Demystifying Pricing of Banking Services

Jim Marous (00:00):

Welcome to Banking Transformed, the top podcast in retail banking. I'm your host, Jim Marous. I am thrilled to welcome Melina Palmer to the Banking Transformed Podcast. Melina is the CEO of the Brainy Business and author of the new book, The Truth About Pricing: How to Apply Behavioral Economics So Customers Buy.

Jim Marous (00:33):

Understanding consumer psychology to optimize pricing strategy is more important than ever. Melina shares unique perspectives on incorporating behavioral economics into banking to create positive outcomes for institutions and account holders alike.

Jim Marous (00:49):

We discussed the common mistakes banks make with pricing, how to better understand the motivations and needs of the modern banking customers, and tips for optimizing product pricing strategies.

Jim Marous (01:01):

The interview is essential listening for any financial institution looking to leverage behavioral psychology for sustainable digital growth, as opposed to simply doing pricing studies and trying to match the competitive price.

Jim Marous (01:16):

In the past, when I was a banker, in the old days, pricing financial services was based on what competition was doing. And that was a time-tested strategy. We would do an ALCO committee, we'd look at everybody locally, see what their pricing things in, and — if we wanted to go higher or lower.

Jim Marous (01:32):

In a digital world where financial institutions everywhere are your competition, just to button away, there's a better way using human psychology and buyer behaviors to optimize bank pricing on products and services for digital growth.

Jim Marous (01:49):

So, Melina, most bankers come from a time where pricing was based on shopping studies. In fact, I'll bet you there's a whole lot of financial institutions that still do it that way. Can you discuss a little bit about your company and a little bit about the modern pricing strategies and what your firm does to help finance institutions leverage customer insights to drive strategy?

Melina Palmer (02:11):

Sure. Well, as I mentioned to you kind of in our pre-chat, I have a background in financial institutions and have a lot of history in that space. And so, while I do work with all types of companies these days, financial institutions always have a very special place in my heart as knowing what it's like having been there through that process.

Melina Palmer (02:35):

And as you said, I've been in those ALCO meetings myself as well. I definitely know what that's like. And looking at those rate sheets and seeing where everybody else is and picking your spot somewhere close to the middle, typically.

Jim Marous (02:49):

Yeah. Well, what's interesting too, because right now we're coming out of a long period where pricing was pretty much labeled set, all the way because nothing was going on with rates. Well, now all of a sudden, people who have not been in the banking world for 10 years or so would not even know how we used to do pricing because it was all preset. It was at zero or close to zero.

Jim Marous (03:11):

Now there's a lot of competition. And your book focuses heavily on how psychology impacts buying decisions and the perception of pricing. So, how does human psychology create misperceptions in maybe how banks set their prices?

Melina Palmer (03:28):

Yeah, so I think the first and most important thing for everyone to know is to understand how our brains really work, because that gets to show why it's so important to be considering psychology. When we look at the way we make decisions, we like to think that this supercomputer in our head is very logical and going by the book for everything all the time and making rational choices about absolutely everything. And that we are in full control of any decisions that we are making.

Melina Palmer (04:01):

In reality, the subconscious is actually making the bulk of the decisions that we have at any given day. And it's using rules of thumb, it's using predictability, it's using habits to make those decisions.

Melina Palmer (04:16):

So, each person research has shown people make 35,000 decisions a day on average. And when we put it in that context. And we realize how many decisions we're making. And then, I love to ask people, “How many decisions do you remember making yesterday?” And it's usually like two.

Jim Marous (04:36):

Outside of what you're going to eat. Exactly.

Melina Palmer (04:39):

10. There aren't tons of things that we remember. And that's because that's happening on that subconscious level. And our conscious brain just can't handle the sheer volume of choice that we need to be making throughout the day.

Melina Palmer (04:52):

And so, the rules that the brain is using to make decisions is the foundation of the field of behavioral economics and in behavioral science where I do my work here at the Brainy Business.

Melina Palmer (05:03):

And so, in that space, and we think about when we go to buy, whether it's a checking account or we're going to buy a brand of toothpaste or something, it's very much based on these habitual rules of how we've done things and what feels right in the moment. And so, The Truth About Pricing, which is the name of the book, and I give away the truth about it on page three, is that pricing isn't about the price. It's just not. The things that happen before the price are way more important than the price itself.

Melina Palmer (05:38):

And this is really important in a commoditized space like we have in banking, in that you have so much of the same kind of stuff, and that relationship is so important and what the brand stands for and being able to be about that holistic experience for your customer or member depending on what side of the industry that you're on.

Melina Palmer (06:01):

And when you can embrace being about something bigger in a way that really resonates to the people that you're speaking to, they're going to want to stick with you. And the rate really becomes secondary in that case when we think about those types of, products and services from a financial institution.

Melina Palmer (06:20):

Just as it is when we think about everyone who has an iPhone, do you even consider when Google has a phone that comes out or Android or whoever else, it doesn't matter because you're brand loyal. And we can get that with the financial institution too.

Jim Marous (06:39):

It's interesting. I was at an event called Sibos up in Toronto last summer, and for the last 10 years they've had the tagline, Sibos: The Future of Money. And I was on a panel that actually introduced what is going to be the next tagline or secondary line, which is be The Future of Value.

Jim Marous (07:01):

And what we talked about were all the different dynamics beyond the dollars and cents that go into decisions, financial institution decisions such as risk, speed of delivery, government regulatory things, all these elements that are very secondary in your mind, but very primary in how you make decisions.

Jim Marous (07:23):

And based on what you just said and where we went with Sibos, do we then find many financial institutions that are really pricing in a real suboptimal position where they don't have to offer the highest price to get the dollars? They may have to reinforce some ancillary items that drive value. Is that what the case is now more than ever?

Melina Palmer (07:49):

Yeah. I would say that being able to understand what is valued by the person you're speaking to is a huge thread within the book. Interestingly enough, the original title when I pitched it to my publisher was What Your Buyer Values and Can't Tell You, to go in line with my other two books in the naming convention. But we landed with The Truth About Pricing.

Melina Palmer (08:14):

So, understanding value and what someone does actually value and what they're interested in is hugely important in the way that you message and communicate. And even when you're picking the pricing. So, as we know, there's usually a couple people, like you said, ALCO is going to be setting rates. Maybe that's coming through lending, or something finance. That happens.

Melina Palmer (08:38):

And in marketing, or when you're the person in the branch that's having to be talking about this, or you're communicating down to your teams about how to talk about the price, the rate, it may feel like you want to use that jargon and to be talking about the rate first.

Melina Palmer (08:54):

And I know you probably see that from a lot of your competitors, but that's just not super compelling. Even if the rate is really awesome, it doesn't translate into the mind of the person that's choosing if they want to come to you or not.

Melina Palmer (09:08):

So, years ago I did a project for a credit union in Southern California. They had a new rewards checking account they were super excited about, and they brought me in to help with some of that marketing messaging. And they were planning their billboards and everything.

Melina Palmer (09:24):

The headline of this was going to be earn up to 1.26% APY on up to $25,000 in balances. That was the thing that was going to be on the billboard, which is obviously getting people to stop on the freeway in Los Angeles to find out who's talking about it.

Melina Palmer (09:44):

Even if you know the rates, it's just not compelling. And our brains are really lazy and that's something you look at and go, "Ooh, math. That seems ... maybe I should look into that, but I'm going to put it in the later drawer," that then gathers a bunch of dust. It's not compelling me to go do anything.

Melina Palmer (10:01):

And so, in that instance, I got them to reframe the message, to be same numbers, of course, but looking at it in a different way, considering what matters to, in this case, potential members. And I got them to instead say, did your checking account pay you $315 last year? That that's what went on their main message. Which that's the 1.26 by the 25,000, but it feels completely different. It's very easy to say maybe yes, but very likely, no, it didn't.

Melina Palmer (10:35):

And then you have this curiosity of who's talking about that and that pull of curiosity that's going to get someone to want to go learn more is so important when you're one of a million options, it feels like these days.

Melina Palmer (10:53):

So, something a little bit different, something that resonates and makes them go, "Huh, I want to figure out what this is about." You're going to go take some action. And that simple reframe, just something like that is just really foundational in behavioral science and a simple tweak that you can make, even if you didn't set the rate. Even if you have no control, you actually have a lot of control in what people end up choosing and how they move forward.

Jim Marous (11:19):

So, what common mistakes do you see financial institutions make when it comes to pricing? Building a pricing structure, building a product structure. How can they better understand how to change what they've done in the past?

Melina Palmer (11:34):

I think the biggest mistake that any company really ends up making is jumping too quickly into thinking you know what the problem is and going into solve it mode. That is a way that we've been programmed through school.

Melina Palmer (11:52):

As someone who has a two-year-old, I can tell you we ask a lot of questions as children, but through school, we kind of stop doing that. And we've been conditioned to believe there's a right answer for everything. And the way that we first see a problem is exactly the way that we need to go. That's the path you need to go down, but it's just not typically that way. And it's really easy to find the right answer to the wrong question.

Melina Palmer (12:20):

So, if you don't spend enough time thinking about what the problem really is, you can end up wasting a lot of time building products or adding features that people don't really want or need or value that's not going to move the needle. And setting prices that aren't necessary, that aren't going to be helpful for you in that way.

Melina Palmer (12:44):

So, taking the time to step back and also to know that especially in a space like banking, you are not your best customer a lot of the time. And the people you might be talking to don't know all the ins and outs behind the scenes.

Melina Palmer (13:01):

You have a real curse of knowledge problem that the people in the room that are making the choices about how you're going to price, what products you're going to offer, what matters. You have so much information in your way that you're not thinking about what it's like for the person that's on the outside, kind of stumbling upon what it is that you have.

Melina Palmer (13:23):

And so, looking for ways that you can get out of your own way to be able to find those products and services that people may want is a really key aspect that anybody can be working on. And again, when we get to the point of that compelling product or service that people are super excited about and say, "Hey, have you heard that they've got this thing over here?" It just ends up being less about the rates themselves than it is about the institution or that specific offering.

Jim Marous (13:56):

So, let's talk about how you get engaged with the financial institution. You come in, they've engaged you to fix their pricing model or to inform them about what has to be done, where do you start and what do you have to do to work with the financial institution to make it so we don't get in our own way?

Melina Palmer (14:14):

Yeah. So, always start back in that understanding the foundation of where we are, what we're about, and the internal cultural structure of what your brand, what makes you different than someone else. So, that vibe is really important when you're looking at how you're going to be messaging about a way that you can stand out from other organizations in the space.

Melina Palmer (14:43):

And so, it would be unlikely to come in and say, "Okay, let's look at the entire suite of every single product and service you offer and do this all in one big eating the elephant sort of situation. That's a lot. And so, typically would be looking more at, if there's a specific problem that's trying to be solved maybe looking at re-energizing a loyalty program, let's say.

Melina Palmer (15:15):

And knowing — the credit union I used to work at, we had, a loyalty program. We were trying to engage with young members as is the kind of story of the whole industry. Trying to get younger people in and looking at the loyalty program, one of the big benefits that you got as we're trying to get everyone into digital services and things was that you got a free box of checks and say like, why would this be the treat?

Melina Palmer (15:45):

This is the thing that we're trying to promote when nobody wants that, and we actually don't want it. It's expensive. They just sit in a drawer somewhere. There's no reason to have this thing. So, looking at something like what's really going to be driving loyalty, what is making someone engaged and considering us in a different way, then we would be looking at experience, that is how we're drawing people in, how they're attracted to us.

Melina Palmer (16:16):

And knowing that actually loyalty is not based on things like satisfaction, or even NPS scores aren't going to be looking really at loyalty because loyalty is coming through delight, if we need someone to be delighted to be more likely to be loyal, which has higher profitability.

Melina Palmer (16:35):

And so, how you sprinkle in moments of delight, perhaps that could tie into that loyalty program that would spread across different products and services that may need to be shifted. So, it's a lot of thoughtful conversation, slowing down at the beginning to make sure we're making the right choices and that things are being thought about in the right way.

Melina Palmer (16:56):

What's going to be most profitable for you? What's valuable for the person you're selling to that they're going to be excited about? Where might you sprinkle in some moments of delight? And then looking at through launch, and ultimately as well through communication.

Melina Palmer (17:12):

So, my second book, What Your Employees Need and Can't Tell You is all about understanding how our brains really react to change, how we can communicate better, getting people on board with whatever ideas we're selling, even if they don't report to you.

Melina Palmer (17:26):

So, as a person who's then trying to get teams excited about getting rid of a product and adding something new, and someone always loves that legacy product that nobody really buys. There's one person who's super in love with that thing.

Melina Palmer (17:41):

So, we have to understand how they're going to be less averse about this communication, how we can get people excited internally. And so, helping with communication, it's really a full faceted approach to pricing. But that's important in product development, and that's really necessary when we're considering psychology. And that psychology goes throughout the organization, internal communication, as well as the way that you're talking about it with potential customers and members.

Jim Marous (18:11):

So, what we're really talking about here is not a pricing strategy that really is market movement where all these institutions will move together, but really there's an individualized nature of future pricing which really takes into account the dynamics of each institution as opposed to that institution in a big marketplace. Correct.

Jim Marous (18:33):

I mean, you're really looking at the personality of the organization, the personality of their customers, and then putting that into a pricing model as opposed to simply, this is this, this is this, we're going to be somewhere in between. Correct?

Melina Palmer (18:45):

Absolutely. Yes.

Jim Marous (18:47):

So, how do you find out when you can't always trust the people who are within an organization to talk about how consumers view you. How do you engage as a consultant with a financial institution to get that first dynamic of what customers believe about your organization and how that can impact pricing?

Melina Palmer (19:09):

Yeah, so there's a wide array and depending on the institution and their size and the type of work they've already been doing, they may have regular focus groups that they're running, or ways that they are interacting with current and potential customers.

Melina Palmer (19:28):

But there is an aspect of asking the question. And again, my first book is called What Your Customer Wants and Can't Tell You. So, we know that people, when they tell us what they want, it's not necessarily what they actually want.

Melina Palmer (19:44):

People don't really know what they want. I have a case study in there from Netflix that I think is really telling in this case, that when people are asking, what would make you be more likely to convert and actually get the trial of Netflix? What would they be doing and what people would say across the board, what they wanted was to be able to see what the shows were, what are the options, the movies that I'll be able to see within. I want a little sampling before I go to sign up.

Melina Palmer (20:18):

And the people inside of Netflix agreed they had been fighting for it for years to be able to have this because they felt that this was the biggest hurdle in people not doing that first trial or testing out using Netflix. And so, they finally decided they're going to do some testing and they're going to see what's going to be the best version of showcasing this information. Because they were sure that was going to be the best thing that was going to convert more.

Melina Palmer (20:45):

And so, they went against a control, which you should always do when you're running a test. And the original, the control won in that first test, not being able to see the shows that were available ended up winning. So, then they tried another one and happened again and again, and again and again.

Melina Palmer (21:03):

Everything they tested performed worse than the thing that everyone said that they wanted, and everyone believed was the real thing that people wanted to have. But when you have access, we've all had that moment when you're in Netflix and you say there's nothing to watch, and there are a million things in there to watch.

Melina Palmer (21:21):

But then there's some paradox of choice. And once you're in there, it feels very different than, again, you don't have the curiosity that's drawing you in. So, what you think you want isn't necessarily what you want.

Melina Palmer (21:31):

So, in the case of if there is already some market research, or if you're planning to do something with surveys or focus groups, or looking at social media, what people are saying, what is coming in on some, if you have regular follow up where you can ask questions of customers and things like that, there are a lot of opportunities to layer that in.

Melina Palmer (21:53):

But really the benefit of working with the Brainy Business is that we have awareness and case studies and best practices from all types of organizations and understanding human behavior from around the world, and it's able to be outside of just banking.

Melina Palmer (22:10):

So, I work with large candy companies and with technology companies and we have clients that are in just such diverse areas and it's all about, again, the way humans decide and what drives their behavior. It doesn't necessarily have to be within what you think you know, and think people want.

Jim Marous (22:36):

So, we're in a scenario right now where there's some institutions that really need to pump up their deposits. What strategies have you seen work beyond simply raising rates that organizations should at least consider within ...

Jim Marous (22:53):

Now, knowing that every institution's different, every customer base is different at all this, but if you were to try to get away from simply pricing being the way to generate more deposits, which has its negative impact on loyalty and other elements as well, what do you usually look to next? What are some of the things that organizations should at least consider and test other than simply rate?

Melina Palmer (23:18):

Yeah. In that way you can get into a lot of different approaches that as you consider what people might care about, there may be something within the community that is really relevant to people. If that is something that your institution is maybe focused on being more community based, being able to say that when you have your money here, it's helping small businesses like so and so down the street or keeping your money local, that could be a message that might be helpful.

Melina Palmer (23:59):

So, thinking about those of steps back, if we understand what someone is intuitively connected to is going to be helping to understand what may drive some of their behavior. So, that's one path, is something that you can be trying. I mean, it ends up being a flip sort of deal here.

Melina Palmer (24:35):

But if you have a certain amount that's on deposit, then you get to have maybe some other perk or benefit that doesn't necessarily have to be a rate, but that's somewhere else. That could also be working with a local like the zoo, or you can get discount tickets to theme parks that are close by, some of these perks that go somewhere else that then that business wants to contribute because it helps them to get some visibility.

Melina Palmer (25:09):

And then they're going to be talking about it. Just looking at creative ways that you can be finding some win win-wins across the board is where I might start. Those are some ways to start thinking about something.

Jim Marous (25:27):

So, what do institutions understand the least about consumer behaviors? Where do we slip up as an industry the most?

Melina Palmer (25:37):

I think it really comes back to assuming that people know the things that you know, or that you think they should know. And that just because somebody wants to do something, even if they understand, even if they get it, humans are really busy, there are a lot of things going on.

Melina Palmer (25:57):

We have competing things vying for our time constantly and we've got kids and Netflix and Instagram and jobs and all these things that can feel very overwhelming. And it's nice to think that someone's going to sit down and they're going to dutifully read this entire big brochure that you provided them.

Melina Palmer (26:21):

And then they're going to go to the website and they're going to read all of that copy in detail to get to the point at the end of the page and then, and then, and then, and then. There's too much friction and extra steps and text and assumption that it's about a bunch of these logical aspects that aren't really as compelling as you think they may be.

Melina Palmer (26:47):

And so, reducing a lot of that extra mental burden, making it as simple as possible, we don't need to fill out a bunch of extra forms and text boxes and steps. Anything you can be doing to reduce that burden is going to make it easier to do business with you.

Melina Palmer (27:07):

We look at Amazon, Amazon, we have that buy now button. And we use it all the time. You may not know they actually patented one click buying back in 1999, so they were the only ones that could have one click buying. Everyone else had to have that sort of hurdle of, are you sure? Do you really want to buy this thing?

Melina Palmer (27:28):

And it may not feel like that's that big of a deal because we have the extra clicks and boxes and things all the time, we ask people. Steve Jobs paid a million dollars to be able to have one click buying in iTunes.

Melina Palmer (27:42):

So, he invested a million dollars to remove a single click from that buying process. And while that's not the only reason, of course, that iTunes had such great success, when we look at iTunes in Amazon and reducing that, if you think that if every extra step, every text box was worth a million dollars, how much could you remove?

Melina Palmer (28:04):

What do you actually need right now versus information you're trying to hoard, because it might be useful someday if we want to sell you a mortgage or something.

Melina Palmer (28:14):

Instead, if we just get the least amount that we need to be able to communicate and be on someone's radar and have them having those little micro moments of enjoying hearing from us, that is such a big win. You can ask another question when they care about that other thing later, but if you don't even know who they are, what's the point?

Jim Marous (28:35):

It's interesting, we talk about that so much in the digital account opening, the digital loan acquisition. We reference Apple quite a bit, that they have a five-step process to get an Apple credit card. In fact, you only touch the button on your phone five times. It is not like you have to type things in. It's all there to begin with.

Jim Marous (28:54):

And that becomes part of the value proposition. It allows you to say, I'm less worried about the rate than I was about the ease of getting engaged. And it's so interesting as they all come together, getting back to, that's all part of the value proposition, that speed, ease of use, lack of friction, the way the organization's positioned, which I'm going to talk about a little bit after our break.

Jim Marous (29:19):

But it's very interesting how all these elements they're not linear. And for some customers it will be, but how loyal are those customers? So, let's take a break here and let's hear from our sponsors of podcast.

Jim Marous (29:38):

Welcome back to Banking Transformed. So, I'm joined today by Melina Palmer, CEO of Brainy Business. We've been exploring the challenges, opportunities, and strategies that financial institutions need to understand in the world of modern pricing.

Jim Marous (29:54):

So, you emphasize confidence in pricing strategy and aligning pricing with brand positioning. How should banking executives think about incorporating brand identity and their mission into pricing decisions?

Melina Palmer (30:08):

Yeah. Thank you for the question. And the confidence piece is so key when it comes to people buying in or buying that product or service. When I work with people that are selling maybe services that are consulting or something, if you go in and say, "Well, it's $10,000, and I know that seems like a lot, and it may be difficult, but we just raise the rates and if you need a discount and blah, blah, blah, blah, blah."

Melina Palmer (30:38):

You've totally talked someone out of something that they may have thought was a great deal because you didn't feel good about it, you weren't secure in whatever it was. And so, then, we look at a different example of if you were to say, "Oh, we're so excited that you're looking to work with us and move forward. We have this option is $10,000 and most people find that it blah, blah, blah."

Melina Palmer (31:02):

And you just say it like it's the time of day or the weather. And the most people aspect is really important because we are a herding species. And when we're looking to try something new, something where we're uncertain, we want to know that other people like us have been there before, that this is a safe choice. We're being a part of the herd in this way.

Melina Palmer (31:26):

And so, understanding if you do have something that's most popular, the best value, a great choice CEOs pick whatever, that you're able to have when you're communicating it to people can help them to feel safe in making a choice. And the thing about financial services, it's very stressful for a lot of people when they're going into get a loan or to apply when they don't understand how their credit score really works.

Melina Palmer (31:57):

When they aren't sure ... we know that you should be able to know if you're going to get approved or not before you even apply. If you understand how the system works, it's actually very easy.

Melina Palmer (32:12):

When you don't, which is the vast majority of people out there, then it's just so scary and stressful when you're coming in to have a conversation. And so, there's already a real cognitive strain, which means when we have that extra burden on our brain, we are really rooted in the status quo. We're fear based, it's hard to make a decision. We got a lot of brain chemicals and things pumping in there making it hard to make a choice.

Melina Palmer (32:43):

So, helping that person to feel at ease, to feel safe can make a huge, huge difference. There was a really interesting research study that they were asking people in a mall to imagine that there was damage to their car, or it was broken down and they needed to go in to see about getting a repair.

Melina Palmer (33:05):

And in one case, they were told it was $150 repair that was needed. And in the other case, it was a $1,500 repair that was going to be needed. And they had to just do the thought experiment about what you would do, what this would be like.

Melina Palmer (33:21):

And then they had them do a cognitive test, like a math test or something after the fact to see how this changed from beforehand. And they separated people into those who were considered poor and those who were rich or well off when they did those studies.

Melina Palmer (33:40):

And in the $150 example, it didn't really impact their cognitive skills when they did the post-test. In the $1,500 example, those who were well off, it didn't impact them, but those who were on the poorer side, it did, it impacted their ability to do a cognitive test just from thinking about what it would be like if there was a $1,500 emergency that happened.

Melina Palmer (34:07):

And it impacts, oh my gosh, what would I even do? And the stress in your brain just starts swirling around and it impacted so many other areas of life.

Melina Palmer (34:19):

And so, understanding the stress that someone might be under when they're sitting there with you, taking some time to help them to feel calm, to understand that it's a safe space, that they have the opportunity that we're here to work with you.

Melina Palmer (34:34):

And you think about with medicine and holistically treating the whole person and not just the symptom they come in with, when you look at that customer or member as a whole person that needs support and that they might be stressed and not understand their options, but you're there to help them, that's a way that even if you're selling things, it can feel like more of a service and a value that you can confidently recommend something that that person is going to be so delighted to be able to have because you saw them.

Melina Palmer (35:06):

Investing a few minutes in that personal connection with someone to help them to feel safe and feel seen is so much more important than the exact rate on the car loan that you're going to provide to them. And then again, when it comes to being loyal, they'll remember the person that cared about them, they remember the institution that cared about them, that investment in them. It just means so much more, and it's actually really easy to do.

Jim Marous (35:38):

So, how about a success story? How have you gone into a finance institution that's had a challenge with their pricing structure or with maybe trying to achieve a goal? Can you give us an example of maybe a success you had in bringing in behavioral pricing approach or understanding customer behavior to build a higher revenue, maybe higher growth, whatever you might have solved for?

Melina Palmer (36:00):

Yeah. Well, the first thing that comes to mind, of course, goes back to that credit union I mentioned from Southern California, with their super enticing, billboard plan. Where we reframed that message.

Melina Palmer (36:13):

So, they didn't change anything about the media buy that they had planned at the launch. They didn't change the investment, changed the messaging in a couple ways of how we were talking about, they didn't shift the rate or anything of what they were already planning to do. And they saw a 60% increase in month over month account openings when that went live. So, that was pretty cool.

Jim Marous (36:40):

Well, no, it's interesting because I didn't even catch it the first time, not as well as I should have, but basically, you've taken some of the thinking that's needed out of the process for the consumer. You've done the math for them.

Jim Marous (36:53):

We take it that everybody knows what y over y means, what effective annual yield means, all these different elements. And especially when you get into loan products more than even the deposit products, it's very hard for consumers to understand the differences.

Jim Marous (37:12):

We're getting to a point where consumers, if they want to downsize, I'm going to be a good example. And I have a mortgage on my current house that's large than what we want to move into. What the balance is between where I am today versus where I want to be tomorrow based on the interest rates the way they are today.

Jim Marous (37:29):

So, it's help me with this, do the math for me, show me what the value proposition is and get me over that buying hurdle that my brain's overcharged with that. So, it's interesting. Are there also prompts you can do, any psychological tactics that can help move a consumer to the buying decision?

Melina Palmer (37:50):

Yes. And when you were just talking about that, it reminded me of a project I did for a veterinary client. Like I said, I have so many diverse clients I get to work with which I love. I really think it's helpful for everyone as we layer these different aspects in.

Melina Palmer (38:08):

But for this veterinarian, and they were definitely on the more expensive side of things and were really thinking that price was the biggest hurdle when it came to people working with them and buying in on the things that they were going to recommend for pets.

Melina Palmer (38:27):

And they also had a whole lot of things that you should be having, let's say for your dog, there are different shots and things you should be doing on an annual basis that people don't necessarily understand that they should be doing to help their dog to be healthy.

Melina Palmer (38:42):

And so, in this case though, I got them to ask for people, "Do you care more?" Like if you're going to choose, do you care more about coming into the vet as least often as possible? Is this your motivator to do this not often or is price the most important factor in spreading that out over the year.

Melina Palmer (39:04):

When someone can tell you like, "Oh yeah, I don't care. I can make this thing work. My dog hates getting into a kennel. I do not want to go there. I would rather just do the whole thing." They're now in a mindset where they're willing to invest, they know that they're doing the thing and taking it upfront this way, and that they're able to — the vet in this case had a payment plan or something that was available.

Melina Palmer (39:29):

But when you ask someone in that way and phrase it in the kind of ways that we think about what might matter to us, it can help them to guide you into what you would recommend for them.

Melina Palmer (39:42):

So, understanding those questions that are really key for someone, in the case of the auto loans or credit cards or something. And it's talking about do you care about your monthly payments and is cashflow most important or are you really thinking about investments or whatnot?

Melina Palmer (40:02):

You can be asking questions to understand what they care about before you make a recommendation of what's going to be best for them at the place that they are right now.

Melina Palmer (40:11):

And so, when you think about too some of the prompts, what's going to be driving behavior and making someone want to come in or to call or to take an action, there are a lot of different paths of course, that we can go here. Those 35,000 decisions are going in a lot of different directions. We have hundreds of rules the brain is using.

Melina Palmer (40:33):

One thing you can be considering is understanding how time matters to people. So, for one, we're all victim to something that's called time discounting, which I call the I'll Start Monday effect. So, when we think about, you're going to start that exercise program diet on Monday, and like you even set the alarm Sunday night to get up and run, and when you go to wake up, you go, "Ugh, now?" And you want to hit snooze.

Melina Palmer (41:02):

When we think about ourselves in the future, our brains think about it like we're a completely different person. So, when you're telling someone to call later, when you're talking about saving for their future self, it just doesn't resonate typically in the same way to where we feel like we need to take an action today because I'm thinking about helping someone I don't even know, that's not really me.

Melina Palmer (41:22):

And so, bringing it to where that feels more now and, in the moment, can be impactful. And some of this you can look at important and key times in people's lives. So, of course we have New Year's resolutions, and we know people are looking for fresh starts and maybe they're going to be better with their money.

Melina Palmer (41:41):

They're looking at debt consolidation at that time. And we know life events are things that are important that you might want to align with a choice someone's going to be making, if they just got married, of course we're thinking about kids or whatever that happens to be. Also, when you have milestone birthdays and things coming up.

Melina Palmer (42:00):

So, in the same way that someone whose age ends in a nine is more likely to run their first 5K, 10K, half marathon, whatever, than someone whose agent's in a one. So, 39 versus 41, you're more likely to run the marathon the first time.

Melina Palmer (42:20):

So, what else might they be looking at investing in or thinking about as their big life change as someone is finishing up a decade that you might want to communicate that other people like them would do at this time to be triggering that herding aspect. Those little things can make a big difference.

Jim Marous (42:39):

So, Melina, you've unpacked a lot of information here and you mentioned you have three books out there right now that really look at the internal employee, the customers, and now the pricing scenario. How do our listeners unpack more around what you've been talking about?

Melina Palmer (42:57):

Yeah, well thank you so much for bringing those up. And the best way to learn more would be to go to thebrainybusiness.com, have information about all the books, the podcast, consulting, trainings, things like that.

Melina Palmer (43:11):

And as a special for your listeners, for anyone who wants to get a first chapter of any of the books for free, get to see if it's a fit for you, try before you buy. If you go to thebrainybusiness.com/bankingtransformed all as one word, then you can check out any or all of the books, get a chapter of those.

[Music Playing]

Melina Palmer (43:31):

Of course, you can find me on the socials as the Brainy Biz, Melina Palmer on LinkedIn, or just send an email [email protected].

Jim Marous (43:41):

Melina, we'll even help that out a little bit in the host notes, if you've accessed us through any of our digital platforms, within the host notes on any of the podcast platforms, we'll also reference where they can download a chapter of your book. So, thank you so much for being on the show today. I really appreciate your time.

Melina Palmer (43:59):

Of course. Thanks for having me.

Jim Marous (44:01):

Thanks for listening to Banking Transformed, the top podcast in retail banking and the winner of three international awards for podcast excellence. We appreciate the support we have received to make this endeavor a success. If you enjoy what we're doing, please take some time to show some love in the form of a positive review.

Jim Marous (44:19):

Finally, be sure to catch my recent articles on the Financial Brand and the research we're doing for the Digital Banking Report.

Jim Marous (44:27):

This has been a production of Evergreen Podcasts. A special thank you to our senior producer Leah Haslage, audio engineer Chris Fafalios, and video producer Will Pritts.

Jim Marous (44:36):

If you've not already done so, remember to subscribe to Banking Transformed on both your favorite podcast app and on YouTube for more thought-provoking discussions on the intersection of finance, technology, and leadership.