What Small Businesses Want From Banks And Credit Unions

Banking Kismet did a good job of taking one credit union to task for ineffective marketing to businesses. The crux of George’s argument was that the attributes that the credit union was using to differentiate itself, and to establish its superiority over large banks, weren’t truly differentiating factors.

While Banking Kismet was referring to just one CU, I think we can all agree that this CU’s approach isn’t unique. [For a great discussion on this, see The Financial Brand’s Service is not what differentiates you].

But while Banking Kismet’s analysis is spot on, it didn’t address the question: So what would differentiate the credit union in the minds of small businesses? Put another way: What are small businesses looking for when choosing a bank or credit union?

I haven’t written about this topic before, because I thought everybody knew the answer already. Apparently not. It comes down to three things:

  1. Are you going to lend me money or not?
  2. Do you understand my business and can you help me grow my business?
  3. Do you provide technology to make banking more convenient?

That’s it. END OF STORY.

Crowing about “personalized service” is useless. Finding out that you don’t know my business well enough to help me is no better coming from someone who knows my name than it is from someone who doesn’t know my name.

And if you’re not inclined to lend me money, then your volunteer board of directors only does me good if one of them is my cousin or next-door neighbor.

Not every small business puts equal importance across the three factors (the list comes from a report recently published by Aite Group on small business banking). But you’ll reach a pretty large percentage of small businesses if you meet all three criteria.

Of course, that’s a lot easier said than done. You’ll need underwriting capabilities to determine the best risks from the poor lending risks. And you might want to figure out which types of businesses you want to develop a knowledge of, and competency in helping. Oh, and you might want to invest in technology capabilities like mobile banking, remote deposit capture, and electronic invoicing.

Or you could just beat your chest, scream about your personalized service, and hope for the best.

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10 thoughts on “What Small Businesses Want From Banks And Credit Unions

  1. As I was hitting “post” on my blog, I got a “ding” from yours. Creeps me out. But we’re talking about the same thing at the same time – and of course we disagree.

    In the profit zone of commodity with cost parity, service is your best bet. There, I said it. But, it has to be intimate, consistent, nurturing, all the words you love.

    Check out my Marriott post. They are trying to differentiate in the super crowded business hotel commodity category with service.


  2. @Ron Well said. Also, in our market, there isn’t a single bank or credit union that offers better incentives for businesses. Not a single one. I’m more than willing to sit down with a competitor and do an analysis. If we really concentrated on the commercial market, we could own it. The question is, is the business the right customer for us?

    @Denise. Ron’s #1 is vital. If you won’t give me a loan then why would I care about your service? And if you won’t give me a loan, then you aren’t really providing a vital service for me are you?

  3. @George. Here’s the problem with relying on number one to drive your business. Not everyone qualifies.

    Some people (and businesses) should never get a loan – ever. That’s the number one reason our economy is in the sh*tter

    #2 is the most important. IF I qualify for the loan and you give it to me, then get to know me, and get more from me. That’s service.

  4. There is something else that businesses want from a lender. It falls underneath, “Are you going to help me grow my business or not?”

    And that is content. Good, meaty content that is relevant to small business. White papers, case studies, seminars, webinars. Tips and tricks on managing all aspects of your business.

    You are correct, differentiating on services is useless. Ditto for rates. That’s the price of admission, we know that.

  5. Right Denise. I agree. Banks and CUs clearly can’t resort to a loose lending policy to differentiate themselves, but they could target certain business sectors. #2 is extremely important, but I struggle with using that as a differentiator for marketing purposes. Chicken and the egg. How can you communicate #2, and service in general, to people who have not yet experienced it? Service keeps members or customers happy, but I don’t think it can be used to market to new customers, except through third party word-of-mouth. Maybe it’s an appropriate objective for social media marketing?

  6. @Dan – Exactly! You just said it.

    Service cannot be used – ever – to market to new customers EXCEPT through third party word-of-mouth. That’s where most freak out and give up. They don’t

    a. know how to really give good service
    b. don’t trust if they do that it will matter
    c. don’t practice it like a religion
    d. don’t measure it

    Great conversation. Thanks for playing.

  7. Shawn: Agreed. I probably should have worded #2 to say “HOW will you help me grow my business?” and that’s exactly where content comes in. But, outside of the largest banks, most FIs can’t have content for every industry and serve the needs of every small business. They have to make a choice.

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  9. Ron…love how you cut to the chase.

    Speaking as a business owner (15 years and counting), I absolutely agree. I’ve been banking with the same bank for the entire time despite repeated failures in service and mediocre technology. But they gave me the small line of credit that gave me the freedom to quit my job and start the biz full time.

    So totally agree with #1 and #3. But I’m not so sure about #2, it seems like it could mostly be included in #1.

  10. Jim: Based on the surveys of small business owners that Aite Group has done, #1 and #2 are very different things. In the minds of many small business owners, many banks simply aren’t willing to lend to small businesses. That may or may not be true — it doesn’t matter, it’s their perception. Beyond the willingness (and/or ability) to lend, however, small business owners want to know that the bank they’re dealing with understands the nuances, intricacies, whatevers, of their particular business or industry.

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