Why Your Average Bank Customer Could Lead Innovation Astray

Bank Innovation

There is a common fallacy when designing bank products that you want to design for the “average” target customer. If you are designing a product to attract a Millennial, for example, you draw up a customer persona for your down-the-middle 29-year old, college educated, city dweller and try to figure out what he or she wants in a bank product. The problem is that statistically speaking, most people born between the early 80’s and late 90’s, aren’t living in a city, didn’t graduate from college and hate being called a Millennial. In this post, we explore the fallacy of the “average customer” and show how some of the best bank product design is based on solutions, not demographics.


The Problem


Here is an example. At almost every banking conference we attend, millennials are discussed and it comes up that they are getting married later. While the statistics below show that is technically true, on its face it would lead you to conclude that the average millennial is single and that you are looking to design a product for an individual. 


Married 25 to 29 year olds


However, that could be the wrong conclusion and would inhibit successful bank product design because 60% of millennials are either married or living together in a monogamous relationship.  This fact should lead bankers into looking at all the various forms of being single or married and further narrow down their target.


The Extremes Matter


One of the first steps in a successful bank innovation process is to ignore the average and focus on the extreme sides of your desired target customer.  If your target is truly those potential customers born between 1982 and 2004 (the most common banking definition of a millennial), then design for the oldest, the youngest, the richest, the poorest, the least engaged and the most engaged. Find out what problem you are trying to solve and then pick the extreme examples of your target population.  Doing so will increase the odds of your design efforts being successful. If it works for the extremes, it will work fine for the middle. Another way to look at this is that the edges of your customer bullseye inform the mean, but the opposite is not necessarily true.


Feeling The Edges


The big difference between designing for the middle verses designing for the extremes is that dealing with the edges of your target customer helps you not only better define the product but better define your customer and what your bank truly desires.  Discussing what the edges of your target customer segment looks like forces the bank to outline the attributes of a customer. In so doing, banks can better think through not only the use cases of when the customer engages with the product, but how and how often. If you just look at the average customer, like all averages, it can often be deceptive. 


Defining the edges of your target market


Attitudinal, Not Demographic


We discussed the design process (HERE) for Simple bank’s new non-spouse shared account, which is a product targeted at the millennial demographic. However, if you start at the middle and ask what does the average millennial need, it is not a shared account. When Simple designed that account, they looked at the fringes of their target and then figured out what problems needed to be solved. They then narrowed down their customer target not by demographic features, but by attitudinal features. In this case, they started to focus on the non-married millennials that were cohabitating, but in a relationship.


The Bank then reached the conclusion that there was a need in several customer cohorts for an online shared bank account managed by two legally unrelated parties. Sure, two millennial roommates could use the account, but the product that was also perfect for boomers that are trying to assist their aging parents, but do not have formal legal guardianship of the estate.


Putting This Into Action


We have found that some of the most successful bank products have been created around behavior and attitudes as opposed to demographic averages such as age, marital status or gender.  In fact, banks are almost three times more likely to be successful with a product if they start looking at attitude, understand the problem and then offer a solution for the extreme customers that have that problem. By ring-fencing your desired customer traits and persona, banks can better understand what product attributes are needed to take care of the bulk of the problem. The middle of the target will then take care of itself.