Value Communication in Banking: Still a Long Way to Go

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Value Communication in Banking

Have you ever asked your customers if they know which services you provide them? Do you know which services your customers value most? If the answer is no or not really, we can tell you that this is also the case at many other banks. Simon-Kucher & Partners has observed various institutions that suffer as a result. Revenue and sales targets aren’t being achieved, customer satisfaction is low, prices are deemed to be too high, and net promoter scores (NPS) leave much to be desired. So, how can banks optimize their value communication, and therefore, their sales? This short article offers a pragmatic answer to this crucial question.

Banking services are uninspiring products

Let‘s face it, banking isn’t the most exciting industry for consumers. The services provided are largely intangible and complex to understand. Unlike buying a new car or smartphone, the customer feels little emotion when purchasing banking products. In addition, most people have a very low level of involvement with banking services, which they primarily obtain to meet basic needs, such as receiving their salary and making payments. However, simply because a product isn’t attractive by nature doesn’t mean it shouldn’t be presented in the best light. In fact, the more complex a product is, the more important it is to communicate it effectively.

By improving transparency, banks are making things more confusing

Simon-Kucher & Partners has had the opportunity to collaborate with many banks on this topic over the last few years. We have observed that several banks put a lot of energy into making their services and pricing more transparent. However, most banks are still struggling to communicate added value in a comprehensive way. Not only have banks overloaded their customers with information, their approach to presenting products is too complex, which only adds to the confusion. This kind of communication has a double negative effect: Customers aren’t fully aware of the significant effort banks are making to meet their needs, and at the same time, many up- and cross-selling opportunities are being missed.

Without properly educating and supporting front staff, it will never improve

We have also observed that many bankers and relationship managers have great difficulty communicating the added value of their services. Although banks do spend time on training front office staff, the sessions typically take the form of linear presentations that are rarely repeated. For training to be effective, it should incorporate relevant case studies and individual feedback and needs to be held on a regular basis.

In terms of supporting materials, most banks provide their sales teams with general marketing brochures, exhaustive fact sheets, or complex price lists. Unfortunately, these documents aren’t being used in practice. Their level of detail and presentation style make them difficult to use, and they often don’t take the customer’s perspective or behavioral effects into account.

“Accelerated by the COVID-19 crisis, customer behavior is becoming more digital and new touchpoints are required to offset the loss of personal contact. It is vital that banks analyze and evaluate customer behavior more efficiently and develop targeted sales processes and initiatives. This is precisely where many banks are lagging behind right now.” – Matthias Nisster, Partner, Munich.

By integrating dynamic, digital solutions, banks can enable their front office staff to instantly adapt to customers’ responses during discussions. For example, a tool can provide prompts to the advisor about which products the customer is genuinely interested in.

Digital solutions can also lead to stronger engagement, as advisors are able to explain complex topics, e.g. by using behaviorally optimized video clips and interactive questionnaires. The most effective tools give the customer room to explore solutions independently or with their advisors, both in the branch and remotely, supporting advisors with tailored approaches and specific sales prompts based on the customer’s needs, preferences, personality, and stage of life.

Example: Value-selling tools applied in banking

Selling means demonstrating the link between price and value. Increasingly, this must happen online, or in conversations that are assisted with digital solutions.

Value-selling tools provide discipline to the salesforce and enforce good presentation practices, steering sales discussions toward more profitable or otherwise desired products and their elements. In our experience, the most effective value-selling tools include:

  • A value driver list and analysis Based on assessment of the bank’s own offers and those of competitors
  • A value communication framework: Guides advisors to sell on value rather than on price, using targeted value-selling arguments specific to the customer’s profile
  • A concession matrix and counter arguments: Guides advisors on how to demand counter value based on planned concessions and counter arguments

The potential revenue impact of a value-selling tool is significant. In one of our recent projects, supporting sales representatives in value argumentation resulted in a significant revenue improvement and a 40 percent increase in cross-selling and up-selling rates.

Other industries offer valuable inspiration

Many industries are much more advanced than banking and have already developed dynamic and interactive communication tools. For example, salespeople in the automotive industry are known to be extremely efficient but still benefit from digital tools; they have been using them to set up new cars according to customer preferences for several years. These configuration tools are available on the manufacturers’ websites, allowing customers to find out about the various options and are used by sales staff during customer discussions to provide a better understanding of the final product.

What about the banking industry? Our Global Sales Study shows that most digital initiatives fail to meet their commercial goals and more 50 percent of banks are unsatisfied with the effectiveness of their current digital tools.  

However, Simon-Kucher has already helped banks in many countries develop tools to improve internal and external communications. Typical questions addressed by these tools include:

  • How can we encourage customers to start investing in order to overcome the problems of low or even negative interest rates?
  • How can we enable customers to find the current account, mortgage, or investment offering that best fits their individual needs? 
  • How can we encourage customers to strengthen their relationship with the bank, increase up- and cross-selling, boost customer loyalty, and reduce the risk of losing customers?

Case study: Quick-wins to boost cross-sales and primacy among customers

One of our clients in the banking industry came to us with the challenge of improving cross-sales without price or product changes. Our initial audit showed that the bank was undertaking many digital optimization initiatives but was missing a lot of quick wins that could boost cross-sales and primary buying behaviour. We identified weak points in the digital storefront where bundles and other products were pitched to the audience. For example, their front-end system:

  • Was not engaging for customers
  • Did not guide the salesforce
  • Did not use customer segmentation to steer the sales process

Some solutions were as simple as presenting all three bundled items together on the same page. As a longer-term initiative, we also restructured the bank’s digital value communication, improved their choice architecture, and established a complex gamification system to incentivize behavior. The result?

  • +12% improvement in primary banking behavior
  • +20% more clients exhibiting “top-of-wallet” behavior
  • +11% savings balances at $5k

When we look at how banks usually communicate with customers, we see a lot of room for improvement. By communicating value effectively, significant potential can be unlocked in multiple areas, including customer satisfaction, loyalty, price perception, and cross-selling. However, this will be a difficult task requiring significant effort and a change in culture across the entire organization.

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