May 19, 2017

Most value propositions are dumb.

Take my four years at Morgan Stanley as a case study. Every few months or so, the newest recruits head off to a centralized training center in the Northeast to be taught how to create an elevator pitch and have conversations with potential clients.

Two hundred newly minted financial advisors spend the week honing and perfecting their own value proposition. On the final day, they each say:

“As a financial advisor, I work with individuals, families, retirees, and business owners to help them achieve their financial goals.”

Impactful, right?

It may all be true, but the line by itself is completely undifferentiated and meaningless to a potential client. In addition, a similar version is being repeated by 15,000 other advisors at Morgan Stanley, and another 50,000 advisers at the other big investment firms. There’s absolutely no differentiation from the client’s perspective on what that individual does or why the client should choose them.

However, not all advisers stick to the script. The ones who are exceptionally high-performing discover and use something much more targeted and authentic that’s attractive to a specific customer base with whom their vision and values are aligned. It is these individuals who become the outliers – the Elon Musk or Jeff Bezos of advisors.

By the end of my four years at Morgan Stanley, my focus was on union pension funds in the building trades on the East Coast between $25MM-$250MM in assets. Clearly, it was a smaller market than serving all individuals, families, and business owners in the country, but given our focus and expertise, we had a great success rate in connecting with our market, finding an opportunity to differentiate ourselves, and quadrupling our business in three years.

Most banks still haven’t figured this out. For example, let’s look at a few value propositions/mission statements from some well-known banks, broken into three categories.

First, profit-driven:

Regions: Our Mission at Regions is to achieve superior economic value for our shareholders over time by making life better for our customers, our associates and our communities and creating shared value as we help them meet their financial goals and aspirations
BB&T: Our ultimate purpose is to create superior long-term economic rewards for our shareholders.

(I’m not kidding, these are actually on their website. Having a hard time getting over these…)

The mission statements here do not align to any sort of value proposition for customer. In fact, these banks see financial returns as their mission, and customers as just a means to that end.

Next, generic missions that can apply to anyone and everyone:

Bank of America: Making financial lives better through the power of every connection.
Wells Fargo: We want to satisfy our customers’ financial needs and help them succeed financially.

Part of the issue here is scale, and Wells and Bank of America don’t have the luxury of focusing on niches, so they must go broad to support their broad distribution model. However, if you drop a few levels down and look at the majority of smaller banks, you will hear some variation on the theme of improving financial lives and meetings financial needs through service and convenience. Getting warmer, but I can’t yet directly connect these words to me as a customer, and they all sound the same… just like my financial advisor colleagues at Morgan Stanley.

Finally, a few better examples:

New Resource Bank: New Resource Bank is the bank for businesses building a better world. We advance sustainability and use banking to promote well-being for all people and the planet.
USAA: We proudly serve military members and their families. When you join USAA you become part of a family that stands by you during every stage of your life.
Live Oak Bank: Empowering the American Dream of small business owners.

None of these are perfect, but the difference between these and the first group is stark. As a customer, I can understand who the bank serves and why they do what they do. The value prop and mission should be a differentiating factor.

What impact could a stronger, more targeted, customer-centric mission and vision have on your business and strategy? Think about Chase’s $500 checking account offer. If you continue as a commodity business with the same message of “improving financial lives and providing convenience and technology, (and making a bunch of money for shareholders)” you’ll be earning commodity-like returns yet having to compete against increasing customer acquisition costs. One way to compete is to pay $600-700 per customer and attract the deal chasers, but your margins will go way down and you’ll be stuck in a race to the bottom with predictable results.

Or, you can change the game completely. You can’t be all things to all people anyway, so discover who you can serve authentically in line with your values and move the conversation beyond price and convenience.

Spend some time on the following questions:

1. Why does your organization exist, and why should your customers care?
2. Who do you serve, and what makes you uniquely qualified to serve them?
3. How is the world different, or how are people’s lives changed, because your company exists?
4. How can you connect with them based on your shared values?

Answering these questions will help you understand more clearly where and how to compete on your own terms and win much more easily (and less expensively).

Don’t forget, the riches are in the niches.

P.S. If you answered “to meet their financial needs” to Question 1, you failed. Shoot me an email and let’s talk.