The Mystery of Market Share

by Mark Singleton

9/5/2011

In the world of banking, as in many other businesses, winning market share is vital.  Generally speaking, if you have the greatest number of customers, you lead rather than follow.  Instead of reacting to marketplace preferences, you set them.

Every week I meet with our marketing, business development and department directors and invariably the conversation evolves into two basic questions about market share:  how can we keep our current customers happy and how can we gain more customers in the communities we serve.  Although CNB of Texas has done a pretty good job of doing both in the past 143 years, finding a winning formula to dominate market share continues to elude me.  Here’s why.

First, you must begin with the premise that the great majority of consumers believe that  banking is banking, is banking.  There is very little difference between what the mammoth, national banks offer to the general consumer that isn’t provided by smaller, independent banks.  Admittedly, colossal institutions like Bank of America, Citigroup and Wells Fargo can make massive loans to industry giants and foreign countries (which ironically helped to lead us into a recession and the meltdown we continue to experience), but banks like CNB don’t play in that arena.  It is a rare occasion that we are approached for a business loan that exceeds our capabilities simply because General Motors and Argentina don’t come to us for financial help.

On a day-to-day basis, CNB offers our business and individual consumers the same products and services they could get from any of the big boy banks.  In fact, in several cases, because smaller banks respond to a much smaller marketplace, we can provide personal customer service that far exceeds the pick-a-number handcuffs that shackle larger financial institutions.

If you believe that most banks offer basically the same products and services, then you can jump right into our executive meetings as we try to determine how to win market share in an environment where products and services put you on a somewhat level playing field.  Let me take you inside our think tank.

It is no trade secret on how CNB of Texas differentiates itself from our competition.  Our philosophy is that giving back to the communities we serve is what sets us apart.  We believe that businesses, families and individuals want to bank with CNB because its commitment to civic programs, churches, education and a better lifestyle directly benefits them.  Our values are simple:  people want to do business with a bank that cares about them and the community.

And, in many cases, it’s not working.

We have given tens of thousands of dollars to some school districts and yet they bank elsewhere.  The same goes with civic organizations, churches, youth programs, and many community programs.  It absolutely baffles me that with one hand out to receive donations the other hand stabs you in the back. 

So, you are sitting in our think tank session.  Do you cut-off-funds to those who don’t appreciate your benevolence, or do you continue to hold true to philanthropic and altruistic values that giving should never be a “what’s in it for me” arrangement.   Certainly, CNB of Texas has maintained its covenant to communities no matter the consequences, but it is a maddening dilemma.

What the competition does is that instead of donating hundreds of thousands of dollars back in benevolence like CNB, they use those funds to offer higher interest rates on money market or savings accounts.  And, believe me, people will change banks for a one-quarter percent difference in what they can earn on their deposits.

So, what would your vote be in one of our executive meetings?  Would you continue to invest in goodwill to citizens and the community that often is taken for granted or would you take the same funds and build market share by getting new customers that will switch to your bank if you offer higher interest on savings and deposits? 

Let’s make the decision a little bit more difficult.    The attorney generals of Arizona and Nevada are suing Bank of America for engaging in “widespread fraud” by misleading customers with “false promises.”   Other banking giants like J.P. Morgan, Citigroup and Wells Fargo are being sued by customers, credit unions, the Department of Justice, retirement funds and other groups for failure of full disclosure.  And yet, these banks continue to retain and gain customers.  I just don’t understand.  

You are sitting at our roundtable discussion.  It’s your turn to find a solution to retaining CNB customers and gaining more.   And, I bet you start to stammer just like I do when confronted with the mystery of marketshare. 

It just doesn’t make any sense.  Ten big banks own 77% of all banking assets in the U.S.  In 2002, that percentage was 55%.  The big boys keep growing and yet they are a prime player in the causes for recession, unemployment and your misery.

But many small, community banks are not much better.  They pump their money back into their own pockets instead of supporting the communities in which they are located.  Their community spirit is just paying lip service if they don’t put their money where their mouth is.

Being a responsible community bank also means taking an active part in school and government bond referendums, being a key player in economic development or elected positions, and not being afraid to take a stand even if it may lose you some market share.

Yes, market share is important.  However, so is integrity.