Are rural banks using their first mover advantage?
Rural and community banks in Ghana provide basic banking services to their clients. Rural banks are found in towns, cities and rural areas among others. Rural banks have helped to bridge the gap between the banked and unbanked population in their catchment areas.
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According to the Efficiency Monitoring Unit of ARB Apex Bank report for the fourth quarter of 2016, there were over 140 RCBs operating across the country.
It is worth mentioning that some RCBs have been in existence in their catchment areas over three decades. Consider the following example: Adansi Rural Bank in the Ashanti Region, with its head office located at Fomena, was established in 1980; Ankobra West Rural Bank in the Western Region with its head office located at Asiama was established in 1978; Ga Rural Bank (head office is located at Amasaman) was also established in 1984. It is also worth mentioning that some of the aforementioned rural banks and many others started operations in their catchment areas at a time when there was no competition from other financial institutions.
They were enjoying monopoly power. Therefore, they can be described as first movers. A first mover is an organisation that first establishes itself in given market. First mover is also referred to as market pioneer or first entrant. In line with the adage “early bird gets the worm, first movers can benefit in diverse ways.
Benefits of first mover
First, first movers can get the best location (strategic location). This will be at the disadvantage of later entrants. Some visionary RCBs were able to acquire strategic locations for their operations while others suffered from first mover disadvantage.
Second, first mover can benefit from stronger brand recognition as a result of its long-term existence in the catchment area.
Third, first mover can win loyal customers when it delivers superior value to customers. This will therefore make switching cost high. This will no doubt have an adverse effect on later entrants in the catchment area.
Fourth, first movers better understand the needs and wants of existing and potential customers than later entrants. This is the case with many RCBs. Many RCBs are familiar with the culture and financial market dynamics in their catchment areas better than new entrants.
However, it is sad to say in this article that several RCBs did not maximise their first mover advantage by becoming preferred providers.
They have therefore allowed later entrant banks and other specialised deposit taking financial institution such as savings and loans companies, finance houses and microfinance companies to capture a large market share in their catchment areas thereby enjoying late mover advantage.
In fact, the competition in the banking landscape will continue to deepen. Therefore RCBs cannot avoid later entrants in their catchment areas. Currently, GN Bank is invading the catchment areas of RCBs. The same could be said of other financial institutions.
Odotobiri Rural Bank has been enjoying monopoly power at Jacobu where its head office is located. However, the bank monopoly power has been broken by the entrants of GN Bank and Opportunity International Savings and Loans Company.
In view of the fact that new entrants are invading the catchment areas of RCBs, it is vitally important for them to capitalise on their first mover advantage to maintain their market share.
The article will further discuss recommendations about what RCBs should do to maximise their first mover advantage.
Recommendations
1. RCBs should cultivate customer’s loyalty in order to ensure high switching cost. Therefore, they should improve on their service quality.
2. RCBs should dominate in their catchment areas and not allow banks and other specialised deposit institutions to overtake them. They should therefore establish mobilisation centres at strategic locations in their catchment areas as encirclement strategy.
3. RCBs should capitalise on their name recognition and their relationship with people in their operational areas to penetrate the market.
4. As already mentioned, RCBs understand the needs and wants of people in their catchment areas due to their years of existence. Hence, they should develop new products that will appeal to existing and potential customers.
5. RCBs should adopt relationship marketing concept in their banking transaction with customers instead of transaction marketing.
6. RCBs should adopt a strong community relationship concept to deepen their relationship with communities in their operational areas. One way of doing this is engaging in a corporate social responsibility programme. They should also signal to the people in the area that the bank belongs to them. In his book ‘Rural Banking in Ghana,’ Mr Asiedu Mante mentioned the fact that the choice of names of some RCBs were meant to ensure a sense of belonging by the inhabitants of an area. Examples are: Nzema Manle Rural Bank, Amenfiman Rural Bank, Kwahu Rural Bank, Sefwiman Rural Bank among others. RCBs should therefore capitalise on their names to win more customers. They should let people in their catchment areas feel that they own the bank. Management of RCBs should occasionally organise social programmes to fraternise with residents in their communities.
Conclusion
So far the article has revealed that some rural banks have not maximised their first mover advantage thereby paving the way for late entrants to capture their catchment areas. However, they can still do their utmost to improve on their market share by applying some of the recommendations discussed in this article. GB
The Author is the CEO of proven Trusted Solutions, an employee training and development and marketing research firm.
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Email: [email protected] / [email protected]