Posts Tagged ‘economy’
On Tuesday, the Federal Reserve confirmed what we have all been thinking for the last couple months – the US economic recovery is weakening. The health of our small businesses is acknowledged as being key to the recovery and many economists agree that the inability of small firms to obtain financing has stifled economic growth. Small businesses need loans to invest in capital and hire employees so that they can begin new projects. We need to have faith in these companies in order to break the negative cycle that is holding back the country.
I was therefore shocked to read in the Mintel Comperemedia Q2 2010 Small Business Lines and Loans Review that just 3% of business panelists had received a business loan offer via direct mail during the quarter; this is down from nearly 40% two years ago.
This fact is particularly alarming when you consider some of the bold statements made recently by banks as they compete to outdo each other with various lending statistics. I take my hat off to those banks that are not just talking-up their lending activities, but are also integrating those efforts with direct marketing campaigns. In other words, reaching out to small businesses, directly, in their time of need.
PNC, BBVA Compass and Chase are doing just that:
– PNC has been promoting its Cash Flow Options program in direct mail. Cash Flow Options encompasses a suite of loan products and the bank is offering a half-point reduction off its daily quoted interest rate plus a 50% reduction off the loan origination fee.
– BBVA Compass has been sending offers to small business owners promoting unsecured lines of credit and business loans. Lines range from $10,000 to $250,000 with interest rates as low as 6.00%. For 5-year term loans of $100,000 or more, small business owners can get a rate as low as 5.18%.
– Chase’s Loan for Hire campaign is the most noteworthy campaign of the national banks. Small businesses can get a half-point rate discount on each employee they hire up to three. Also, if you have a business checking account with Chase, you get another half-point discount on top of that for a total of 2% off the published daily interest rate. We haven’t seen a direct mail campaign promoting Loan for Hire yet, but Chase has blanketed the country with print and radio advertisements and has been promoting the product in its branches.
The PNC, BBVA and Chase examples are encouraging, but clearly it is not enough to keep economic recovery strong. Another positive sign is that small business credit card marketing is up significantly. This will be invaluable for many small firms as they struggle to stay afloat.
It’s time for business lending to follow suit and pull this country clear of the great recession once and for all. Yes, a rallying cry for small business marketers; nothing less than our economic future is at stake.
Further evidence that the “Great Recession” has had a significant effect on consumer behavior:
– In a recent Mintel consumer study, a substantial 76% of respondents state that they are “smarter shoppers” than they were a year ago.
– Almost seven in ten say they are trying to buy only necessary items, such as food (and that last number includes about half of those households earning more than $100k annually).
But price is not the only consideration. Only half of the consumers in the survey say that low price is more important than good customer service, while seven in ten say they only buy brands they trust.
What does this mean? It means that the definition of “smart shopper” is not just about price, it is more and more about value. And the concept of value has been extended to include trust in the brand, as well as good customer service.
These numbers look very much the same as they did a year and even two years ago, when the recession was just beginning to alter consumer behavior. This means that consumers are settling into a “less is more” mindset, while expecting more from their brand and shopping experiences.
Anyone in Financial Services (along with other industries) who is not conducting branding studies and consumer experience research should probably take note.
Thank you to everyone who listened in to my webinar yesterday (July 22): “Beyond the New Normal: The Financial Services Consumer in Today’s Economy.”
I really enjoy presenting Mintel Comperemedia’s information on how people are reacting and changing their habits due to the economy of the last couple years. Many of you asked questions related to consumer trust, which I think is an excellent topic for banks and other financial institutions to think about right now.
If you missed the webinar, you can access the slides and recording here:
Here are my answers to some of the questions we didn’t get to yesterday:
Q. Is there somewhere that all of the statistics are posted? Some were mentioned that were not on the slides.
A. Please contact your account manager with specific requests for data. I will also be posting some data points from the presentation on the blog over the next few days. If you are not a Mintel Comperemedia client, please contact email@example.com to learn more about subscribing.
Q. There seems to be a lot of contradictory information – consumers don’t want a relationship with a bank, but that’s the only way we’ll attract customers. If we need to build trust, how specifically do bank marketers do that?
A. Actually…customers DO want a relationship with banks and other financial services companies. I could write a book (actually several books) on different ways that companies could build trust with their customers, but it begins with a longer term focus, rather short-term strategies designed to maximize quarterly earnings, as well as openness with customers – being forthcoming with information about what to expect from the relationship.
As I mentioned during the webinar, it is not necessarily the fees themselves that are the problem, for example. Instead, the problem is that customers feel like banks are being unfair or even “sneaky” about how they charge fees to their customers. Same thing for privacy and the use of personal information.
The best way to think about it is to think about what factors into maintaining a long-term friendship, since customers are looking for the same things from a personal relationship as from a business relationship.
Q. What was meant by “control” in the characteristics people expect from banks?
A. We didn’t define the concept of control when we asked about the 12 attributes. That would actually be a good focus for future studies – to break down those attributes even further to gain an even better understanding of how customers define “trust”.
The question(s) as they were asked were:
“Thinking about what it means to ‘trust’ another person (financial services company), please indicate on a scale of 1-5 how important each of the following is in establishing that trust”
Top 6 for both:
Bottom 6 or both:
Reciprocity (receiving an equal or greater amount in return)
Q. Where will lower income customers turn for credit, given that alternative lenders (e.g., payday, auto title) are increasingly scrutinized?
A. Lower income customers have definitely borne much of the burden of the declining availability of credit. The regulatory changes will probably only exacerbate that situation. This is a huge market, however, and eventually (as always happens), new ways of mitigating risk, or new ways of offering credit that to these segments that have regulatory approval, will appear.
One way that this market may open up again is through the use of better risk assessment tools – above and beyond the traditional Fico or other type of risk score. That would allow lower income customers, who are not necessarily higher risk, to have access to credit because lenders will have better and more detailed ways of assessing credit worthiness.
Q. How do you see Bank of America’s move to eliminate ODP (overdraft protection) fees in the context of your presentation?
A. One of the best marketing moves a bank can make is to be proactive about eliminating or restricting something ahead of the game. It is a tremendous differentiation strategy that helps establish trust. The same is true for entire industries.
About three years ago I wrote a piece for the Mintel Oxygen website titled “Self regulate or be regulated,” suggesting that the credit card industry, which has historically suffered from a tremendous lack of consumer trust, might want to be proactive in limiting fees across the industry to improve general perceptions of the entire industry. That of course never happened, and sure enough, the CARD Act has accomplished much of that restriction of fees for them.
The result? People are still highly distrustful of credit card companies/issuers/networks, and their fees have been restricted anyway. It might have been better to get ahead of the game and at least have the additional bonus of somewhat improved customer relations.
This relates to my points about a short-term focus on quantifiable returns, rather than the longer term focus on building a relationship that improves perceptions of a brand.
Please join Mintel Comperemedia’s, Susan Menke, Ph. D and Economic Psychologist, on July 22, 2010 for a free webinar entitled “Beyond the New Normal: The Financial Services Consumer in Today’s Economy.” The webinar will start promptly at 2pm CT.
You can register HERE.
Over the last two years, the banking crisis and the “great recession” have caused a dramatic shift in consumer’s attitudes and behaviors. Consumers are now asking for different kinds of products and services from their financial services providers, and the most successful companies will listen to what they are saying and act accordingly.
A few of the questions to be discussed in this webinar include:
– How is the consumer mindset changing as they place more emphasis on asset accumulation and less on consumption?
– What are the similarities and differences in the ways Gen X, Gen Y and Baby Boomers have been affected?
– What specifically is driving the level of trust (or lack thereof) in the financial services industry? How instrumental are concerns about privacy and security?
– What is the current status of financial reform legislation, and what does the consumer think about it?
– What is currently driving consumer satisfaction with the financial services industry? How does this relate to the “emerging under-banked” trend that Mintel has been discussing for the last several years?
– How important will social media be to the future of the industry?
The webinar will last 45 minutes with 15 minutes of Q&A. All attendees will receive a copy of the presentation and the slides following the webinar. Also, you can check back here on the Comperemedia Blog to see answers to questions submitted during the webinar from July 23, 2010 on.
Want to learn more about Susan Menke, VP of Mintel Comperemedia? Read her bio or contact firstname.lastname@example.org to get in touch with her.