Shop for a new car, a cell phone plan, a cable TV package or a major appliance these days and you’ll find one consistent and very successful product strategy–Good/Better/Best (GBB).
GBB is a three-tiered strategy conceptually defined as follows:
- Good: A basic level of value for price sensitive customers. Good offers a minimal amount of added value to differentiate yourself from your competitors and/or to marginally satisfy comparison shoppers. For example, coach class airline tickets would fit in this category.
- Better: An in-between level of value for customers who appreciate some level of value and are willing to pay a certain price to receive it, because they are still a bit price sensitive. The amount of value added above Good depends on the product type and marketplace, but the incremental level of value must be noticeable. For example, business class airline tickets would be better than coach but not as expensive as first class.
- Best: An advanced level of value for those customers who are actively looking for maximum added value. Price sensitivity is not a priority. The amount of value added above Better has to be all that is economically possible to add and still maintain acceptable profit margins or strategic goals. First class airline tickets would be a Best option when flying.
Every successful GBB design works when the product offerings build on each other. Your Good product is fundamental. Better is Good plus more. Best is Better plus more. GBB provides choices by comparison, easily showing how the price changes when different features are added or subtracted. As a result, buyers will be content that they decided to buy only as much as they needed. The power behind GBB is simplicity and familiarity.
While buyers appreciate choice, too many choices are counterproductive. The paradox of choice theory holds that too many options discourages rather than encourages buyers to buy. Why? Because it increases the effort that goes into making a buying decision. So buyers decide not to decide and don't buy your product. Or if they do buy, the effort to make the decision often diminishes from the enjoyment derived from the product. In short, buyers do not respond well to choice overload and GBB keeps it simple. It’s very familiar to think in terms of three when buying things. Popular use of GBB product design by retailers for commonly purchased items has conditioned the typical buyer to be at ease with this product design.
GBB simplicity also works well for the sellers of the product. There are only three options to understand and communicate to a buyer. Plus, sellers feel credible as GBB appeals to a wider market, providing something for everyone without requiring everyone to just buy the premium option.
So how does this all relate to your consumer checking line-up strategy? Actually, it’s very natural, because you can align your GBB checking products with the three types of checking account buyers:
- A fee averse buyer wants free checking if it’s available or the cheapest account you offer.
- A value buyer is most focused on account benefits and is willing to pay for the account if there’s a perceived fair exchange of value.
- An interest buyer demands some yield on their deposits and also expects to be rewarded for being a productive or loyal customer.
In addition, nearly all three checking products under a GBB structure generate enough average annual revenue to cover the annual costs to service a typical checking account relationship, except for totally free checking.
Here’s how that breaks down, along with the comparative average annual revenue from each GBB checking product type and typical distribution of these accounts in a checking portfolio:
|Product Strategy||Buyer Type||Checking Product Type||Average Annual Revenue||Percentage Range of Total Accounts|
|Good||Fee Averse||Totally Free
(minimal requirement to avoid fees)
|Better||Value||Flat Monthly Fee||$563||25%-40%|
Source: StrategyCorps’ Brain database tracking the financial performance of nearly 5 million checking accounts. Average annual revenue is the total of all checking related fees (including debit interchange) per respective account type and the allocated net interest income from the account type’s respective annual average DDA balance.
So what does a GBB-based checking line-up look like for a financial institution like yours? Here’s a sample GBB checking line-up in action as shown on sales/marketing materials.
As your financial institution works to have a more successful checking line-up that’s modern, customer engaging, competitively different and optimally financially productive, learn from the successful product design strategy of GBB. Don’t overthink it, over complicate it or, in general, overdo it. Your customers will be happier and your bottom line will be healthier.