Moving Away From Primitive Pricing For Bank Products

Bank Fee Schedules Can Be Confusing

I can’t go grocery shopping with the wife. Call me crazy, but when I go to the market it is for the purpose of getting food. The wife on the other hand, goes to look around, socialize and have a buffet of tiny items put out by staff with clear plastic gloves. I would like to get mad at her, but I can’t since I chalk her inability to shop by objective up to a biological flaw.

 

In prehistoric times, man would get hungry, rally some buddies and then go out and smack the juiciest Wooly Mammoth he could find. Primitive Man did not take 20 minutes to find the perfect parking space, did not ask if the Mammoth was on sale and did not inquire if the Wooly Mammoth was organically grass fed. Primitive Man just smacked the Mammoth and then dragged it home only stopping to curse the bag boy for putting the Mammoth in a single paper grocery bag with weak handles. In the similar vein, some banks are just wired to hide the pricing of their products.

 

Banks fall into two categories, those that show their loan, deposit and fee pricing freely to the public and those that just do the regulatory minimum. Admittedly, bank products are often complex. Banks further complicate their marketing efforts by presenting pricing in a convoluted fashion, often stuffed in a thick book with a bunch of marketing brochures made available only to customers that come into a branch. In these banks’ defense, this practice goes back to the days of Alexander Hamilton.

 

For those banks that are biologically set against showing their pricing, there is usually a boisterous faction in the bank that argues that the lack of price transparency forces customers to speak with a banker that can better impart his or her sales personality. The same faction also argues that hiding pricing prevents the competition from knowing your bank’s position. Of course, 90% of banks never give pricing display a single thought.

 

While all this might be true, it is our opinion that banks would increase sales by making pricing more transparent. For starters, having transparent pricing helps customers do their research and due diligence without a sales person. It is a means of self-selection without the bank having to spend resources. Hopefully, your bank’s brand already gives a signal of where your products would be priced so the ballpark level of pricing shouldn’t be a surprise to your customers or your competition. If you think your pricing options are too complicated to display, well we would argue the issue is how you price. Maybe they could be presented with greater graphics, in a clear table or maybe a bundled pricing concept such as an annual “subscription fee” or different monthly pricing tier is the solution. In repeated business and retail surveys, price/rate is in the top three factors in decision – so why not make it easy for customers to discern?

 

Price awareness leads to consumer confidence as it creates more transparency. Allowing the customer to find the price of a wire or money market account quickly on the website leads to greater satisfaction and a quicker sales cycle. By the same token, having a daily or weekly loan pricing sheet that goes out to prospective borrowers does wonders for loan origination marketing. Not providing pricing serves to drive up the cost of acquisition as customers are forced to spend time just to see if they are in the right ballpark. While it is true that displaying pricing may drive some customers away, it is also true that those customers that are still interested in the product are now more likely to purchase the product, thereby helping conversions.

 

We encourage banks to at least experiment with pricing and make the display of such central to the product marketing conversation. Greater transparency is good for the sales process, for the income statement and for the regulators. When it comes to displaying pricing, consider fighting your biological urge to keep pricing hidden. Maybe it’s a loan pricing sheet or maybe it is an easy-to-read matrix of cash management fees that is on the website, but try highlighting pricing in order to drive sales. Pricing is central to bank customer’s decision process - the last thing that your buying process should be is primitively difficult.

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