A national bank recently opened two new branch locations in my neighborhood, each of them a little more than a mile or so from each other. It got me thinking about brick-and-mortar banks… and do we still need them?
Backing up a bit, think of mobile banking apps and branch banks as products, products that are designed to appeal to very specific market segments and like others, can help a bank generate loyalty and earn a customer for life.
Now, as irrelevant as it might seem, think about the cola wars of the 1990’s… the battle between Coke and Pepsi. Those of us in the ad agency world watched this battle closely; not only was it fun to watch, but there were (and still are) a great many lessons, from a marketing perspective, to be learned from it.
Here is the battle that soft drinks fight. Soft drinks, like cigarettes, are powerful brands. If you were an insider on the Cola war-era “Taste Test Challenges,” you learned that often an individual who is loyal to a brand of cola, when blindfolded, can’t tell the difference between their preferred brand and a competitor. In many cases, taste didn’t even matter. Consumers wear their brand as a badge and are extremely loyal. I remember reading that taste test subjects, when choosing the wrong brand when tested, said that the taste test “doesn’t matter” and that they would stick with their brand regardless.
Here's what Pepsi figured out. They understood that, when operating in an over-the-top brand loyalty category, that they had to “earn” Pepsi drinkers early and count on their unfailing loyalty in order to grow their brand and outsell Coke. Knowing that young people “graduate” from juices to soft drinks as they enter teen-hood, Pepsi launched a marketing campaign built on “The Taste of a New Generation.” Coca-Cola, seeing what Pepsi was doing and figuring that their image as traditional and “classic” wouldn’t play well with those kids making the transition from juices to colas, responded as quickly (and in as knee-jerk a way possible) as they could… with a new brand that they hoped would appeal to that same, “new generation” consumer: New Coke.
Well, we all know how that turned out. They shelved Coca-Cola Classic… or at least announced that they would, with the intention of replacing it with a more youthful brand that could better compete. And what happened? You don’t see New Coke on the shelves these days, do you? How and why someone at Coca-Cola thought that taking their flagship brand — the then-most-popular cola on the planet — off the market was a good idea, I’ll never know. Why not simply add New Coke as an extension to their beverage line-up?
Back to banking and branches. Do banks need a killer app? Think of Pepsi. Do they also need branch banks? Think of Coca-Cola Classic. Your younger banking customers, who are the future of your business, will more than likely never set foot in a branch bank… at least not for many years. In the meantime, your more seasoned bankers, who don’t have the same comfort with phone banking that… their children, perhaps, have?... do love the comfort of branch banking.
There are, of course, a number of factors that contribute to the opening and closing of branch banks and the NCRC, in their article, “The Great Consolidation of Banks and Acceleration of Branch Closure Across the U.S.,” does a good job of taking a deep dive into the subject. The economy, legislation, competition, consolidation through mergers and acquisitions, and simply “following the money” are all factors. I realize that this is a complex issue. But when I think of branch openings versus closings and where the industry is going, I can’t help but think of it in terms of marketing. It makes sense to have both. Banks need to market themselves by offering consumers the best of both worlds; Branch banking and mobile banking. Which is not too unlike the thinking behind New Coke and how it was marketed; “the great taste of Coca-Cola with the sweetness of Pepsi.”
As the younger, “taste of a new generation” banking customer’s tastes begin to change, i.e., they learn that there is more to sound money management than using a mobile device to make P2P payments and check balances, they’ll graduate to that more traditional, “classic” flavor of banking. That reliable, more traditional, brick-and-mortar branch.
As always, I’d love to hear your thoughts.
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