Marketing executive Kevin Tynan dropped a startling bombshell in the bank marketing world earlier this year. In an article on his website, Tynan pointed to a recent Harris survey that said that big banks are winning the hearts, minds and bank accounts of two-thirds of millennials. Community banks, he argued, aren’t so lucky.
In his last sentence, he dropped the bomb: “I say leave Millennials to the big banks; focus on profitable prospects.”
To say it’s unusual for a marketing executive to turn his back on an exploding demographic is an understatement in the extreme.
In fairness, Tynan does offer up some intriguing data to make his case. A few points:
- Tynan is spot on with one of his arguments. Millennials shouldn’t be viewed as a monolith. Every person is an individual. Turning 21 does not guarantee certain behaviors. Tynan wrote: “Millennials tend to be as diverse, affluent, cynical, optimistic, ethical, thrifty and altruistic as the parents who raised them. Their only commonalities are shared experiences which don’t result in uniform attitudes and behaviors.”
That’s true. However, by arguing to write off Millennials, Tynan is himself giving millennials the cookie-cutter treatment.
- Two-thirds make less than $50,000 in annual household income; 23 percent spend more than they make and nearly one-third have unpaid medical debt, he writes. And, citing a Wells Fargo survey, Tynan writes that 40 percent of Millennials are “overwhelmed by debt obligations.”
- He also points out that 67 percent of Millennials do business with the big banks – like Chase, Wells Fargo and Bank of America. He says that may be a blessing for community banks.
- And, Tynan writes, Millennials change banks at twice the rate of older customers, place greater stock in technology than service and one-third of the generation believe they will live in a bank-free future.
- Tynan points out that the average VantageScore for Millennials is 628, lower than previous generations and considered “subprime.”
Tynan’s bottom line bears repeating: “I say leave the Millennials to the big banks; focus on profitable prospects.”
While the data he offers buttresses his argument, Tynan again is treating the generation as a monolith. To write them off misses a great opportunity. Consider:
- Even with financial struggles, Millennials have a bright future earnings potential. The debt the generation faces offers an opportunity for banks and credit unions a great opportunity to educate millennials on debt management, building credit and financial planning.
- If you want to know how bright the finance picture is for Millennials, consider this report from Bloomberg from a year ago. The headline tells the story: “Wall Street Has its Eyes on Millennials’ $30 Trillion Inheritance.
That’s Trillion with a capital T. That’s money the banking sector, especially community banks, cannot afford to ignore. Read the entire Bloomberg article here.
- Tynan undermines his own argument by saying that the generation values technology above service. Community banks have an opportunity to offer quality personal service and technology. And as far as the change of banks, there are two sides to every story. If every Millennial is different, then cultivating relationships is critical. Reducing turnover is key.
- And given the aging Baby Boomer generation, to fail to woo millennials is irresponsible. If not from Gen Y, where will community banks find new customers? Pursue younger clients early in the game.
- Getting to know Millennials is vital to growth and survival of community banks. Use big data, as well as relationship building, to know what products and services best meet each young client’s needs.
In closing, here’s anecdotal evidence that may encourage community bankers to take a whack at the Millennial market, though $30 trillion should be incentive enough.
My Millennial son recently visited a branch of a global banking giant in hopes of obtaining a mortgage for his first home. After “signing in” he waited for 20 minutes, on a worn out chair, for a customer service representative. When the representative finally approached, my son was escorted into a room that contained only an old desk and a phone. It looked more Siberian than C-Suite, and conveyed a message that my son’s business –concerning the biggest investment of his life – wasn’t that big a deal.
The representative of Behemoth Bank dialed a few numbers on the phone, handed the receiver to my son and walked out. Had my son been armed with the number, he could have done the same thing from home.
My son walked out as well, never to return.
This is the community bank advantage. To say, as Tynan does, that Millennials care more about technology than service ignores folks like my son. And treats Millennials with a cookie-cutter approach.
Ignore Millennials? Not on your life.
I would love to hear your thoughts and experiences with Millennials.
Neal, my intent was to point out that Millennials probably shouldn’t be a priority for some banks, particularly community institutions where the expense of acquiring them and nurturing them until profitability is often a losing proposition. If marketing to a younger population makes sense, my general advice is to target specific Millennial lifestyles. For instance, the 26% of Millennials who make $75,000 or more. Using financial lifestyle data we can segregate them into financial product usage and thereby reach only those with the propensity to buy credit cards, auto loans, blue-chip stocks, etc. You’ll find more of my thoughts on Millennial marketing at tynanmarketing.com.
Kevin,
Thanks for the follow up. We received a lot of responses on this one. As you know, it’s a hot topic and everyone is trying to figure it out. Let’s keep the dialogue going.
Neal