What Can You Learn from Amazon’s Brand Strength?
“Alexa, what can financial institutions learn from Amazon’s brand strength?”
Alexa: “Sorry, I don’t know that one.”
Oh well, it was worth a shot. If she had answered, I could have cleared my afternoon. But alas, we have some research to help answer this question.
As part of Raddon’s ongoing Brand Benchmark Study, which helps financial institutions track and measure how their brand resonates in the markets in which they serve, we often do a comparison not only to other local competitors and national financial institutions, but to other non-financial entities as well.
Perhaps unsurprisingly, the tech giants such as Amazon, Google, and Apple all tend to perform stronger than financial institutions when measuring brand sentiment. Based on responses from more the 16,000 consumers representing 38 markets across the United States in our 2017 study, an overwhelming 88% of consumers expressed a positive sentiment towards Amazon. By comparison, USAA, often held up as the gold standard for net promoter scores in the financial services space, received positive sentiment ratings from only 48% of consumers, with another 26% being somewhat neutral. Local credit unions that participated in the study fared slightly better, with 55% of consumers in their markets expressing a positive sentiment.
Financial institutions can pat themselves on the back for having a more positive emotional connection to U.S. consumers than some of the brands in other industries measured, including airlines and U.S. Congress, but one would hope our aspirations as an industry are higher than this.
It’s important to keep in mind that these scores measure the brand sentiment from all consumers in a given market, regardless of which financial institution(s) they currently use. This caveat helps to explain why net promoter scores from existing customers/members for both USAA and local credit unions are typically higher than these overall brand sentiment scores might suggest. But this doesn’t dismiss the fact that consumers will naturally compare their experiences across industries, and technology companies, particularly Amazon, are now the ones setting the bar and altering consumer expectations.
So back to our question for Alexa, what can financial institutions learn from Amazon’s brand strength? The list is long, but for starters, we’ll just highlight five key takeaways.
- One of Amazon’s greatest strengths is their ability to use data smartly, efficiently, and effectively. In an era where consumers are seemingly becoming increasingly wary (or at least more knowledgeable) of how their personal data might be being used (and bought and sold), nearly nine out of every ten consumers still express a positive attitude towards Amazon and Google. At the risk of oversimplifying Amazon’s use of data, this would suggest that consumers are accepting of data being used for marketing purposes, if it translates to relevant recommendations and offers. This is clearly a rapidly evolving area that many financial institutions are striving to improve in. As Amazon and others change consumer expectations as to what a relevant offer looks like, financial institutions need to keep pace and leverage the bevy of underutilized data within their purview.
- Amazon makes it easy. From initial product search to check-out, the process is fast and efficient. It just works. Can you say the same for your online account opening process? While obtaining a mortgage is not the same as buying a 16-color motion sensor LED toilet night light (2,100 5-star reviews can’t be wrong, right?), consumers are becoming conditioned to the ease of one-click shopping. Rocket Mortgage from Quicken Loans is a good example of appealing to this expectation in the financial services space. While the process may not truly be as easy as “push button, get mortgage”, it’s noteworthy that the ease of the process takes center stage in the marketing of the product.
- Amazon is an expert in strategic pricing. The average consumer often views Amazon as a low-cost leader, but many price comparison studies have suggested this may be more perception than reality. As pointed out in this Forbes article, Amazon may change prices on more than 80 million products during a single day, but it’s done strategically to have lower prices on highly viewed and best-selling items. Doing so helps create the perception that Amazon has the lowest prices overall. This is another area demonstrating how Amazon uses data very wisely, but financial institutions don’t need to adjust CD interest rates several million times a day to learn from this strategy. Price perception strategy should be a consideration when pricing all deposit and loan products. Do you need to be the price leader across all products and all consumer segments to still be considered a price leader in your markets? Amazon pricing suggests that branding and strategic pricing can help create a perception of being a price leader without sacrificing margins across the board. When selectively deciding which areas you choose to use rate as a differentiator – it’s important to understand that not all consumers are equally rate sensitive.
- Amazon proves that consumers are willing to pay a fee for something where they perceive value is being returned. We delve deeper into the psyche of Amazon Prime members and other consumer “disruptor” services in our recent Raddon Research Insights report “Technology and Banking: How Consumers Are Adapting to the Digital World”, but the willingness of a large percentage of the population to pay $119 per year for an Amazon Prime membership (55% of our survey respondents claim to have subscribed to Amazon Prime at some point) speaks volumes to the perceived value of benefits such as free shipping and the streaming of movies and music. Past research from Raddon has shown that consumers and small businesses are both willing to pay fees to financial institutions for things of value. Courtesy pay on the consumer side is a good example of this, and small business owners are even more likely than the general population to understand and agree to value-based fees. As an example, in Raddon’s “Small Business Insights: Technology Fuels Growth” study released earlier this year, we highlighted the 57% of small business owners that expressed a need for a service allowing their company immediate access to deposited funds. Proving their acceptance of value-based fees, 72% of that group are willing to pay a fee for such an immediate funds access service.
- Amazon’s acquisition of Whole Foods and recent investments into initiatives such as the Amazon Go cashier-less supermarket show that Amazon embraces a high-tech and high-touch model. We’ve touched on this notion of digital pioneers such as Amazon embracing physical channels in past Raddon Report articles such as Digital Killed the Retail Star – Or Not? The implications for financial institutions should be clear: consumers are multi-channel, and the co-existence of physical branches and digital channels will continue to be a vital aspect of delivery and the customer experience.
Amazon’s impact on the financial services space will continue to be felt regardless of whether or not they eventually become more of a direct competitive threat to traditional banking services. From altering consumer expectations to demonstrating innovative ways of utilizing data and artificial intelligence, Amazon’s brand strength will continue to influence the financial services industry – even if Alexa won’t tell you all the ways how.