Is Scale or Strategic Focus More Important for Growth?

Posted on April 5, 2011

I was at a VIP event last night and ran into the CMO of a successful financial institution who I’d never met, but we had connected through LinkedIn a while back.  After exchanging pleasantries, we found ourselves sharing philosophies on the prevailing trend in the financial industry as it relates to distribution reach.   Specifically, the consolidation in the banking industry and obsession with putting a “branch and ATM on every street corner” has led to a lack of focus in terms of customer targeting (mix).  In essence, a branch on every corner implies all customers are equal and all are welcome — the opposite of strategic focus.

This CMO commented that one advantage in his local market is that his largest competitors are not regional/local — and therefore their focus is fragmented across multiple city/state markets.  This simple but profound observation led to our discussing the advantage that lies in market (customer) focus.  The fact is, no brand can serve all markets with equal effectiveness, so understanding your USP and what markets you can effectively reach with your USP is critical.   It is critical because we all have limited  resources so we must be prudent with where/how we focus these resources to ensure we are attracting and retaining the right customer mix (a balance of “have’s” and “have not’s”).

I shared my view that while smaller financial institutions may lack a branch network to compete with bigger rivals in town, this could actually be a strategic advantage (read our prior blog post on Growth Through Focus).  Fewer branches in targeted communities means more time can be spent developing individual marketing strategies for each branch/community to deliver our USP more effectively.   What’s more — creating advocacy (a key differentiator in an otherwise commodity industry) cannot be executed with a “branch on every corner, all things to all people” distribution strategy.   If convenience (through physical branches) is the only differentiator our competitors can devise, then the sheer weight of managing these massive branch networks (and the subsequent operating overhead) may actually work against our competitors being able to respond quickly to changing market conditions.

Indeed, “small is the new big” and continued advances in transaction technology will increasingly force a rethinking in the role of the physical branch so that the new priority for winning/keeping customers will be about engagement.


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