Escape the Commodity Trap

If you work in financial services, you may view your central challenge as balancing profitability and growth against cost cutting and risk reduction. But from a member perspective, these concerns don’t register as significant. To consumers, financial products and services today are largely undifferentiated, making it almost impossible for members to find out if an offering is going to fit their needs. Because of this, pricing and terms have become the main purchasing criteria, especially for personal banking. Yet, pricing and terms don’t inspire loyalty or help members feel their needs are being addressed. Your products and services are more like commodities. How can you escape the commodity trap? Take a closer look at how your products and services relate to your members’ “jobs to be done.” Why is product development specifically challenged by the commodity trap? Product managers face three major challenges in designing new products that achieve both profitability and market share growth:
  1. How to generate additional value for members
  2. How to limit or decrease costs and inefficiencies in the product and its usage
  3. How to ensure the final product works in all target markets, segments and contexts.
How would you go about in answering all three questions? Changing perspective: What are your members’ “jobs to be done?” CO-OP commissioned consumer research for THINK 17 about the “jobs” members want done related to their personal finances. Together with “Jobs to be Done” author Stephen Wunker, we found that consumers are most interested in reducing financial stress and increasing financial certainty. In addition, consumers are generally not setting long-term or near-term financial plans, tracking their spending well or setting budgets. They do not seem to expect CUs to help them with these objectives, but they are more open to advice from CUs than non-CU members seem toward banks. Fintechs aren’t necessarily a threat. Consumers seem wary of going this route, so long as other, trusted institutions can help them achieve critical jobs to be done. Trust in most financial institutions is good but not overwhelming. While there is doubt about the trustworthiness of banks in general, people do seem to trust their own bank. However, bank customers don’t trust their banks nearly as much as CU members trust their CUs. Financial advisors, investment firms, and insurance companies all rate lower than credit unions on their trustworthiness. Members do not value the “jobs” of making transactions, checking their account balances or finding out which is the right saving product for them. Instead, the “job” members want to get done is to get help with managing their finances. In other studies, up to 60 percent of people have indicated they’d be willing to pay more for simpler experiences and interactions. Jobs-based thinking can help credit unions identify true member needs and develop concepts that clearly target these needs. By offering value that goes beyond pricing and terms, CUs also create an opportunity to lift themselves out of the commodity trap. As a side benefit, doing a better job of attracting and serving members may also reduce product costs and increase efficiencies, demonstrating that two jobs well done are even better than one.