Bankers and Consumers Chill Together
By George Anderson
It’s a common site to see a bank inside a store looking to take advantage of the customer traffic that passes through its doors every day.
Now, however, banks are starting to take a different tack and that involves turning branches into destination points for things other than financial services. In essence, banks are taking the approach that, in addition to opening in stores, they can take what makes some retailers special and bring those elements together in the banking environment to attract consumers to branches and keep them there once they’ve stepped inside.
Union National Community Bank in Lancaster, Penn, for example, has rebranded all its new branches under the Gold Café name. The locations, which are open seven days a week for extended hours, have full-service coffee bars, free WiFi access, plasma screens with custom video content, comfy seating, a fireplace and an outdoor patio.
According to the Union National Community Bank web site, the company is looking to combine its experience in financial services with the aesthetic of a coffee house.
“Our goal is to be remarkable in everything we do as we deliver unmatched value across all of our product and service offerings. That begins the moment someone steps through the door – and we intend that moment to be one that clearly communicates our commitment to creating a positive, engaging banking experience unlike any other. We believe that together we can change banking for the better. For the best.”
According to an article in The Wall Street Journal, banks such as Union National are finding that making branches a place where consumers can come to relax or get some work done is paying off in bigger deposits by consumers and less turnover within the employee ranks.
The Bank of Smithtown, for example, has installed coffee bars, stools and plasma screen televisions at roughly half of its current 13 branches. Last year, the bank opened three new branches with this format and those locations represented about a third of the bank’s deposit growth for 2005.
Moderator’s Comment: What does the success of Gold Café and other more “comfortable” banking environments say about what modern consumers are
looking for? Do you think we will see elements of this concept make their way into banks within retail stores, as well? –
George Anderson – Moderator
This certainly isn’t a new concept in finance. I worked for a major financial institute in England over seven years ago and even then they were designing concept branches which housed coffee areas, child play areas and places to meet and so on.
A “meeter greater” was also introduced in order to place a greater emphasis on customer service and remove some of the bland reputation that banking was starting to get.
For some time major retailers have started to go down the route of a more customer satisfying environment. Occasion merchandizing was being heavily discussed a number of years ago in the UK, replacing the traditional aisle format with specified areas, such as party, breakfast, pet etc…
In order to grow loyalty, retailers are clearly looking for differentiation above and beyond EDLP and reward strategies; the store is now becoming an environment to entice customers back into spending.
One of the fastest growing banks in the country is Commerce Bank, who largely pioneered 7-day banking and also sorts coins for free. Litmus tests for determining whether a bank wants more customers include: (1) Does their listed phone number assume you already have an account or does it allow noncustomers to talk to a human being? (2) Will they open an account by mail or are they a front for the Department of Homeland Security and demand in-person time wasting to open all accounts? (3) Will the people who answer the phone give you their full name or just a first name so when they make an error they can’t be blamed? (4) Does the bank return phone calls within the next business day for messages left on voice mail? (5) Will the bank open an account for a new business startup or do they want a one-year track record, helping to prevent any entrepreneurship? (6) How long does it take to respond to business loan paperwork? My guess: these tests might be more important than free coffee.
This fits right in with our recommendations to retailers that they stop thinking of shoppers as commercial machines and instead treat them as guests and human beings. It doesn’t mean that they aren’t there to engage in commercial transactions, but if you want them to spend more time with you, it better be because you have given them something that attracts them, NOT because you have put something they want or need (like milk) in the far corner of the store.
Let’s not get too caught up in this move to make banks more consumer friendly. The banking industry has gone through more trends with regards to retail locations than grocery stores have gone through resets. Everyone from Citi down to the smallest bank has tried techniques to upgrade retail and the ideas stick until the investment community begins to demand a higher ROI from their investments. I applaud what this bank in PA is doing but we’ll have to see how many of these ideas are still there five years from now, and more importantly, let’s watch to see what new retail ideas come out of publicly held banks.
For several years, there have been banks partnering with coffee houses. A bank I used to use when I lived in the L.A. area to this day still has a Starbucks – from 10 years ago! This may not be for every demographic but this example is very much an eclectic group of consumers ranging from blue collar to executives, so if it works there, it could work anywhere.
Banks need to do all they can, which when it comes to marketing, financial institutions have failed as a whole. This is one of many potential ideas that I’ve worked on with different banking establishments, but old habits die hard. I commend this PA bank and any other financial service business that can look beyond the tired ways of the past.
Yet again attitudes are more than just an ocean apart between the US and UK. Here, banks are closing branches left, right and centre. Some of those that do still have a presence, as in my small village which has had two competitors for at least 40 years, are now opening for shorter hours and outsourcing their ATMs to private companies that charge people for withdrawing (or depositing) their own money. No branch that I have ever heard of stays open beyond 4:30 pm. Until recently, that was 3:30 pm. Even now, any transactions that take place after 3:30 don’t get processed until the following day. As for enticing people to enter and chill out, I think they would have to do far more in terms of providing a useful and user-friendly service before anyone started wanting to get cosy.
Since we are social beings, this makes some sense, but seems like a stretch, at least under the present conditions. However, if Starbucks or Caribou, etc. would co-locate and then Charles Schwab or Morgan Stanley, etc. would join in, then you’d have a great hangout for baby boomers on their way to the golf course or tennis club, etc.
Bankers are discovering that they no longer have the upper hand with depositors. They are coming to the realization that going to the bank is drudgery and something many consumers would rather avoid.
I’m not sure coffee and cookies is the answer. It’s another service that most people don’t want to pay for. I would suggest bankers start looking at the enormous fees they charge for various services — maybe even look at an EDLP strategy instead of what seems to be an everyday high price.
There seems to be a pervasive feeling that if you give people something to eat, it will placate them to a point where they accept poor service. Not the case. Bankers, like any other retailer, need to make it easier, quicker and cheaper for their customers. If they don’t, maybe Wal-Mart will.
Banks worked hard to encourage consumers to use their online services and ATMs. We are trainable – especially if the new idea results in more convenience and faster service. However, the practice significantly decreased the opportunity to have a personal exchange with consumers and develop a personal relationship. Be careful of unintended consequences. Now the banks want us to come back in and “hang out.” For those consumers who value convenience and quick service, they probably don’t want to “hang out.” Which consumers do? Is that who that banks are trying to attract?
I agree with David. This’ll work some places, where demographics are right, and not in others. My bank up here in the wilds of Vermont has had coffee and cookies for free for ages. If they put in lounge chairs and started serving latte, you’d hear the gales of laughter in the next county. And if they started charging for it, and competing with our beloved Dan & Whit’s General Store across the street, you’d have a run on deposits. But back where I lived for most of my career, down in Rye, N.Y., it would make perfect sense.
For decades, newly-minted MBAs considered the retail segment of the commercial banking industry the ugly step sister of corporate finance and investment banking. According to a recent article in one of the major business publications, the area is now attracting both finance and marketing grads in droves. The younger generation of banking executives are a far cry from the three-piece suits who used to occupy the top positions, and nowhere is that reflected more than in retail. Marketing is now considered a critical element of the bank’s overall operation, and offering coffee and Wi-Fi service is a result of this new thinking. Retail bankers are no longer required to wear a suit and tie, they are not stuck in a teller’s cage and, as George mentions, they are open to real innovation.
I see this as a favorable development, one that will make all retailers reconsider their service offerings.
What ‘are’ customers looking for? That’s the key question.
Currently, most banks are setting a goal to be their retail customers’ key financial advisor. Most customers are pretty uninterested in having a ‘relationship’ with their bank. Instead they view it as a commodity business, where poor service just means you walk across the street to a competitor.
To be successful, banks will need to merge their retail experience efforts (coffee shop or otherwise) with efforts to make their front line employees extremely competent, empowered, and able to really be the trusted advisor to their retail clients.
Think about the Santa of ‘Miracle on 34th Street’ and his recommending non-Macy stocked products to the parents and kids. If your banker was willing to not just match rate, but actually recommend another bank’s CDs because of better rates when your CD was up, wouldn’t you be more likely to keep the rest of your business with that banker?
In short, making the retail branch a pleasant environment is necessary, but not sufficient, to develop loyal business.
It seems that Canada has more in common with the UK than with our American neighbours. Here, banks are closing locations and relying much more heavily on the speed of ATM’s and online banking. In fact, the fastest growing banks are the ‘indie’ players like ING Direct that have traded their bricks and mortar locations for higher interest rates and lower fees.
Convincing customers to hang out at a bank – and pay for the privilege – seems silly at best.
If a bank can put a coffee shop in their facility, then I think Starbucks should be allowed to open checking accounts and loan money to their customers as well.
While the idea of a coffee shop in a bank is certainly original, I do not think the idea will multiply to a significant number of banks over the long term. And while coffee may be a way to get customers there, perhaps free coffee and friendly customer service are a better combination. I am not sure how important a fireplace and outdoor patio are to consumers who are very often in a hurry and don’t enjoy waiting in lines at banks or any retailer.
It is easy to be confused by all the banking offers and financial terminology, and consumers appreciate someone taking the time to explain these offers clearly and simply, in person and on line. Having accessible customer service representatives to answer questions is becoming more and more a rarity. Some banks don’t even offer a choice on 800 numbers that allow you to speak to a real person anymore.
Focusing on customer service, knowledgeable employees, and offering ways to understand and compare financial offers and monthly statements may help banks seeking to develop a “relationship” with their customers, rather than what seems to be the more common theme of additional fees, less personalized service, and less convenience for consumers.
I would agree that upgrading the ambiance of the average bank branch is an opportunity. At the same time, I am amazed at how many of these massive, space-inefficient buildings are still standing.
While opening a coffee-house style bank branch is certainly original, I think it is a stretch in terms of the best place to put dollars when trying to position a banking business for the future.
With direct deposit, ATMs and online banking, there is little need for the average person to visit a branch. The preferences of the next generation of consumers will be skewed even more so in that direction.
Furthermore, I daresay most of us have by now “filled the gap” of the missing human relationships we once enjoyed with the folks behind the branch counter.
My assessment is that banks should focus on web features, more ATMs, good customer service, innovative products, lower costs, and convenient locations and hours for when face to face contact is needed (grocery stores work well).
My bank has been serving coffee and cookies for years for free. If they started asking customers to pay for it, I’m not so sure it would work. It looks like some banks are trying to squeeze more money out of their customers in order to cover the cost of coffee. I’ve seen coffee shops in bookstores, home improvement stores, convenience stores, libraries, and now — banks? In some markets it will probably work well. Time will tell.
Put pearls and lipstick on a pig and it is still a pig. There is a message here for all of the “Mega” banks, retailers and service organizations. The need is to get back to the basics and their core competencies. Have you ever tried to get a customer service issue resolved online or on the phone? Get one part of a business matrix to communicate with another, after you were sold on the convenience of one stop banking services? (Mortgage, Checking and Investment services) “Sorry Sir, that is a different company.”
If they want to continue to pursue these alternate channels to woo customers, might I suggest California and our Marijuana Retail Stores? Perfect.
Humbly said, “If supermarkets have bank branches with no life-style value setting or pleasurable environment.” A coffee shop in a bank, or visa versa, fits the ambiance far better, in today’s lifestyle. Does Starbucks bring ATM machines to its locations? Hmmmmmm