Academic journal article ABA Banking Journal

To Know Thyself, Shop the Competition

Academic journal article ABA Banking Journal

To Know Thyself, Shop the Competition

Article excerpt

For Treynor State Bank, competition is stiff. Though the $25 million-assets bank is located in a rural community in western Iowa, it's just 20 miles from downtown Omaha, Nebr., and likewise a short drive from Council Bluffs, Iowa. The bank has daily turf wars with large city banks as well as other community banks, savings and loans, and credit unions.

About 31% of Treynor State's loans are agricultural loans, but it also serves the bedroom community that commutes to work in nearby cities, notes Judy Guttau, the bank's marketing director. Not only does the bank need to be in touch with what its peers in nearby communities are doing to attract customers, but with what larger institutions in Council Bluffs offer to lure customers into their branches during lunch hour.

That's why last year the bank decided to shop the competition. It implemented a low-cost internal shopping program that has benefited the bank in more ways than one. The program is summarized in ABA's Community Banker's Toolbox for the Future. Additional details are presented here.

Shopping can be cheap

In 1993, the bank hired a local college student to visit all primary financial insitutions in its market and develop data regarding their product offerings, fees, interest rates, locations, hours, and other distribution channels. The idea stemmed from a similar study conducted for the bank about eight years ago by an advertising firm. "At that time we were trying to develop a sales culture, and it was important to know what our strengths and weaknesses were."

It still is. But this time around, the shopping study was internally organized, keeping its cost to a minimum.

Developing a low-cost shopping program isn't too hard to do. The study took 42 hours total to put together. Twelve of those hours were the actual shopping spree. "We paid ten dollars an hour to our shopper, so it was very reasonable," Guttau says.

The bank focused on 15 financial institutions--five rural banks in its immediate market area, seven metropolitan banks which are its strongest competitors in the Omaha area, and three metropolitan savings and loans.

Most of the data was collected from brochures and flyers. A good deal of information also came from personal visits or telephone conversations with the competition's customer service representatives. The student recorded her impressions of each bank. …

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