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What Can the Music Industry Teach Financial Brands About Digital Growth?
by Audrey Cannata on August 18, 2020
Flashback to the early-90s.
Green Day, Mariah Carey, and Janet Jackson are blasting through the boom-box in your room as you try to capture your favorite song in split-second timing on your cassette tape.
Fast forward a few years and the revealing of the CD-R allowed consumers to “rip” their favorite CDs to share. Access to music just became easier (and cheaper).
Finally, jump ahead a few short years to 2001, as the third millennium begins, music is completely transformed forever.
Steve Jobs unveils the iPod and the streaming revolution has rapidly taken off.
So, why are we talking about music?
As James Robert shared in a recent podcast with James Lenz of CUES, what has happened in the music industry is happening in the financial services space. If we understand the evolution of the music industry over the past 50 years, we can apply this knowledge to our financial brand in hopes of not falling behind in this digital-first, mobile-first world we are in.
Let’s look at three ways music has transformed and the challenges it means for banks and credit unions.
1. Music was digitized.
We went from the 8-track to the cassette, to the CD, to MP3. What is music now? Music is now streaming with platforms like Spotify and Pandora. Music was digitized from the physical world to the digital world, and now to the streaming world. The music industry had to adapt to the shift in consumer needs and behavior.
Before COVID-19, financial institutions were already transforming products and services in response to consumer demand. Online-banking, mobile-banking, and remote-deposit were being integrated, but with little to no strategy for how these service delivery channels related to the future growth model. Now, almost overnight, in a post-COVID-19 world, banks and credit unions are having to transform their thinking to adapt to the changes, especially with face-to-face communication in the branch declining even more. Gaining trust and communicating empathy in a digital world is essential as you work towards reducing the financial stress many of your consumers are feeling.
2. Music was democratized.
Who used to own the music? The record labels. You could argue the record labels still own the music today. But now anyone can hit it big in the music space. Anyone can create music and be their own record label. Anyone can get their music out to the masses. There is no one controlling whose music gets released and placed on the shelves.
Look at Justin Bieber. He became famous because of digitization and democratization. Because of YouTube, he became a worldwide sensation at the age of 13.
What are we seeing in the financial industry? The explosion of FinTech. Like music, these services are focused on micro-niche markets or micro-problems. And for banks and credit unions, it's like death by a thousand cuts. Customer expectations are rising in regards to digital experiences as these expectations are being set by GAFA (Google, Apple, Facebook, Amazon). The solutions and tools FinTechs bring to market can feel threatening, even damaging, if banks and credit unions do not see this disruption as an opportunity to develop a digital growth plan beyond service delivery channels of online and mobile banking.
3. Music was demonetized.
The Eagles’ “Greatest Hits” recently surpassed Michael Jackson’s “Thriller” as the most sold album of all time. Over 38 million units sold. Most of these sales were $15-20 CD’s, or compact discs.
The revenue generated from physical album sales was astronomical.
Conversely, I just upgrade my iTunes account to $9.99/month to stream any song or album in the Apple Music Library.
We don’t need a calculator to see the bigger picture here: The revenue models of music have transformed over time, just like the revenue models of financial brands must transform beyond the traditional thinking of net interest, income, non-interest income, etc.
How Do Financial Brands Overcome These Challenges?
As James Robert shares with James Lenz, the first step is to academically define digital growth. There needs to be a unified definition. A definition that is well-known throughout the entire financial brand, from top to bottom and bottom to top.
Our definition of digital growth:
Digital growth is a systematic process that is centered around the modern consumer journey. It unifies four key players internally:
1. Marketing
2. Sales
3. Operations
4. IT
Through this unification, these four departments all work towards three primary goals for growth:
1. Increase traffic to the website
2. Generate leads from that traffic
3. Convert those leads to loans and deposits.
And all of this is accomplished by positioning a bank or credit union beyond the commoditized, great rates and amazing service and a look-alike laundry list of bulleted features that every other financial brand promotes.
Help First. Sell Second.
This is one of the biggest mantras James Robert teaches at CUES School of Strategic Marketing.
We understand this is a big transformational shift for a lot of people to make on their own. And then having to take it back internally and re-communicate is challenging.
But when that commitment is owned internally --from top to bottom and bottom to top-- digital growth begins to happen.
So, why all of the confusion?
Many leaders in financial institutions believe that because they have a website with online banking or mobile banking capabilities, they’ve checked the digital box. These are all great, but they’re all the service part of the business.
Digital growth is about the acquisition. It’s about driving traffic to the website, increasing leads, and increasing loans and deposits.
And this requires much more than simply dabbling in digital.
What about the pandemic? Now what?
Consumer behavior was changing before COVID-19. It’s continuing to shift this post-COVID-19 world. Many branches are still closed or they might be appointment only. Mobile banking is increasing, particularly in the older populations, where mobile banking adoption wasn't as high before.
Will that behavior change whenever the branch is fully opened back up again?
Why should it?
If I’ve grown accustomed to remote-deposit, what purpose does it serve for me to drive to the branch anymore?
Now, I don’t believe brick and mortar locations will be completely useless. There is still a desire for face-to-face communication, specifically when dealing with the complexities of loans and stressful money matters. However, we may see a continued reduction in the number of branches as well as the size of the average branch footprint. And perhaps that face-to-face communication will be done more and more via digital video channels like zoom and FaceTime.
Be the Helpful Guide
What’s more important than what you are selling, is what you are communicating. Financial brands have to communicate hope for people in the communities they serve. The stress level that people were feeling before COVID-19 has exponentially increased post-COVID-19.
Consumers are looking for hope and someone to guide them beyond the current realities and into some level of security. Then, we can guide them towards a bigger, better, and brighter future.
The Biggest Mistake Financial Institutions are Making
Not having a defined digital growth strategy in the first place.
We're still seeing in 2020, in a post-COVID-19 world, 85% of financial brands have not taken the time to pause and diagnose where they're at, to gain clarity around where they could go next. What happens when they have no strategy? They “dabble in digital.” Banks and credit unions have done a lot of digital tactics, but it's not through the unified lens of digital growth.
So what does that yield?
1. Frustration. Things aren’t working out like expected.
2. Confusion. There is uncertainty about how to move forward.
3. Overwhelment. The speed of change continues to quicken and it’s hard to keep up.
Because of this, bank and credit union marketing teams, in particular, get stuck in the Circle of Chaos.
But here’s the good news: You don’t have to stay stuck there.
Opportunities Ahead
First and foremost, there is an opportunity for you to gain clarity into the future. When you gain clarity into future growth opportunities, you naturally overcome the fear of the unknown that holds so many banks and credit unions back from making progress in the first place. Looking at the world from a whole new vantage point is one of the biggest opportunities through gaining clarity.
When we look at the way that the world was, which was physical-first branch first. Digital was bolted on as an ad hoc to the traditional growth model. But now when you start flipping the model upside down to where digital-first leads the way, and the physical world supports the digital, is very scary. You're literally flipping people's worlds upside down. So courage and commitment are really needed. And that comes through the ideas of strategic planning.
But, as James Robert says, don’t boil the ocean. Don't take on too much.
Look at the world through a lens of 90 days, not three to five years.
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