Jun 042012
 

As with everything in life, some things are better than others.  To some consumers, Coke tastes better than a generic cola.  To some car buyers, a Mercedes is preferred to a Honda.  To some print store owners, a customer placing a large order is preferred to a customer placing a small order.  To some financial advisors, a client with a large portfolio is preferred to a client with a very small portfolio.

We ought not be surprised that the preference likewise should hold for customers and members of Community Banks and Credit Unions.  That is, a Bank or Credit Union executive, assuming a rationale individual, should prefer a customer / member that is capable, willing and interested in purchasing numerous banking products & services over a customer / member who is interested in just one or two basic products.

To help us understand customer segmentation, FIS Global recently published an article entitled Attracting and Retaining Gen Y and Gen X, in which they discuss some of the demographic traits of the Gen Y population.  One of the most interesting findings is provided in the following graphic:

Banking Products by Generation1 Some Bank Customers Are Better Than Others

Banking Products by Generation, FIS Global

Not surprisingly, FIS found that Gen Y has high penetration of credit card debt and student loans.  Factors that we understand do not bode well for the financial well-being of the individual, and thus, place many of the Gen Y into dire financial position, especially given their high un- and under-employment rates (read more here and here).

But perhaps what is more interesting, is not the percentage of consumers who have banking products, but the percentage who do not!

Gen_YGen_X Young BoomersOlder BoomersMature
Credit_Card_Balances50%45%55%60%45%
Mortgage75%55%55%55%65%
Home Equity90%88%85%80%80%
Auto Loan65%60%65%65%70%

We find that generally speaking, more than 50% of consumers are dis-interested or otherwise unable to qualify for banking products that are revenue-generating for financial institutions.  Most acutely, Gen Y are poor candidates for most revenue generating products with at least 65% of the population dis-interested in banking products that are revenue generating for a financial institution.  Other generations, offer a slightly better customer base, yet here too, Bank and Credit Union marketers must be judicial in their approach to ensure that they are targeting the right consumer.

 


Serge Milman

Serge Milman is the Principal Partner of San Francisco, CA based SFO Consultants which provides Strategy, Finance and Operations Management Consulting services. He is also the Principal of Optirate – a blog dedicated to growth and profitability strategies for Banks and Credit Unions. Serge can be reached at info@SFOconsultants.com.

  2 Responses to “Some Bank Customers Are Better Than Others”


  1. Tim Suther of Adage just posted an article entitled ‘Not All Customers Are Created Equal’ ( http://adage.com/article/cmo-strategy/customers-created-equal/235361/ ) in which he argues that service delivery should be differentiated based on factors including profitability potential.


  2. Yet another study (http://blogs.smartmoney.com/advice/2012/07/06/the-jobless-class-of-2012/) reveals that
    – less than 50% of those who graduated college since 2006 have full-time jobs
    – most college graduates are settling for jobs that in the past would have gone to those without a college degree
    – the unemployment rate for 18 – 29 year old demographic is a whopping 17% (more than double the national average).

    This is indeed a very difficult time. Yet Banks and Credit Unions must understand their customer base with the objective of developing products & services that fit the various segments. This would not only benefit the consumers but the Financial Institutions themselves.

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