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How thought leadership supports financial services premiumisation
Demonstrating deep expertise, fostering trust and creating the best possible outcomes for clients is an essential part of standing out from the competition and being able to charge premium pricing for financial services.
The alternative is to be stuck on a commoditisation treadmill with little influence over pricing, suffering wafer thin profit margins and a constant struggle to retain clients. Premiumisation, on the other hand, paves a way out of that cul-de-sac of misery.
If a financial solution happens to be unique – then so much the better. But the reality with most financial services – even in the B2B space where offerings tend to be more complex – is that some form of commoditisation prevails.
Narrowing the competition
Delivering complex services, involving say derivatives, structured finance, M&A or specialist types of asset management, does substantially slim down the competition. That’s even more so if the client base happens to be among the top 1000 corporates. Usually only the largest financial firms can deliver the range of critical services needed by these big organisations. In the case of banks, this is due to their bulge bracket balance sheets, the scale of their in-house expertise, distribution, modelling capabilities, unique data sets and skills in optimising regulatory frameworks.
But attracting attention in a market, be it crowded or just composed of a few players, requires substantial thought around positioning, branding, marketing and communication.
Though servicing that client base can be very profitable, it is also sophisticated and demanding. Simple marketing promotions with declarations of being “the best”, “the first”, “the biggest” or “we’re open for business” won’t cut the mustard here. What these prospects are looking for are solutions that solve a particular problem, probably a difficult one. And for that they’re looking for knowledgeable suppliers with viable solutions.
Educating the market
This is where thought leadership steps in. Solving complex problems often requires sophisticated solutions that need explaining and even justification. If the solution is new to a market then it will need a strong element of education as well. That education, delivered in an unbiased way, helps build trust in the new solution and its provider. That may include clearly explaining who this unique solution isn’t for and why. Indeed, many complex financial products often only work under particular circumstances or for specific client groups.
Successful new products, be it an exotic over-the-counter derivative or a novel investment strategy, do tend to eventually get copied by rivals.
High awareness audiences
This is a good segue to addressing the question of how thought leadership can support a solution that is no longer unique or has become quite common. At this stage of development, the market understands the solution well and seeks competitive pricing. In this case, thought leadership starts to play a slightly different role. It is now more about differentiating the provider and showing their superiority over rivals.
Given higher market awareness, there is less need for education. Instead, thought leadership can look at addressing complexities, such as around geopolitics, ESG or artificial intelligence in a way that is relevant to the financial solution in question. How might mega-trends, such as ageing populations, re-shoring factories, automation and technological innovation influence long-term inflation and interest rates? That in turn has implications for a range of financial products used for hedging, financing, IPOs, M&A and so on. It also has huge implications for investing, risk evaluation and the performance of the different asset classes.
A more normal interest rate environment, historically speaking, might signal a return to the outperformance of more conventional lower risk investment strategies, for instance?
Rich source
Such mega-trends provide a rich seam of material to mine for thought leadership ideas. There are many complex interacting trends that need explaining, maybe require new frameworks, strategies and different ways of looking at the world. Those findings may provide surprising insights that are contrary to prevailing views, which could be very compelling when backed by data and strong arguments.
Again, this helps build trust in a firm’s expertise and the fact that it is thinking about the challenges impacting its clients and is providing helpful solutions. It demonstrates deep forward looking thinking, which gives potential clients a degree of confidence.
More generally, good thought leadership can reinforce the positioning of a firm’s expertise, drive search engine rankings (search engines favour original and useful content), foster greater lead generation, create more social media sharing and increase ‘mind share’ in the market.
Indeed, thought leadership should partly be seen as an act of generosity. It is spreading valuable knowledge while accepting that not every consumer of it will lead to business. And the higher the quality of that thought leadership, the more it will highlight that the originator of that knowledge holds unique and valuable insights. It may not lead to new business straight away, but it could do so somewhere down the road.
Making it work
Producing and leveraging thought leadership is a multi-faceted exercise. It requires extensive cooperation and knowledge sharing between the producers of the solution, researchers, business development, marketing, sales and corporate communications. Each one of these disciplines will have its own perspective of the market that needs to be accounted for.
For instance, marketing will want to hook the interest of prospective clients. It may also want to use thought leadership to indirectly back claims of uniqueness. Or use it as part of a branding strategy for a particular product i.e. labelling it in a way that highlights how it’s different from rival offerings.
Meanwhile, sales will want the thought leadership to trigger conversations with prospects and corporate communications want a fresh story to engage journalists. All three functions could pull subtly different angles from the same thought leadership piece to fully engage their constituencies.
Desperate for explanations
The rapidly evolving nature of the global economy, geopolitics and markets has created a mind bogglingly complex environment for organisations to cope with. It has left many longing for enlightening explanations around mega-trends and their likely consequences so they can plan with some degree of confidence. The current global uncertainty and volatility has created enormous demand for financial thought leaders who can provide much needed clarity.