How Banks Rake in Billions – You too Can: Part 1

People wonder how banks make so much money year in year out, sometimes it looks like the banks are doing extra ordinary things, yes it looks that way.
You will not understand except you have been there, even when you have been there you need to know how the business works.
If you understand their secret, you can also replicate that formula in building your businesses.

Any business can apply that same strategies and get exact same results in what they do. So am going to share a little of what they actually do in a series, so this is the first part.

So what do banks leverage on?

1. Customer Base:
The more numbers you have the better for you as a business. This is one of the most important things banks look at, their customer base is very important to them.

Before, banks used to be specialized, like commercial banks, merchant banks, some even classified themselves as international banks etc, until most realized they have been missing in the retail business when they saw the profit and deposit base of those new banks that started like STB who latter became UBA, Access banks, Diamond and then GTbank.

Every bank in Nigeria applied for a commercial license and became jack of all trade in banking, then the crazy chase of more customers started and became more intense as everybody want to increase their customer base to millions, some banks today in Nigeria have over 6million active customers on their database, you know what? this is money.

The banks don’t see people as crowd they see money, that’s why when major events happen, the banks don’t mind spending they will always reap much more than their investment.

That’s how GTbank upped their game by allowing the crowd no matter who you are they accepts you, now their cash deposit base is in Trillions.

So when you are putting up your product don’t go for only the high value, most people do the high value and forget the crowd who might want to buy your product but your product has gone out of their reach.

Yes some people will say they are not for everybody, this is the same thing some banks said years back and today they accept everybody, the truth is that if you are not for everybody your revenue will be limited or at most one big ticket. The banks are more interested in recurrent income not one of.

For example, if you have a product and you intend to price it for N5,000 because you have made your calculation that if 100 people buy it that will be N500,000 while if you bring down the price by 40% you have the potential of reaching 500 people which will come up to 1.5Million.
the higher your product pricing the less subscribers you will ever get, there is no trick to it.

So a customer base of 1,000 active people doing business with you paying N500 Naira monthly is better than a customer base of 200 customers who paid a one off fee of N10,000. Do the maths.

The more the people you have the higher your revenue and the more likely you have repeat customers.

Imagine banks now with customer base of over 6million active base doing transactions day in day out. That’s why they declare billions.

We will continue on this series, please drop a comment as I will like to read your feedback.

To your Success
Lawrence Obi

How Banks Make Billions – You too Can: Part 2

Here is the second part for your reading pleasure.

What I have shared is not just a story, but a practical experience and what I am currently applying in my business, and I have also helped so many businesses to accept some of this concept to grow their businesses.

I have seen several arguments and responses that this concept might not apply to most businesses, yes, it’s true but it depends on where you are and where you want to be per time. I have reviewed several businesses both local and global and I have seen some of this strategy work for them, including the top global revenue generators like Walmart, Amazon, google, Facebook, Apple.

People say some products are premium like apple, yes, I agree, but the truth is because of our exchange rate, standard of living strength of our currency, it now looks like some foreign products are out of reach to most Africans. Apple is a value product properly priced for their market.

The average minimum wage earner in the US can afford an iPhone which is the mass market, while in Africa or Nigeria you must be in the middle class and earn a minimum of N400k to be able to afford a brand-new iPhone, add to the fact that no telco's will even give you a plan, so you repay little by little which is very common in the western world. In 2017 Alone apple sold over 200million phones and targeting 300 million in 2018 that’s about the population of west Africa and have sold 77million in first quarter alone.

Having a lean customer base, no matter the type of product you sell, can never cut it for you. Even some Oil companies don go for countries with low population they want to import refined products into Nigeria where the consumption rate is high in month.

Straight to the second things Banks do:

2. Banks create products for every potential customers:

Banks segment their customers and create value products that will suite them. You know why they do this? So, they can increase their customer and cash deposit base because they call it cheap funds. So the ultimate goal is to have as much as they can get from these cheap deposits. There is no customer discrimination if the person is bringing money.
They always work tirelessly to create a product for any identified customer segment if there is a market and crowd for it. The crowd factor is key here, the product might be similar and the same with every other high valued product, but the entry point will just be made easy.

So those who think they are enjoying the banks premium product, stop deceiving yourself you are just paying higher than most people, but everything is same, if they say you have access to lounges when you use a card, just know you are the one paying for that lounge and the drinks you enjoy there. In business nothing comes free to the customer you pay for it one way or the other, they gather all the thing you like put it together as a package and you pay for it based on the amount you can afford.

It is also very important to note why you should segment your customer especially in Africa, the rich want to have something the poor can’t afford, and the poor wants to have what looks like that thing the rich is holding, so you create a balance on your product.

If you find this informative and valuable, please drop a comment.

To your Success
Lawrence Obi

Part 3 will be published briefly.

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Lawrence obi, I'll like to reach you. let's discuss business further. Greatestbenforever@yahoo.com