How To Win The SMB Customer In Business Banking
By Derek Yueh , Partnership Lead at the B2B Institute?
With the recent collapse of our nation’s regional banks, the steady rise of entrepreneurship continuing beyond the height of the Covid pandemic, and the continuous convergence of traditional FinServ brands and FinTech Disruptors, it’s more important than ever to recognize that the SMB customer’s needs go beyond bank deposits and withdrawals.?
As a result, the SMB customer has never had more brands to choose from to solve their ever-evolving needs. However, the paradox is that when these SMBs enter the market for a new financial product/service, they typically default to less than a handful of brands. The implication is that the SMB customer is up for grabs, and whichever brand understands the SMB customer best and places their bets on the right customer needs (what we will refer to as “Category Entry Points”, as coined by Jenni Romaniuk at Ehrenberg-Bass Institute ) will be the brand that wins.
Read on for three key learnings from our latest research on the Business Banking category, which you can download here: https://business.linkedin.com/content/dam/me/business/en-us/marketing-solutions/resources/pdfs/smb-banking-whitepaper.pdf
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Mapping Out The SMB Landscape
SMBs Practice Brand Non-Monogamy
On average, SMBs engage with 3.3 financial service providers, indicating that customer "loyalty" is not guaranteed and that the SMB customers is always up for grabs. Traditional banks don’t just compete with other traditional banks and fintech brands don’t just compete with other fintech brands. The line has blurred and in this competitive landscape, one could even argue that every bank competes against Starbucks for customer deposits and against airlines for credit card customers. Regardless of how wide or narrow your competitive lens is, understanding who you are competing against to keep your existing customers and to acquire new customers is fundamental in winning over SMBs when they enter the market.
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The Shortlist Is Short
When in-market, SMBs consider an average of 2.6 brands for new financial products or services. Making it onto this shortlist is crucial for brands, as it significantly influences purchase decisions. The reason why it’s so important to be mentally available is that only the mentally available brands get remembered, considered, and ultimately chosen. This data shows us that buyers don’t really do much evaluation; they tend to consider and buy only the brands that they remember.?
To put this number into perspective, this basically means that on average, a SMB only considered the one bank they actually went with and perhaps one other. And although SMBs bank with 3.3 brands on average, they only consider 2.6 brands when they’re in-market, meaning that just because you have existing business with a SMB customer doesn’t mean your place on their consideration shortlist is guaranteed the next time they need a new product/service. That’s why the most important thing a marketer can do is to get their brand on the consideration shortlist because if you don’t make it onto that list, you’re out of the race.
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The Rules To Winning The SMB Landscape
In order to win the SMB customer, you first have to win the mind of the SMB customer. In other words, (and at the risk of sounding trite), brands that are known by more customers are also brands that are bought by more customers. This is suggested by the strong correlation between a brand’s mental penetration and buyer penetration in the chart below:
But a brand’s Mental Penetration is only half of the equation when it comes to winning on Mental Availability. Mental Availability is also a function of a brand’s Network Size as well.
Let’s break this down:
The reason why it’s important for marketers to measure their brand across the depth and breadth of customers’ memories is that it helps illuminate a path for how they can grow their brand. It’s not just about how MANY potential customers know about your brand, it’s also about how MUCH those potential customers know about your brand.
Formulating A Strategy To Win The SMB Landscape
In an ideal world, a marketer could build brand association with every single CEP to capture every single customer. But in the real world, where marketers operate with limited advertising budgets and customers operate with limited mental bandwidth, it’s impossible for brands to effectively message against every single Category Entry Point at a time. Brands have to understand where to strategically place their bets, but they can’t develop an informed strategy unless they have an understanding of the competitive landscape. In the chart below, we see how 17 brands perform across two different CEPs that might seem diametrically opposed to each other, but reveals some interesting insights on how SMBs view the category in terms of whether there really is a divide between traditional brands vs digitally native brands or whether this is a false binary imagined by the banks.?
For SMBs that want to bank with brands that would feel like a local bank, they disproportionately think of two brands: Bank of America and Wells Fargo. Interestingly enough, U.S. Bank and PNC are right on their heels, instead of Citi and JPM Chase, the remaining two Big 4 Banks.?
?When SMBs want to bank with a brand that caters to their preference of banking primarily online and/or on their phones, they also disproportionately think of two brands: PayPal and Square. On the surface, these results might suggest that brands must make a binary choice between either being a brand that acts like a local bank or digital first brand, but the data suggest that’s not necessarily true. If you look at the chart, you’ll see that brands like Plaid, Stripe, and PayPal have no barriers to acting like a local bank, even if they may not have any physical footprint. It turns out customers don’t think of “local” as a physical state, but rather a state of mind.?
?Want To Dive Deeper?
To learn more about all 30 CEPs we uncovered in the research and get a deeper understanding of each brand's performance, contact your LinkedIn account representative or [email protected].?
B2B Edge is an exclusive consultancy service from the B2B Institute that combines our industry-leading research with the peerless first-party data assets of LinkedIn. We help clients find a competitive edge through performance branding.