Small community banks should develop a niche market other than real estate lending

You've got to say, I think that if I keep working at this and want it badly enough I can have it. It's called perseverance: Lee Iacocca

Many business managers lack the knowledge about finding ideal markets for their products and services. Identifying specific markets where a product can thrive is important. It means the organization is well placed and in return, it will thrive here since the market is consistent and the demand is equally high. In banking, identifying markets is important. There has been a shift in banking paradigms forcing consumers to change perception about banks being secure partners in personal development. From such a level of understanding, banks are threatened with obsoleteness since they have failed to identify with consumer needs.

However, the inception of community banks brings with it a new dawn in banking. With personal development taking center stage, consumer need these tailor made products to develop themselves. This is how niche markets are realized. A niche market is a select or more appropriately, a specific market that subscribes to a particular service or product almost holistically. Identifying niche markets is very complex and involves considerable amounts of efforts to identify and tap them. Mapping out niche markets could be vital in making small banking a success. Niche markets could serve as ideal business environment for such business models.

The micro-markets in a community or a certain society in an outskirt can serve as a niche market. Since consumer needs vary with demographics, a niche would mean having a set of specific products for a specific market. A community bank would then be forced to have a select business model that serves the interests of a certain section of the community. This is renowned the niche. Ideally, designing products would be the initial step before going full throttle. Next step would be to identify if this market is still ready for the product and then marketing and establishing this product would follow. The local community, especially high-end suburbs can provide the ideal niche market. In such areas, banking hours are short, all, there are no banks around at all. As such, having a product that allows this community to enjoy banking the whole week and throughout the weekend would be vital. The loyalty would be incredible and the return from such investment would be more secure than investing in lending.

Robin Trehan is M&A expert in small Banks M&A. More information