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“Sticky” for the right reasons

“Hassle” makes a lousy long-term marketing plan

Editor & Publisher William Streeter brings his longtime magazine column favorite, "Like It Or Not," to our blog lineup. Read Bill's periodic looks at what's going on in American finance. Editor & Publisher William Streeter brings his longtime magazine column favorite, "Like It Or Not," to our blog lineup. Read Bill's periodic looks at what's going on in American finance.

As long as I can recall, the word “sticky” has been used by marketers and product managers—in banking and elsewhere. In that context the word describes the degree to which a product or service causes a customer to “stick” with a company versus stray to a competitor.

I came across the term recently in a report on automated clearing house payments. It brought to mind the idea that there are right and wrong reasons for stickiness.

Wrong kind of stickiness

The report, presenting the results of a survey, gave a perfect example of a wrong reason.

As stated in the report, “It takes time for [ACH] users to set up their payee information, and it can be a hassle to re-enter it when switching financial institutions.”

The report wasn’t suggesting banks make things difficult. Rather it observed that because it is so difficult to reconstruct accounts, preferences, etc. when changing banks, the ACH payment product is, thus, a “sticky product.”

Nonbank products and services also fit that description—cable TV/cell phone packages come to mind.

If “hassle” is how you keep someone as a customer, however, this basically means the customer is thinking, “I hate this company, but it’s such a pain to switch I’m not going to bother.”

Not exactly a foundation to build on.

Plus there is the possibility that a bank, or any company, will resist making improvements because of losing the perceived stickiness.

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“Right” stickiness comes from a bank making it easy to handle your finances, to get information you need, to solve a problem, and be pleasant to deal with, among other attributes. It means the bank looks at processes and procedures and figures out how to remove as much of the hassle as possible.

Ease of use will win

In fairness, many account-opening or similar procedures in banking were created in a far different era. Quite often they must also meet legal requirements.

An analyst I recently spoke with on the subject observed that “banks didn’t start out designing an account intending for it to be difficult to change, or to move to another institution. Rather it’s because the procedure was designed and set up on old technology.”

ACH payments certainly fit that description. While there obviously have been changes made to the procedures used since the 1970s, it would seem there is room for improvement.

Part of the larger challenge banks face in this regard is that the rapid emergence of the digital age has changed people’s expectations. Not every digital process is perfect—far from it. But overall, the rapid development in apps of various types has improved ease of use and speed of use.

Furthermore, anything that is “a hassle” is fodder for countless bright entrepreneurs who figure out much simpler and usually faster ways to do the same thing digitally. We all know examples of where we have personally used such a replacement product and thought, “That was so much easier.” (Yes, there are downsides to all things being digital, but that’s a different subject.)

I suspect in the area of ACH payments, the same thing will happen, if it hasn’t already. A new tech firm will pop up with a wizard or app to streamline a cumbersome process. If the firm partners with a bank, this could give that institution an edge. Or maybe a bank will “rent” its charter to this new fintech payment company. Or a nonbank company could work out another way to bypass the ACH “rail” altogether.

I don’t mean to pick on ACH payments in particular. The point really is that if a product or process is clunky, the days are over when people will just put up with that. There are too many options now.

Bill Streeter

Bill Streeter is Editor & Publisher of Banking Exchange. He has been a full-time business journalist for 43 years, 37 of them with ABA Banking Journal. During his time with the Journal, he rose from Assistant Managing Editor to Editor-in-Chief and in 2012 became Editor & Publisher. He has been an observer of momentous changes in banking, from the introduction of ATMs to the 2008 financial crisis and passage of the Dodd-Frank Act. He has won numerous business journalism awards, including being part of a team that won a finalist position in the Jesse Neal Awards, the "Pulitzer Prize" of business journalism.

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