The Death of Loyalty

It is unclear when loyalty died. It lingered in some verticals longer than others. But its passing was quick and merciful in commoditized industries where price generally drives buying decisions. In other instances, it lingered, became pale, and lost a lot of weight while sleeping most of the time. In some cases, those working around it did not even notice loyalty was, in fact, dead.

Community banks may still think loyalty is alive and well, just working remotely. Credit unions have struggled to understand that their “unique” position in the market stopped driving office loyalty every day. At some point – sometime between the introduction of the iPhone and the rise of the COVID-19 pandemic – most consumers stopped thinking about loyalty as part of their relationship to the companies, organizations, and institutions they depend on in their daily lives

Busyness Charged with Murder

What killed loyalty was a realignment of what consumers value most in their lives. Demands on our time have increased steadily in the new millennium. Experientially, we know this is true, but upon reflection, it may also seem counterintuitive given the technology designed to simplify our lives that we have adopted.  

A number of different elements fuel our “busyness,” but the fact that we feel pressed for time, living in the same 24-hour day that prior generations have, is key to understanding what has taken the place of loyalty. In the past, we might have based our relationship with a retailer or a financial institution based on the fact that they were locally based and/or recommended to us by someone at work. The connection was generally relational in some regard.

While we might still investigate a retailer or institution for the same reason now, our relationship with them is only a matter of convenience – literally. We will stay with them only if they offer us a higher level of convenience than other options. In other words, while time is money, we now want to use our money to buy more time for ourselves and our families.  

Why is this important for a community bank or credit union to understand? Because the way to keep the prospects you attract is to provide them with a value-add that saves them time managing their financial lives. This is not the same as delivering some digital feature or function that gives you parity in the marketplace.  

Table Stakes Versus Value Add

Up until the pandemic, the number of table stakes grew whenever there was widespread adoption of new features introduced in digital banking (e.g., remote deposit capture). As digital became the default for how to bank during the pandemic, the definition of table stakes became anything and everything, including activities normally requiring a branch visit.

Most institutions have not achieved this goal, but all institutions that wish to remain competitive need to execute a plan that will get them there. Meanwhile, all institutions should be looking for ways to add convenience to the client’s experience with new value adds that save time.

When considering options about such value adds, do not forget to favor those options that provide your customers or members with easy access to actionable information; usually, this type of option will also provide you with data about them you may not know but could leverage, e.g., net worth and relationships with other institutions.

Once you have identified potential candidates in terms of value-adds that will wow your clients, focus on those that can be deployed quickly. Don’t choose options that require you to disrupt your current legacy systems or that require you to hire new skill sets in order to derive value from them.

Loyalty will be missed by some. Nonetheless, it is time to move on and align your institution’s priorities with the priorities held by those it serves. Give them convenience in the form of simple, actionable data that would take them hours to accumulate and analyze. Otherwise, they will go somewhere else for it.