What Financial Firms Can Learn From The Grateful Dead

A few years ago, I wrote something called “What Bankers Can Learn From The Grateful Dead.” This comment, from Ron Bensley Jr. on Modern Marketing, reminded me of that:

Latteland Community Credit Union (pseudonym) recently imposed an 8% fee for using their formerly-free coin machines. From a marketing and member-relations standpoint, this was a poor decision. The no-fee Latteland CU coin-counting machines were part of what made this CU special and unique to its members.”

My take: This isn’t just an issue about “nickel and diming” customers with fees (RB’s pun, not mine). It’s a business model issue. It’s a lack of understanding — on the part of the CU — about how it makes money. Not understanding your business model — and changing it when it’s succeeding — is worse than any transaction, service, or even data privacy mistake your firm could commit.

What does this have to do with the Grateful Dead? Back in 1965, record companies ruled the music industry. You made money back then (whether you were the company or the artist) by selling records. Bands went on tour simply to drive record sales. There were no festivals, no Bonnaroo, no Police reunions, no $150 concert tickets. And you certainly couldn’t bring a tape recorder into a concert to tape it. Not that you’d want to — most concerts were simply faithful reproduction of the albums.

The Dead turned this business model on its head. They toured incessantly. Played a different show every night. Sometimes for four or more hours. And let fans tape concerts and freely share those tapes. They cut studio albums simply to fulfill contractual obligations.

They innovated a new business model in their industry and built what the Net Promoter groupies call “customer advocates”, what Ken Blanchard calls “raving fans”, or what the rest of the world calls “Deadheads.”

The lesson? They never changed their business model. They didn’t say, after 10 years, “you can’t record concerts anymore” or “we’re going to stop playing concerts and start recording more in the studio and support ourselves with record sales.” (They did take a break at the 10 year mark, but when they resumed, they pretty much toured regularly for the ensuing 19 years).

By changing it’s business model — how it makes money — Latteland is risking what’s made it successful. And it isn’t alone. Colin recently commented on Barclay’s decision to impose a fee on cardholders with inactive accounts. By doing this, it’s changing its model — with potentially devastating effects.

These firms need to take a lesson from the Dead. I’d even be happy to share a few concert tapes with them. And share part two of the lesson: Vertical integration (the Dead took over their ticket sales and merchandising efforts).

Footnote: A few months after I published the brief in 2001, a client (a bank) that wasn’t renewing its contract cited the brief as a reason why. I bring that up because there’s an executive of that bank that has left comments on this site before, and might be reading this — and I wanted to remind him of that.

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