Part 1: from Differentiation to Innovation

A saving account, a credit card, a loan… we are all customers of this type of product at one or different financial institutions. What exactly makes us choose for a specific bank when we decide to open a bank account? Do we just choose the closest bank in our neighborhood? Are youngsters automatically choosing the same bank where their parents are already client? Or do we really have a preference for a specific bank?

 As a customer, it’s definitely not an easy job to compare different financial institutions. Especially in the retail banking market it is a challenge to find differences in the offering of the biggest players. Some niche-players, such as online banks, did succeed in differentiating from competition. These banks stand for simplicity in their offering & services, which allows them to reduce costs for the customer. The sustainable bank Triodos is another example of a clear positioning in the financial market. Next to these exceptions, most banks aren’t really differentiating. They all offer the same products & services and all own a large branch network. That’s at least the perception that lives in the market.

The Carrefour-case recently proved that it is crucial to differentiate in a competitive market and to have a clear positioning. Customers associate players like Colruyt with fair prices and Delhaize with a higher quality of products and a nice shopping environment. But what about the positioning of Carrefour? We could ask ourselves the same question about the big Belgian banks.

The Yearly Marketing Survey from The House of Marketing indicates that differentiation is one of the top-objectives of Belgian marketers since many years. The question yet remains how marketers can achieve this objective. An important part of the answer is innovation. Innovation really allows us to be different and to add value for the customer. Unfortunately, the results from the Yearly Marketing Survey show us that innovation is currently not a top priority for Belgian marketers. In difficult economic circumstances, where budgets are often cut,it isn’t really a surprise that marketers don’t have the necessary resources to invest in innovation. Marketers should nevertheless boost innovation in their company if they want to win this war in which the innovation gap keeps on growing. The willingness & strategy to innovate must of course be supported by management while marketing should be an important driver.

Marketers shouldn’t forget to involve the customer in this innovation process. Today, customers want to have a conversation with their brands. Therefore, marketers need to grasp this opportunity to learn from their customers. Social networks are of course a great tool to integrate the customer in our innovation process.

Although the importance of innovation is quite obvious for many marketers, it doesn’t seem to be the reality in banks. For many years there were no innovation programs as business was doing well. In the current environment other players such as for example retailers and telecom operators are entering the financial market. Examples are Carrefour and Krëfel who are offering loans to customers. Kruidvat offers this as well in the Netherlands. These companies approach the sector in another way and offer a different service or an innovative product to the market. Banks need to wake up if they want to maintain their market share. In the end, the winners will be the companies who were able to innovate faster, better and cheaper than competition.

Grégory Delens – The House of Marketing