Pricing is a key lever for growth. Given today’s broadening field of competitors and the ease with which customers can move their accounts, however, banks may be tempted to engage in pricing wars that put them in a race to the bottom. But it’s not inevitable.
Pricing can equally be used as a lever in the race to the top—for higher revenue today and customer relationships that pump out more and more profit over time. At the Banking Growth Forum, Meenaz Sunderji, Vice President of Strategic Alliance at Zafin, will explain how and share real-world examples of banks using pricing successfully for immediate and sustainable growth.
I caught up with Meenaz on the phone a few days ago, and we talked about the fine balance between pricing for the present and future. Financial institutions need to make money now, like any other firm, said Meenaz, but they also need to keep in mind the potential of a relationship—i.e., price not only for what is, but for what could be.
While there’s no magical formula, Meenaz says the key is to “focus on what is important to a customer at a point in time in their life and continue doing that throughout their life.” He believes the companies that do this right will turn loyalty into a major competitive factor in the financial services industry.
One of the strategies Meenaz will be talking about for meeting customer needs is product and service bundling. He says that when McDonalds first introduced the Happy Meal, some of the firm’s execs were probably worried it would reduce revenues, since buying the products individually would generate more than selling them as a package. In reality, what they did was to induce customers to spend a little bit more to get additional value, generating more incremental revenue.
Banks, suggests Meenaz, should, at a minimum, do something like that. Gradually they can move toward other kinds of bundling—open bundle, dynamic bundle and/or full relationship based pricing (ideal state), which instead of being prefabricated, is generated for a particular customer and bundle at a particular point in time.