“… deposits are flooding in the door … the result of a favorable macro environment, not the strength of their brands or their own marketing pizzazz. – Tom Brown, bankstocks.com

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The word most associated with the word “predatory” – in a Google search – is “lenders.”

For bank marketers a funny thing happened on the way to building our brand. While we were working to positively position and frame our industry and our individual organizations – the financial services industry “got framed” as predatory lenders, fee hounds, collection Nazis, and greedy recipients of bailout funds. The change represents a new opportunity and a new risk in the marketplace. It involves a segment called “enemies.” Let me explain.

The origin of installment credit in this country was born out of doing business with people we know – a segment we might call “friends.” Customers would buy from the local grocer on credit and then pay him/her back as they could, which for farmers was often after harvest. It was somewhat like micro lending that got its start in India and has garnered so much positive press in recent years. These transactions were between friends – people who knew each other in communities where reputations were built slowly and lasted a lifetime. The commitment of the borrower was to pay the debt back as soon as possible and the lender to be as lenient as possible in collecting repayment. Personal commitment was the glue that held the relationship together and the lubricant to get past the rough spots.

Things changed. Our population moved from small towns and farms where everyone knew each other to cities filled with strangers. Banks grew larger and expanded into new markets. As institutions scaled up, a new model evolved. New products such as credit cards, adjustable rate mortgages, tax advantaged savings such as IRAs and overdraft protection were developed. Math-based approaches utilizing tools such as credit scoring and profitability analysis replaced personal relationships in assigning credit limits, rates, payment terms, and fees to these “strangers.” Quantitative scores became the surrogate for knowing them, their character, personal history, and family reputation.

Likewise for customers the math of rates, convenience measured in time and effort, and credit limits determined where they banked. These new mathematical relationships connected strangers – customers and their bank – without making them friends.

Recently, in the larger financial arena, we see the emergence of a third kind of relationship – neither friend nor stranger. Duking it out with banks over mortgage defaults and foreclosures, credit card debt and collections, overdraft fees, called loans, tight credit, collapse of esoteric products like swaps, and government bailouts creates animus and enemies. Politicians who blame the banks for our economic challenges and a media in the business of selling drama have added to the mayhem. As a result, the industry now serves a growing oppositional segment which with slight hyperbole we might call “enemies.”

All of this presents an interesting paradox. Deposits are pouring in from a mix of risk-averse friends, strangers and even “enemies” – some of whom had previously written off banks as the last place to put their funds – at a time the industry faces unprecedented enmity. The marketing question is how to seize the opportunity this inflow provides – especially considering these parked funds could be very transient. Clearly the historic challenge of how to convert passive “strangers’ into friends now has a new component: how to migrate those who have low regard or are even hostile enough toward banks to be called “enemies” into mathematical relationships (strangers) and even friends. This is a customer retention challenge with a new twist.

There is no easy primer for how to market to enemies or those who may have strong negative feelings. The marketing task is compounded by recent research that shows that the word most associated with “advertising” is the word “false.” Empty words will not fly with this group. Nonetheless, this hostile segment of existing and prospective bank customers may represent a sizeable and growing market that warrants a strategy. It starts with understanding who they are, their feelings are and the key obstacles to building a longer-term relationship. Acknowledging their concerns and developing specific tactics to close the relational gap will be a part of the answer.

Research indicates that many in this crowd place investment banks, stock brokers, financial planners and commercial banks all in one large bucket. Yet, perversely, retail banks continue to score among the highest on the dimension of trust and security. Now is the time to reposition and reframe by differentiating based on what you are not – not an investment bank, not a brokerage, not big, not distant, not a mortgage bank, not financial planners. After years of trying to convince the marketplace that we are “more than just a bank,” it may be a good time to remind them that we are first and foremost a safe, local, retail bank.

Just a retail bank looking for some enemies to convert into connected strangers or even committed friends. Now that is a segment strategy.

(Column appeared originally in ABA Bank Marketing magazine – November 2009)

By ROBERT E. HALL

Not to be reproduced without written permission. All rights reserved. © Copyright Robert E. Hall 2009