How do you create a competitive product lineup? Three is a magic number.

Tim Barrett, Executive DDA Strategist

Velocity Solutions

In 1973, “Three Is a Magic Number” premiered as the pilot episode of the “Schoolhouse Rock!” series developed for Saturday morning children’s programming on the television network ABC.  The title song and its accompanying animated video were created after ad agency co-chairman David McCall observed that his son had learned every Rolling Stones lyric but could not remember multiplication tables.  At one point the song says it takes three legs to make a table stand.  Do your demand deposit accounts have the legs to stand up to the competition in the markets you serve? Now I am not suggesting that you train your staff to sing and perform for your potential account holders, however, making your product lineup memorable for both your staff and your account holders is truly crucial for successful growth.

If your bank or credit union is evaluating your deposit products and whether they’ve evolved with industry changes and maintained a competitive edge, perhaps now is the time to use a focused analysis to realign marketing, usage and sales. Increased operational expenses, rising regulatory costs and big bank pressures necessitate a strategic focus.  The stress on fee income requires a thorough review of retail and business products and associated service fees and product pricing. Simplification of your product offerings and consolidation of existing products should be your primary goal.  I suggest the power of three.  No more than three consumer and three business products should be necessary.

A demand deposit product strategy should support executive management’s strategic direction while creating a competitive advantage. This strategy should include a comprehensive competitive analysis and result in a distinct and cohesive alignment of service fees and product pricing by comparison.  The strategy should include a survey of best practices and consumer opinion as it relates to the acceptance of products, fees and pricing levels.  The end goals should be to simplify operations, create greater efficiencies, and ultimately provide better, more targeted account holder service.

But how do you go about streamlining your product lineup to the magic number of 3? By following (you guessed it) 3 steps.

Step 1:  Define your strategy

The first step is to create a product/service strategy that rewards customers/members for their behavior. The focus should incent debit card channel usage, relationship onboarding and product penetration, with the goal of reducing expenses and providing new revenue sources.  The result of your efforts should be a forward-looking strategy and product lineup that is adaptable to current and anticipated industry changes. A detailed product-by-product design and pricing/service fee strategy needs to align with your community, mission statement and strategic direction.  The focus of the project is to review existing and new products, but if you find any missing items that could significantly improve revenue or reduce costs, then be sure to document them for future attention!


Step 2 – Define Your Objectives

Review all retail and business deposit products currently used by account holders and create a strategic document summarizing what features they offer, in which channels the products are used, profitability of the offerings (by product, customer/account holders and channel), and compare them to what is currently being offered in the marketplace.

  • Craft analysis that will create an extensive understanding of the current product offerings and how they interact.
  • Determine what potential updates (product consolidation, curtailment or creation) may be required. It might make sense to no longer “grandfather” a product.
  • Look at how account holder incentives have impacted behavior. This will result in potentially identifying approaches for attracting new account holders that “fit” with the strategic direction.


Step 3 – Conduct some, or all, of the following activities

  • Perform competitive analysis to determine products currently being offered in the community you serve. List your competition and create a matrix detailing account features/pricing/transaction levels for each current retail and business deposit product compared to your competition.  Do the same for any products that are offered, but never or rarely used.
  • Determine what competitive advantage various products/combinations of existing offerings could offer if implemented.
  • Detail how account holders acquire new products, which products have historically been successful and which products have failed.
  • Utilize branch knowledge, interview employees and conduct selected account holders focus groups. Use the focus groups to understand community needs and thoughts about what they would like from your institution.
  • Determine which channels, fees and products have been historically accepted and profitable. Most importantly, find out why and apply that learned experience to new products and services.
  • Identify data elements required to enable the creation of a product pro forma.
  • Create a sample pro forma with associated documentation for use when creating new products or adding functionality to existing products. Create and maintain a pro forma for each existing product to demonstrate how they perform.
  • Identify appropriate transaction and product combinations that would allow account holders (or segments of account holders) to avoid paying some or all the fees as an incentive.
  • Create a strategic document to identify the key drivers of income and cost by feature and usage patterns and what has historically been used by account holders.
  • Create a framework that allows for improved account holders service and more active account holders relationships.


By following these steps, you should be on your way to creating a consolidated product line that will succeed in the markets you serve and provide a steady revenue stream from your account holders with services they are willing to pay for.  If you are successful, your revenue per account could increase by a multiple of three.