If a toothpaste can, then financial institutions can too

Published in the March 2021 edition of Moneywise Magazine.

By Engaged Strategy|2021-06-24T17:41:39+10:00March 20th, 2021|

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Over the last few months, I have been constantly talking about the importance of enhancing customer experience in the financial sector. This is because the financial industry has been metamorphosing at a very fast pace. Competition is running high with several micro-financing companies and co-operatives cropping up, and banks merging. In such a scenario it is absolutely critical for a brand to differentiate itself if it wants to grow its market share.

Now you may say that the need for differentiation has always been there. And that’s true. But it is even more important today because one needs to focus on the challenge of identifying a powerful differentiating factor. A few years ago, offering lower interest rates for loans and higher returns on investments was key. But today, that is a parity. The big question is what should be the point of difference to get a larger share of the heavily fragmented market?

A good example for this is the toothpaste industry. Now we all know that Colgate is an age-old brand that has focussed on providing overall oral care for the entire family. You buy one toothpaste and it works for everyone at home. Over time this was encapsulated in the ‘ring of confidence’ creative concept. Though it has come up with variations over the years, it is still remembered for its initial value proposition of providing an odour-free and comprehensive oral care solution for the entire family. Its early entry into the market gave it that unique advantage. As time passed, we’ve seen brands like Close-Up that came up with a gel formula and a value proposition focussed on fresh breath with a tag line “Close-Up is for closeups” aimed squarely at the younger segment. Sensodyne with a value proposition of reducing pain for people with sensitive teeth validated its high price and targeted a niche market segment. Overseas, Macleans focussed on white and bright teeth encapsulated in the tagline “Are your Macleans showing?” These are just a few of hundreds of other toothpaste brands – some proposing a fluoride-free product experience, a few others with herbs and medicated oils and salts. Despite this strong competition, Colgate has continued to have the advantage of being an early entrant and being firm on its value proposition of overall oral care. Similarly, Sensodyne is recommended for people with sensitive teeth, which is a niche market, and a strong early entrant in the solution for sensitive gums space. Each of these brands have a unique value proposition that is tailored to their target segment.

Coming back to the financial industry, in this last year most organisations have worked on improving their functional aspects such as enhancing their user interface, digital services and providing greater transparency in digital transactions. Unfortunately, the focus has been more on creating parity rather than building a sustainable competitive differentiating advantage.

But why is this so important? Well, when a brand differentiates itself from its competitors, it becomes a preferred choice for the customer segment who truly require that specific product or service. In today’s highly competitive market, customers are spoilt for choice. Customer leaks are a constant battle brands are tackling to reduce their cost to serve. In such a scenario, having a prominent differentiating factor helps the consumer market see you for what unique value you propose to offer them. You then enter the shortlist of customers who require such a service or product, thus providing to them your point of difference and improving your share of wallet in your market segment. Let me explain this with an example.

Practically every financial institution offers online transaction services today – be it via a mobile app or a website. Every banking institution offers savings schemes, home loans, automobile loans, pension schemes, mutual funds, ATMs, etc. If you do not provide these, then you are below par in the industry; but if you provide such services then all you create is parity and earn a generic share of wallet. Yet, State Bank of India has a unique place in the eyes of the Indian customer primarily because of its penetration into the grassroots and the feeling of safety it provides for your savings. A customer may have funds distributed across several other banks, but he would probably safekeep his most important assets with the State Bank of India. It may not provide you with a customer experience as fancy as a few of its competitors, but just by delivering a feeling of safety, SBI has probably created a differentiating factor for itself in the highly competitive banking industry.

So how does one understand where to begin and mark this differentiation? Building a strategic point of difference is one of the most challenging but exciting journey you can ever embark on. I liken it to playing three-dimensional chess with three key players:

The first player is your customer. Your point of difference must be something that is of true importance to your customers. Air India, for instance, offers up to 25 kilograms of checked-in baggage for every economy passenger, which is way above what competitor airlines offer.
The second player is your organisation. This is about a good understanding of your organisation’s strengths and capabilities. What processes, products and people capabilities are strengths that can be leveraged. Alternatively, what can be tweaked or modified to give you a strategic advantage. Starbucks, as an example, offers coffee just like other premium coffee shops. But the difference lies in its massive customisation of coffee that is attractive to a young, vibrant customer base.
The last player is your competitors. What can you develop that is unique and not offered by anyone else? What can you develop that is not easily replicable? Just like chess you need to think ahead as to how you can checkmate your competitors.

Once you have worked on the above points, then comes the time to up your game of chess to a 3D level via which advertising the differentiation because there is no point in having something of value which nobody knows about. It is like organising a party and not sending out invitations. It is important to show the market that what you offer is above, beyond and unique from what is available in the market, just like Apple’s unique selling point which is “…a phone should be more than a collection of features. That, above all, a phone should be absolutely simple, beautiful, and magical to use.”; M&M’s “The milk chocolate melts in your mouth, not in your hand”; and Dominos Pizza which says “You get fresh, hot pizza delivered to your door in 30 minutes or less or it’s free.”

It is important to remember that your point of differentiation is what drives customers to prefer your brand over others. Considering the importance of this in the current market scenario, it is vital to chart this strategic action plan with precision to achieve long-term goals. Organisation leaders should engage an expert consultant to facilitate a strategic solution with key stakeholders to provide an unbiased objective, precise and valuable blueprint to help you stand out from the crowd.

Christopher Roberts

Managing Director, Engaged Strategy

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