking is among the most important sectors to the success of our nation. I truly believe that. In a funny way, improving the banking world is an act of patriotism.

If you’re reading this, there’s probably a good chance you’re in banking, too. Why do YOU like it?

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The Difference Between Banks and Credit Unions

// January 29th, 2010 // 11 Comments » // Banking, Banks, Credit Union, Jeff Stephens

I had an interesting thought today, sparked by several tweets, blog posts, and a conversation with a potential client.  It was about the common discussion in our industry:  the differences between banks and credit unions.

We all know, there is indeed a difference.  It’s not that one is inherently better than the other, but there are differences for sure:  legal charters, ownership structures, regulatory differences, etc. There are thousands of websites (like this one from CUNA) with information about how credit unions are different. Still, people don’t widely understand these differences, and frequently make mistakes about them.  Most consumers confuse the two, and the media clearly confuses them routine–they often call credit unions “banks” in news stories.

So here’s the interesting question:

Why is it only credit unions who get pissed about this misunderstanding and confusion between banks and credit unions?

Shouldn’t the banks get just as angry? After all, lumping the two together is a mixup that adds just as much confusion about what banks really are, as it does to what credit unions really are.

Sure, I understand that credit unions are called banks more frequently than banks are called credit unions. But think about it: both banks and credit unions alike have every reason to be aggravated by this continued and frequent mixup. So why don’t we hear more uproar from banks? How come there are no chants about “the bank difference” like there are for “the CU difference”? Shouldn’t both sides be equally interested in clarifying their qualitative differences and arming consumers with accurate information?

In other words, why aren’t banks offended when credit unions are lumped in with them?

(BTW, I honestly don’t have an opinion I’m trying to sell you, on this topic. I just find it extremely interesting and would love to hear your theories.)

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Affiliate Marketing in Banking

// November 18th, 2009 // No Comments » // Banking, Innovation, Jeff Stephens, New banking ideas, Non-technical innovation

As I was reading something businessy lately, a question popped up in my mind:  why isn’t there affiliate marketing in banking?

Maybe there is, in a few cases, on a B2B level—you might argue LendingTree is affiliate marketing for lenders.  But that’s not what I mean.  There’s not, to my knowledge, any affiliate marketing program that could leverage the millions of retail customers out there. For instance, how many Bank of America customers have blogs or websites? Probably millions. Why not take a page from Amazon.com’s book (pun intended) and set up a killer affiliate program to drive traffic to the bank and kick back a reward to the referring site for accounts opened online?

I think I know why.

Because that’s not what bankers do.

Because that’s not how banking works.

And because, likely, nobody has ever really thought about it.

If you can’t tell already from my first few posts on this blog, one of my big pet peeves is that bankers don’t tend to look at business concepts (like affiliate marketing) and try to figure out how it might apply in their industry.

In my opinion, the best and most important activity any entrepreneurial banker can do, is this:

Look at other industries, see what’s successful, and then ask, “how can I apply this to banking?”

I’m not here to tell you affiliate marketing should be the future of banking.  I don’t have an opinion at this point, because I haven’t given it much thought.  Maybe I can think it over and write another post about that.  But I do know this:  at least I remembered to ask myself “how can this apply to banking?”  The answer to that question is less important than the fact that it was asked in the first place.  That’s how innovation happens.

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Richard Branson: Finally an Entrepreneur in Banking

// November 8th, 2009 // 1 Comment » // Banking, Being an entrepreneur, Richard Branson

One of the things you should know about me early-on is that Richard Branson (Virgin Group) is my entrepreneurial hero.  I am more or less obsessed with studying his career, his moves, and perhaps most importantly, his outlook and attitude toward business.  He wrote a book, whose title I really relate to:  Screw It, Let’s Do It.

Branson and Virgin have already been in the banking space to a certain extent with Virgin Money (in the US, Virgin Money helps formalize lending between friends and family; in the UK and a couple other regions, it provides broader financial services).  Now, Virgin has applied for a full banking license, to become a complete full-service banking company.

Watch out bankers.  There’s finally a real entrepreneur in banking.  That should make you very nervous.

That’s because entrepreneurs don’t think like bankers.  Bankers think like bankers.  But entrepreneurs think about applying business principles and scrappiness to creating and building businesses. They don’t focus on running businesses–that’s for managers.  Entrepreneurs, instead, focus on starting and growing…architecting dynamic organizations that shake things up from the traditional.

You can bet I’ll be following Sir Richard’s efforts very closely…and cheering them on.

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