Last fall, a client wanted some guidance; they were unsatisfied with the penetration rate of checking accounts within their member base. Over the last few years they had tried many approaches; market research seemed to point to gaps in their offerings with various member segments, so they embarked on a process that included adding several different account options for members. Adoption rate on most of the new accounts were minimal, despite the research findings. They wanted help, what were they missing, what was the magic new account, feature set or marketing message that would make the difference?
In our experience, this is not an uncommon approach for credit unions, businesses, or people in general. When we run into a problem, have a strategic issue, or sense the need to do something, our basic wiring is to create something, to add something, to build something new. Turns out there is some interesting research about this tendency. A recent article in Nature outlined a series of experiments in which subjects clearly showed an overwhelming tendency to solve problems by adding features when eliminating features would have resulted in a quicker and cleaner solution.
Behavioral Economists and Decision Scientists were not surprised by this finding. I am fond of telling people that we are in the removal business. We identify the barriers that have been inadvertently created that make it difficult for members to do business with credit unions, and we eliminate them. We often find that products, services, features, even messages that were designed to attract members actually have the opposite effect; removing them often has surprising strong positive impact on results.
What are some of the ways you can subtract to make things more effective for your members?
- Reduce product and feature choices – but don’t eliminate them. This is a tough idea for product managers to get their heads around. In classic economics we are taught that choices are good, and more choices are “gooder”. Behavioral Economics tells us that the opposite is true, too many options lead to decision paralysis. The more options we have, the more difficult it becomes to actually make a decision. We also know that having lots of choices has a deleterious effect on the satisfaction members later report concerning their ultimate choice.
- Eliminate required decisions by establishing effective defaults. Defaults are a great way to reduce the number of decisions someone must make while continuing to provide choices. Defaults are powerful tools; members tend to accept them because changing defaults takes energy and thought, and they tend to regard defaults as a recommendation from an expert. But select the defaults carefully, if members think the default choice is for your benefit, not theirs, the long-term impact will not serve you well.
- Reduce Friction. Processes, procedures, operating guidelines all tend to add speed bumps that increase the burden on members, each of those speed bumps provides an opportunity for a member to stop, to reconsider their decision. Look hard to identify those steps – you will find, if you are honest, that some are easily eliminated or reduced. You can deal with others by sometimes breaking the process into incremental steps that can be done over time; or in other cases bundle the steps differently to get members through the maze of requirement quicker. One of our favorite tactics? We often engage in the “Stupid things we do” tour with branches and operating units to identify the things that your staff knows gets in the way of serving members effectively. Listen to them and learn.
So how many choices is enough? We like to joke that 1 is too few, and 100 is too many. But the truth is, it depends. Classic marketing theory usually suggests the rule of 3, but the only way to know the right answer for your members is to test. And in fact, before you adopt any of these three subtraction ideas, you must test. Every context, every eco-system is different, you can’t just take an experience from a credit union across town, or from another state and assume that it will work in your environment. Testing with your members needs to be part of your DNA; it must become part of your normal process.
So what did our client do about that pesky problem with checking accounts? After some research and testing with random groups of members they eliminated 5 of the 9 existing checking accounts and created a simple decision tree for the onboarding representatives to help them default new members into one of the 4 remaining accounts. The number of new members who opened checking accounts as part of their onboarding process improved by 18%, and new member satisfaction scores as well as NPS from new members improved. And lets not forget the benefit of simplifying their operating environment and lowering their cost structure.
So the next time you are trying to solve a problem, look hard at subtracting, not adding!