In a post-crisis financial environment, customers are demanding solutions to satisfy their unique needs for money management. Additionally, they are showing preference for simpler products where benefits and risks are easy to understand and the feeling of control over the product increases their loyalty.
Therefore, banks and credit unions are facing a crossroads: acknowledge and embrace the demands of customers wanting more personalized and simplified services or try to push customers into a dated mass production model.
By Matthew Lifshotz, Director of Global Business Development for Choice Financial Solutions
From Cookie Cutter to Papering Over the Cracks
Taking a look back in history, consumer products used to be built on a made-to-order basis, using expensive highly labor-intensive processes. To make things
more affordable, companies began to adopt mass production technologies and
techniques, creating a one-size-fits-all product line.
When Henry Ford moved automobile production to the
assembly-line model, revolutionizing manufacturing, he divided labor into
standardized tasks that were put together on a moving line. The individual
creation processes and unique personalization of previous years moved towards a
repetitive blueprint that was now centered on the product, not the customer.
The result of this innovative change was standardized production that had lower
costs per vehicle for both the manufacturer and customer.
Ford realized, very quickly, that mass production
allowed him to achieve economies of scale, a key to keeping prices low and
gaining an edge on competition. As a result of this success, all types of
companies (including financial services) have been utilizing this model of mass
production: focused on building the most popular products at the most
economical cost, assuming that customers will choose the options they are
presented with.
However, over time, competition has become more
intense and companies have started to offer a more diverse selection. As a
result of this variety, customers realized that they could find solutions in
the market closer to addressing their specific needs if they shopped around and paid
less attention to traditional concepts such as brand loyalty.
As a consequence of this customer attitude and
shift, companies are being forced to abandon the take-it-or-leave-it approach of
mass production, focusing instead on a more robust product offering that would
aid in their efforts to meet customer demands.
In today’s age, consumers are provided — some may
say overwhelmed — by an ever-expanding variety of goods and services in many
industries. For example, since 1970:
- The number of new vehicle models has risen from 140 to 270.
- The number of TV channels has gone from 5 to over 200.
- The U.S. market makes available to consumers more than 145 over-the-counter pain relievers.
- There are more than 7,500 different prescription drugs.
- Consumers can find over 3,000 types of beers and 50 different brands of bottled water in the market place.
- There are more than 350 breakfast cereals.
A lot has changed since Henry Ford and the assembly line production of the Model T and I am comfortable in saying that the mass-production model will no longer satisfy the overall customer demand. While customization is a recognized strategy in many business-to-business models, today’s retail consumer markets are also motivating companies to increasingly offer personalized solutions.
It’s important to note that personalization is not
jargon for variety. Variety represents a producer’s best guess about what
consumers will buy and offering quantity. Companies that personalize wait until
they know precisely what the customer wants to create quality.
“Brand Keys, a research firm that studies customer loyalty, found that personalization is 30 percent of what draws a person to a brand today, as opposed to only six percent in 1997.”
A paradigm shift is taking place, from a product
centric approach (off-the-rack) to a customer centric approach (made-to-order),
where customer involvement shifts from just purchase to the development as
well. It’s become more important than ever for companies, especially those in
financial services, to be nimble and respond quickly to this market demand.
