Expert word

Finance: an Easy Subject?

You don’t have to know how the processor works or what the dynamic memory is all about in order to work on a notebook. Well, of course, many know it but today anyone can type in a text in a word processor even without knowing those things. A PC is a very complex thing in itself. Clearly, its hardware has become all the more complex. Meanwhile its interface is getting friendlier and easier for the masses, a guarantee that the PC will continue to spread far and wide and the numbers of its users will increase in direct proportion.

This global process has been called commoditization whereby complex or hi-tech goods and services, which were previously accessible only to professionals or a minor segment of society, become easily available to the masses as their consumption becomes increasingly simplified and their manufacturers try to produce them in "a box condition". Not that they literally put their gadgets into boxes (though this is how it is done even in non-material services). What it means here is that the product is prepared as much as possible for use by the customer so that he should not spend too much time studying the operating manual or understanding the subtleties of its adjustments. All you have to do is just unpack it and get down to work. A ready-to-use-just- defreeze-it type of product.

The financial services - banking, insurance, investment – are considered to belong to a sufficiently complex category. Given the rather poor financial literacy of our population, selling these services in the right way is quite a feat. Note the words “sell in the right way". Because it is quite easy to "hoax" a client into buying such service but then it will not be actually a client (the latter will be dealt with a little later on). But it will be quite a challenge to sell the services in such a way as to make him a happy client and your loyal customer.

What does it take to conquer the retail market? Let us recall the classics. “For a message to penetrate deep into a man’s mind, it is necessary "to sharpen" it. To leave out all unclear things, to simplify and once again to simplify it if you want that message to stick deep in the customers’ memory". These words belong to Al Ries and Jack Trout and they justly apply to any kind of market. So, the first rule is position yourself or die. Your message will get lost in the sea of information if you don’t hammer it into customer’s head. He should be able to see that your service is different from all others, and for him to do it is necessary to have an idea, which is 1) bright and powerful and 2) simple enough.

We all know the slogan of a famous financial group: "Finances are easy". An excellent slogan. The main thing is to translate this idea in practice. Because when a client is sold a complex service and he feels lost in the maze of its contract conditions he will start to believe a priori that he’s been duped.

It’s bad enough when a customer fails to understand what he is buying. It is still worse when his adviser does not understand what he is selling. Each service offered should have a clear and short list of basic key parameters which are essential to the client. Those should be explained in an easy-to-understand way without distortions. The client should have a chance to find out all important things about what is being offered to him during the first ten minutes.

What does a client need? Anchor products. Some services which can hook him on and turn him into “a client" in the full meaning of this word. From a convenient but very simple service and "a friendly interface" to a complex financial service. From the principle of “the more the better" to the one “to each according to his needs". Of course, it is quite possible to have 50 kinds of deposits. But why offer them all in a lump? Wouldn’t it be better if clients made their informed choice from the short list and when they become your regular customers, only then will it be possible to give them complete information about all the available options and their modifications.

Even if a client has never heard about "transaction costs", he will take them into account implicitly. Time is precious to him, he is eager to get a quick and complete answer to his question by calling to the call-center or visiting the bank’s website. Here is a good example: the office is open from 9 am till 7 pm. The client is returning from work, trying to get in time before the bank closes, and so he gets there at 6:59 pm. "Sorry, we’ve finished our work". Things would be much better if you made this informal rule: officially we close at 7 pm, but we may receive visitors until 7:15 pm. It is just one little example out of so many that no matter how insignificant such things appear to be, they can make a lot of difference for clients, and can help win their loyalty. It goes without saying here that the retail sales points and offices must work at weekends and preferably till very late hours on weekdays, and the advisers should be polite and competent. That is quite a trifling demand, but as client of several banks I have personally encountered cases of impoliteness and incompetence.

What happens if a client 1) does not understand the contractual conditions and consequently believes he’s been taken in? 2) is dissatisfied with the quality of the service or believes (not without a cause) that the servicing is inconvenient? 3) is unable to compare the benefit and costs in real terms because neither the front office manager nor the call-center employee failed to explain this point clearly enough?

An awful thing happens: cognitive dissonance. The client receives what he did not want at all, and is obviously upset about it. Which means that he is no longer your client, he is your anti-client". So here you get caught into social nets. If an average man buys yoghurt which is off shelf, he will most likely throw it out and forget all about it. But he takes a loan, and then becomes convinced that he got the terms and conditions he did not bargain for, you may be 100 per cent sure that he will tell all about it to as many of his relatives and friends as possible. In addition to being disloyal this client will frighten off new ones and create anti-advertising. In this respect he becomes an “anti-client" and the imputed losses he incurs exceed the profits.

To get a client like this is very simple. To make him loyal and, moreover, one who may attract new clients is a quite a challenge but this is the only way to win retail. To win a war instead of a battle.