Why are banks the first to label themselves as "retail," but the last to behave like a retail store?

In my last post I suggested that there were a number of things banks could learn from retailers in order to turn more of their customers into profitable customers. I focused on the product, looking at how banks could create more attachment between the customer and the product, or minimize complexity so that they don't lose consumer understanding and end up selling only on price. There are other areas, too, where I believe banks could learn from the retail sector.

The first is in front-line investment, where retailers do really put the customer, not the operation, first. Consider the money that a bank invests in its HQ versus its bricks and mortar branches, and then compare that with a large supermarket chain or department store.

Tesco's HQ might be a little bland and old-fashioned, but look at the fittings and refurbishments of its retail stores: It's there that you'll find the latest designs and technologies. In the banking world however, the branch might be battling with one old printer while the corporate HQ has enough IT to power NASA.

Perhaps more banks could take a leaf out of Amplify Credit Union's book in terms of investing in their branches. Amplify is open 9-to-5 as a bank branch, but before and after that for other purposes. In the morning it acts as a meeting destination coffee bar for business people; in the evening it becomes almost a community center, serving as the venue for gatherings such as live music events, the Xbox World Gaming Championships and even weddings!

Another area of interesting comparison is loyalty — something that all sectors are having to fight increasingly hard for. Here, retailers work on the basic human expectation that spending more means getting more.

For example, does one four-pint pack of milk cost the same as four one-pint packs? Of course not! And what about when you spend over a certain amount in store and get a free gift? Or perhaps you're being tempted to buy a car with the offer of free servicing for a few years.

Why is it not the same with banks? You may take out a mortgage, but where's the incentive to also take out home or building insurance, or buy other bank products? In fact, banks often give the best incentives to new customers. 

Perhaps it's segmentation that's at the root of the problem. Banks are quick to label themselves "retail," but whereas other retailers go to pains to identify different consumer groups and tailor their offerings to each accordingly, banks generally stick to segmenting into just "standard" and "premier" groupings.

Retailers know their customer and sell to the real decision-maker. Did you know that 80 percent of fresh food decisions are made prior to shop entry, but that 80 percent of dry goods buying decisions are made in store? Did you know that 80 percent of men's toiletries are bought by women?

The fact that they know who their decision-makers are, and who buys what and when, gives retailers the ability to market the right products at the right time. Rather than attract people into a branch by tailoring their offering to key variables, most banks' default option is to have a fixed line of ATMs near the door to actively deter customers from going any further into the branch. 

Increasing cash volumes, queues in branches and the opening of new main street banks show just how relevant cash and the bank branch still are. But as new competitors continue to challenge them, putting their profit afocus and retail experience to good use, traditional banks should think about what more they can do to put the retail back into retail banking.

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