How Persistence, Engagement, and Innovative Design Wins Customers

How Persistence, Engagement, and Innovative Design Wins Customers

04.16.13Evan Smith

Innovation doesn't have to be a "big idea", bet-the-farm kind of idea

Innovation is a talked-about topic today; many companies in our limping economy are seeking a new line of business, a new stream of revenue, the next "big thing" to help spur growth.  What can feel daunting is finding that next "blue ocean" where a major new business model awaits, like the pot of gold over the horizon.

But innovation doesn't have to be a "big idea", bet-the-farm kind of play that smart people in cool dark rooms dream up (and subsequently push the app to your smartphone).  Here's a story of innovation in a very traditional B2C business, that "connects the dots" for a prospective customer, persistently, one small step at a time, in a way that leads to conversion.

This is about a sequence of innovations in banking – in retail banking (banks serving up mortgages, checking/savings accounts, CDs, safe deposit boxes, etc. to consumers and small businesses).  Banks – big banks, in particular – have been faulted for indifferent customer service, high fees, and weak value propositions and are perpetually challenged to sell effectively across channels. Customers perceive switching costs in retail banking to be high because  changing banks can be challenging (particularly for those with multiple banking products) – there are too many connections, accounts, online vendors, and payment arrangements.  

In this story, innovation is about cracking the code of cross-selling with simple, non-intrusive but repetitive offers to a customer and one-step-at-a-time conversion of a customer from a competitor.  Let's count the number of "innovation interventions" compared to "traditional banking" by a major US retail bank (let’s call this company "Big NY Bank"). You'll see my count of innovations indicated with a "#", below that in the aggregate led to new banking business.

Our customer is Jack. Our story begins in the recent depths of the 2010-2011 recession. Taking advantage of still-low interest rates, Jack took the opportunity to refinance his mortgage.  He wasn't expecting to refinance – in fact, he already had a good rate – but he refinanced based on a pro-active outreach (#1) by his current mortgage lender, a letter that said, in effect:  "You've paid your mortgage on time; based on current rates and Federal programs, we think we can help you to do better.  We'd like to make sure you've got the best rates, so please let us know if you'd like to take advantage of this offer."

Intrigued, Jack called the 800 number (#2). An agent took his basic information over the phone, and matched it up with the current information on file – no repetitive resubmitting of tax returns and income statements (#3). The refinance application underway, Jack got email confirmations (#4) as the loan approval process progressed – from an actual live-human loan processer/account manager, who also called regularly with status updates (#5). At the time of the loan closing, Jack signed each document (still quite a few of them), and watched as these were scanned and sent immediately to the central processing facility (#6). Before he had left the closing attorney's office Big NY, the loan processer, the closing attorney, and Jack had shared confirmation that all required forms and statements had been included and signed.

The bank also sent him a "rebate" offer:  If Jack paid his new refinanced mortgage from a checking account owned by Big NY Bank, Big NY would credit his account with $500 annually (#7). So Jack set up a new checking account.

A new account with Big NY gave Jack a view into the new competitive and differentiated landscape of retail banking. Big NY had some of the first ATMs in his hometown that would scan checks without a deposit envelope (#8), and let him make deposits by snapping a picture of a check with his smartphone (#9). Upon visiting the branch to set up the new checking account, the personal banker was able to share a full array of Big NY's competitive product offerings – positioned to minimize fees, maximize the value of product bundling, and offer further inducements, especially for customers who consolidated greater volumes of their banking business. Jack had seen these offers before, from other banks, in their regular, unsolicited junk mail.  

But what was different now was that Jack had already taken several steps toward Big NY, in becoming a customer with his mortgage. His experience in being "sold", in becoming a customer (#10) – with the favorable impressions Big NY generated – lowered the barrier to taking the next, larger step, to convert his day-to-day retail credit and debit business.

I count about 10 steps in this particular innovation sequence.

What are your stories of innovation from day-to-day life – in “small-i” or “big-I” ways – that illustrate how businesses can convert new customers and spur growth?

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