“Why should I do business with your financial institution” is a question most banks and credit unions struggle with. And the answer to that question is NOT “service!” If you can’t answer that key question in less than 15 seconds people won’t listen to you.

Thanks again for a thought-provoking post!

The problem is commonly stated this way: “Our average age is older, around 58, and it’s aging, so we need to appeal to a younger demographic… But!!! without alienating our existing, long term customers.”

Unfortunately, they often seem to think that means creating an identity that is “middle of the road” instead of committing to a more contemporary identity with a more progressive message — something with real appeal for the younger demographic they seek. (Note: that does not necessarily mean “hip,” “cool,” “funny,” Web 2.0, etc.)

The reality is that you have to target the customers you want (i.e., younger members) and do so 100%, with absolute commitment.

No matter how progressive a financial institution takes their brand, existing long term customers seldom defect — a truth I’ve seen borne out dozens of times with data from my real world, first hand experiences. Surely, there are always a few curmudgeons who hate change of any kind. They may decide to leave, but more often than not, their departure is largely symbolic. So what if they close their $200 savings accounts or their $500 CDs? It isn’t a large group of people who protest.

Most existing customers are unaffected by a brand overhaul. Some even see it for what it should be: a positive change to keep the organization fresh and relevant, growing for the future.

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Re: Targeting “18-55.” Yes, there could very well be a target audience that encompasses this demographic. ING Direct is a good example. They are targeting “Savers,” with an emphasis on those who are online, fairly tech savvy and prefer self-service. That group does include people of almost any age. I’m guessing their sweet spot is Gen X though. I could be wrong.

Also, the larger banks do target everyone. Like Bank of America. They want to be America’s bank, the bank for all Americans. Same thing for Wells Fargo, Chase, Citi, etc. But it takes a pretty big infrastructure to be a bank for everyone. Besides, that brand position is locked up in the market by large banks, so trying to compete on that basis is pretty tough.

I suppose the point is that if you haven’t defined your target audience any further than demographics or if your focus isn’t any more narrow than “18-55,” you’ve still got some work to do.

On another note, we are seeing more institutions using psychographic data for targeting, which is encouraging. It will be interesting to see how that data changes as consumer behaviors change given the current economy.