22 August 2014

Brett King - Breaking Banks

Brett King - Moven

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Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.

Gen-M and why they are abandoning face-to-face

07 October 2012  |  4046 views  |  4

Baby Boomers and Gen-X have in common the need to experience life in all it’s glory. Whether that is born out of a sense of adventure, the need for tactile feedback or in the sense of face-to-face social connections, at the core of much of our buying behavior historically has been the need to ‘touch and feel’ a product before a purchase. There’s a subtle shift in this behavior with Gen-Y and Gen-Z/Digital Natives (sometimes collectively called Generation-M or the ‘multi-tasking’ generation) that is critical to understand if you are going to engage this community successfully moving forward, and it emphasizes why the physical store is under increased threat.

In the banking space I’m often confronted with passionate arguments for why face-to-face interactions, why the availability of advice and the psychological comfort of brick-and-mortar spaces still matter. The problem is that those describing these ‘values’ are inevitably Baby Boomers or Gen-X consumers, describing their comfort levels and buying behaviors. There are a number of key trends we can observe today that signify an abandonment of this traditional buying behavior for the next generation of customers.

The psychology of buying is changing

The last 10-15 years has already seen a significant shift in buying behavior as a result of changing distribution models. When the web started to mature and the dot com phenomenon emerged, we saw the first changes in buying behavior around the willingness to buy physical products like software, books and CDs via online stores. Over time this impacted the retail storefront of the book and music industries as less and less people visited physical stores. The argument oft heard, however, was that products like clothes, shoes, electronic goods, etc. still needed a good old storefront interaction. But success of brands like Zappos, Amazon with their broader retail, and the phenomenon of ‘showrooming’ and the influence of mobile in-store is part of a broader behavioral change, a change in buying behavior writ large.

Pinterest, Instagram, Tumblr, and other social networks are all very powerful communication tools for Gen-M. YouTube is their most popular search engine. Their connection to brands is no longer based on a need to touch and feel the product, or to connect face-to-face. Their connection is visceral, but driven by different senses. Generation M have moved from touch and feel, to see and hear as their new connection with brands, and it needs to happen at speed.

Take a Gen-X attending a concert. They go for the experience – to be a part of the event, experience the band live, to be immersed. The Gen-M digital native goes for the experience too, but they’re driven to share photos, video and to extend the experience of the event to their network. Personal connection to the experience is balanced with the need to share and talk about that experience.

The teenage female of the species would gather at the mall in the 80s and 90s to have a retail shopping experience with her friends, the experience wasn’t the purchase alone, but the collaboration, the social connections, the mall experience. They’d find their way as a group in the shopping environment, trends would develop based on what looked cool, what emerged through group consensus. Today that shopping experience is driven collaboratively online through shopping “haul videos”, discussions around back-to-school or spring break fashion and the like. Decisions on fashion choice aren’t driven by that in-mall collaboration or advertising messages, but through online advocacy, connection with the brand via content – not the store.

It's why videos like this Lady Gaga Makeup Tutorial has 33 million views. No bank has ever got even a fraction of this type of advocacy traffic via YouTube today.

This is why advocacy of brands is such a critical driving force for this new generation of consumers. This is why they think in pictures, why they video themselves, why they check-in and share photos, why Instagram and Pinterest have grown so fast amongst this group. They want to have a visual connection with the product or brand, and they want to hear about the experience of the brand, whether directly from a friend or from a trusted platform such as their social network.

This is how Gen-M connects.

Advocacy is built through seeing and hearing a brand

So when you think about designing the next generation of banking or retail understand that the buying behavior of your core customers over the next decade is dependent on a connection of seeing and hearing what your brand is all about, not touching and feeling the product or brand in-situ, not getting advice or speaking to an expert. No one is a better expert than their friends in a network who’ve already tried your product out. The old concepts of Product, Place and Promotion don’t work in this space. Campaigns have very limited application, because they don’t trigger advocacy well and I’ll always trust my network over a brand message built by an advertiser.

How are your customers connecting with your brand in the see and hear space? Touching and feeling the product is no longer critical. Funneling customers into the store is no longer the best customer experience. Today it’s all about creating a connection with the brand through a product or service that I can advocate and share.

No bank has ever got 33 million views to a YouTube clip TagsOnline bankingRetail banking

Comments: (6)

Salil Ravindran - Oracle - Amsterdam | 08 October, 2012, 14:04

Hi Brett,

I guess awareness and education are key drivers for a shift in buying and engagement behaviour. In case of the retail industry, this probably wasnt a big barrier. General availability of connectivity, online presence and anywhere access was all that was needed. The products were already commoditised and were literally a part of daily lives. This was achieved through years of information exchange, visibility, footfalls at physical stores and even through the education system inherently.

This however, is a big chasm to plug in case of banking and financial services. Basic money in money out products and transfers barring, people still tend to be not-so-aware when it comes to managing own money. People are less informed on opportunities and opportunity losses. The more sound people believe in their own decisions and opinions, the more they tend to speak up.

I guess this is a primary barrier banking providers (banks or non-banks) need to tackle. And it is probably beyond this barrier that you start seeing the kind of explosion that you see today in music and online retail. I guess until then any amount of online, social media and next gen tools will face a certain level of risk of skepticism

 

Brett King - Moven - New York | 09 October, 2012, 11:05

Salil,

I don't think the barriers to entry are there in the way you think they are. Your thinking reflects a traditional view of the market. 

Think about the fastest growing consumer deposit product in the US and China right now - prepaid Debit cards. These are growing for exactly the opposite reasons you articulate. The simplicity of the product, the ability to circumvent the traditional KYC and cash-in/cash-out restrictions, and the advocacy platform. 

The old rules simply are breaking down. The reason financial services is set for such a shake up is there are too many people that think that the inertia in the system is enough to keep the old paradigms going.

BK

Salil Ravindran - Oracle - Amsterdam | 09 October, 2012, 11:14

I largely agree with you Brett and while it is beyond debate that the paradigm has changed, please check the following - Ron's recent note. Hard to ignore

http://snarketing2dot0.com/2012/09/24/pfm-is-dead-long-live-fpm/

And I am driven to believe, PFM is just an example

Brett King - Moven - New York | 09 October, 2012, 11:56

Salil,

I think you've taken the wrong 'take aways' from Ron's post. The reason I think PFM hasn't worked is not that people don't need better control or alternatives to day-to-day banking utility, but that current PFM tools are a poor trade-off in terms of outcome. That is, you need to invest considerable time on a systematic basis to get a positive outcome. We know that only 10-15% of the banked population can be bothered to invest time in PFM for that very reason, the trade-off is poor unless you're an accountant/control-freak when it comes to budgeting.

We live in the instant gratification age - so PFM doesn't produce this type of instant turn-around benefit. Unless, you can make it contextual - see Movenbank CRED.

The key to understanding why there will be a shift in the distribution layer is that the current system is full of inefficiencies and friction at the customer front-end. That provides no value, but makes it difficult to switch, etc. As soon as someone breaks the back of that - it is just 'friction' and no longer value.

BK

Salil Ravindran - Oracle - Amsterdam | 09 October, 2012, 12:29

Agree Brett. Did not mean to say PFM hasnt taken off since there is no perceived need for it but was exactly pointing to the lack of effort from banks to provide the 'instant gratification' you mentioned

CRED - will try it when you come into Netherlands :-)

Salil

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 09 October, 2012, 18:50

I agree that banks shouldn't be using the Baby Boomer and GenX prism to view the world that's increasingly populated by the Millennials. However, when it comes to branches, GenY has spoken for itself: 

Young Brits still visit bank branches - they're usually closed though

Over 15 years after it started, e-commerce accounts for less than 5-7% of total retail sales in the USA. Therefore, we've to consider the possibility that much of the connecting, advocating and sharing that social media is so good at is actually driving more people to physical stores.

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