Understanding customer value shifts.

Intel Corp., the king of microprocessors, recently announced outstanding earnings results. This marked a major performance turnaround, which began with a strategic shift two and a half years earlier. This change was the result of the company's fundamental recognition that its prior--very successful--business strategy had become outdated as customers' values shifted. The insights from this case are applicable to bankers as we strive to understand similar shifts in our customers' values.

Prior to 2000, the microprocessor business was built on speed. Moore's Law, which stated that, "Processor speed will double while chip size is cut in half every 18 months," was the driving truism that framed all product development and marketing at Intel and its competitors. The race was for smaller, faster chips. Intel was the perennial winner. CEO Craig Barrett said at one point, "We did great for years just creating technology and throwing it over the fence to let people use it."

But then things began to change. After the Y2K frenzy, it became apparent that different customers--especially the laptop, mobile computer users--wanted different things. In the world of mobility, customers valued battery life more than speed; and since speed required more power, there was a direct two-dimensional conflict in customer values. An Intel marketing executive, Paul Ortellini, recognized this shift and convinced the successful product-focused company to shift its orientation away flora raw technology and toward customers. He wanted to find out what types of customers were out there in this maturing market and what they valued. This initiative resulted in the definition of four unique user clusters: desktop, mobile laptop, servers, and cell phones. All of these dusters need chips, but their values are different. For example, laptop users value mobility and extended battery life more that speed. Microprocessor clock times had advanced so far that this group of customers could not distinguish the difference in speed between the Pentium III and the newer Pentium IV, except that the lager chip wore down batteries faster.

Mr. Ortellini's recognition of this value shift led to the new Pentium M processor and the Centrino chipset, which while a bit slower, optimize battery life through a variety of technical innovations. Intel is back on top with superior, well-branded products, superior margins, and happy customers.

So, what's the lesson for bank marketer? Simply this: We also are in a period of customer value shifts. But in our case, it is a bit more complicated, unlike Intel, which recognized a simple one-dimensional change in values among mobile users, our customer's values have many changing facets. Take convenience. Convenience of branch location has always been critical, but today a new facet of convenience is "transactional convenience." People want to see and manage their value exchanges in a variety of places at any time. Checks are giving way to online transactions, wireless point-and-click transactions, and other new payment concepts. Customers do not want to trade off branches for these new innovations, as some thought back in 1999. Instead, customers want both.

Finally, there is a huge shift in the attitude toward wealth as the baby boom generation gets closer to retirement. While baby boomers am still active borrowers, or at least refinancers, them are early signs that this group is waking up to the need for stockpiling sufficient financial assets for the golden years. As this group begins to zero in on this value, it will be like a Tsunami wave hitting banks.

L. Biff Motley is Senior Vice President Retail Banking and Marketing, Whitney Bank, New Orleans. He can reached at [phone].