more personalized services, lower fees and more compelling products. Pricing and service still matter. Approximately 10% of consumers change financial institutions in any given market in any given year. It is very difficult to persuade people to switch banks. When they do switch, they do so for a variety of reasons, but it is generally event-driven. The goal is to get people to choose your institution when they are ready to change. Being top of mind when people are ready to switch is key. Since convenience is a primary selection criterion for customers, you should be focusing your marketing on the proximity of your branches to prospective retail and business customers in your market area. Once you’ve attracted those customers, you can use service as a differentiator to maximize your share of wallet through added relationships and a strategic approach to cross-selling additional products and services. Should you follow the big banks’ lead and start charging fees? If you start charging for checking accounts (in the absence of any value-added benefits), you will ultimately drive good customers away to other banks with more locations and all the other perceived advantages discussed above. The best way for a community bank to grow its fee income and reduce the cost of funding is to grow its customer base. Nearly every community bank branch in the United States has excess capacity, meaning they could double or triple their customer bases and still not need to add staff. The key to growing customers is to lead with products that are good for them. Products that are simple and logical, easy to sell and even easier to buy, and — yes — that make money for your bank. Community banks that follow the lead of the big banks will lose! The big institutions have too many advantages, some real and some perceived. Community bankers need to differentiate by leading instead of following. Sean C. Payant, Ph.D., is president at Haberfeld, a data-driven consulting firm specializing in core relationships and profitability growth for community-based financial institutions. Sean can be reached at (402) 323-3614 or sean@haberfeld.com. 13 WEST VIRGINIA BANKER
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