Consumers are insisting on added value. The trend is pervasive throughout the financial services markets.

One example is the shift of life insurance and thrift deposits to mutual funds and low-load insurance products. Consumers are showing that they want simple, less expensive, and more responsive savings vehicles.

How can banks respond to such demands in consumers' own terms? These lessons from retailing apply to megabanks as well as community banks:

Focus on consumers. Realize that consumers buy benefits, not products. Companies must concentrate their efforts on selected markets and deploy their capital, technology, and human resources appropriately.

The shift from a product-oriented or a sales-oriented focus to a consumer focus will be a radical departure from the traditional banking model. Consumer information will become a vital competitive source.

Companies will move well beyond enhancing customer service, to rigorously defining customer service requirements on the customer's terms and striving for continuous improvement through detailed execution and quality-assurance programs.

Apply marketing discipline to all activities. Successful companies will maintain a systematic, practical understanding of targeted markets, and use this understanding to manage their businesses.

Such targeting requires forgoing opportunities that are too far afield from one's core competencies and strategic focus. Trying to be too many things to too many people is a formula for mediocrity, if not failure.

This principle works equally well in large and small companies. It only requires knowing the strengths and limitations that are present in every institution, regardless of size.

Manage distribution aggressively to insure productivity. Especially in retail banking, distribution can be the most significant "benefit" the consumer buys, as well as the most expensive function of the financial intermediary.

High-quality distribution matches the customer's desire for benefits with the provider's product or service.

Continued growth in direct marketing, including electronic banking, will result in a wide range of delivery channels that providers will mix and match to respond cost-effectively to different markets.

Integrate sales, service, product, and information resources. Successful companies will focus on developing multiservice, multibenefit customer relationships. Customers will be better served and companies more productive.

To realize this customer-driven, service-oriented approach will require the creative management of people and technology, our production resources.


The regulations that built fences between traditionally distinct sectors of the financial services industry will largely disappear by the next decade.

As they go, the competitive pressure will be even greater for providers to be in each other's business and truly compete for consumer dollars. Witness what the elimination of protective fences has done to the savings industry.

Ultimately, competition will be the main engine of change in financial services. We have already witnessed the trend for retail consumers to seek investments with greater value and lower cost as they age. Fierce competition dedicated to providing value to the customer is what will win the relationship of the future.

Ms. Bird is chief operating officer of Roosevelt Financial Group, St. Louis.

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