The Consumer Federation of America recently came out with a survey showing that a large majority of Americans believe safe drivers should be charged less than $500 a year for required car insurance. While most of us would undoubtedly love to pay less for coverage such as this, our cynical side wonders what we'd be sacrificing in exchange for cheaper rates.
We strongly believe you get what you pay for, but history shows that people need a reminder from time to time. Banks especially need to do a better job communicating to customers that cheaper isn't necessarily better.
Community banks have long offered our customers reasonably priced services, but with more and more low-cost competitors entering the banking fray, there may be some customers tempted by seemingly greener pastures. It's in your best interest to show customers why doing business with you is a better deal for them - even if the cost may be somewhat higher.
For most banks, finding a fee structure that's profitable and doesn't chase away customers is a delicate balance. Study after study affirms that cost matters to customers so banks have to be careful. In fact, rates and fees were the second most common reason for customers to open or close an account in the previous 12 months, according to the Ernst & Young 2014 Global Consumer Banking Survey.
Even so, banks must be careful not to leave significant revenue opportunities on the table, given higher costs due to increased regulation and increased customer demands. Customers should be charged for premium services. In fact, instead of feeling imposed upon, customers in the past have shown a willingness to pay for services like identity theft alerts, credit score reporting, overdraft transfer services and mobile to name a few.
The trick is to help customers understand what they're getting for their money. In conversations with them, banks should show customers how the product or service is high quality, what it does for them and how it improves their life. Doing that allows you to switch from a cost focus to one all about relationship and benefits for them. The simple fact is, if customers know what they're paying for and why it's worth it, you'll have more wiggle room to charge for your services and customers will be more accepting.
Consider also that many customers want more than just free checking, so be sure to drive home to customers the breadth of services your bank has to offer. Keep in mind that 73% of customers polled by Ernst & Young said they'd be willing to either pay a little more, add more accounts and services or increase deposits or investments if their primary financial services provider invested in their financial well-being. A full 72% percent said they would take one of those actions if the bank helped them with a plan to reach their financial goals. Further, 71% said they would take one of those actions if the bank helped them find new ways to improve how they conduct business.
We know the competition is fierce, but shifting your focus away from cost and toward the significant benefits customers are getting in return for banking with you can increase profits. Doing so can be an effective insurance policy against customer attrition as it drives additional business to your bank. Good luck and keep communicating to employees and customers to enhance the value of your bank over time.