What can legacy finance brands learn from startups?

Most startups have dreams of growing up to be just like the big legacy brands in their industry. What they don’t often realize is that while they’re looking up to the legacy brands, these corporate giants are looking just as hard right back at them, trying to find ways to mimic startup success.

Too often, having multi-million-dollar marketing budgets and massive marketing teams becomes a liability for legacy brands. It can lead to oversimplification of startup success, attributing it to quirky marketing campaigns that the legacy brands then attempt to mimic. The results are often cringe-worthy campaigns that feature things like flash mobs—five years after flash mobs were a thing. Instead of looking at and mimicking surface-level fun marketing, legacy brands should look at a few of the deep, grounding principles that guide startup culture.

Knowing their customer

Startups have a visceral understanding of their customer. They may not have access to big data and focus groups, but they actually speak to their customers directly. In some cases, the founders know the customers so well because the startup emerged due to an unfilled need in their own lives. Legacy brands should take note here. While having access to vast amounts of data and market research is great for identifying overall trends, getting lost in that can lead to forgetting to truly understand the consumer. It is vital to interact with customers, observe them in the buying environment and use that to identify their pain points. The insights gained here can be pivotal to the success of a product or service.

Transparency

Although we’re nearly a decade out of the global financial crisis and the Great Recession, the 2018 Edelman Trust Barometer found that financial services are still the least-trusted sector among consumers. The insurtech startup Lemonade has begun pushing back on this trend by providing radical transparency and focusing on philanthropy. Lemonade offers homeowners and renters insurance. They have built trust with their customers through the Lemonade Giveback. When purchasing a policy, the customer chooses a charity. Any money that is not used to pay claims is donated to the chosen charity. This way, Lemonade does not directly benefit from denying loss claims. It removes the conflict of paying losses versus watching the bottom line. Add this to their strong tech platform that pays claims in as little as three seconds with zero paperwork, and it’s easy to see why they’re so successful with cause-minded millennials and Gen Z.

Experimentation

Because they lack time and resources, startups develop products and services quickly and they test them in the early stages. While legacy financial brands often fall into the trap of waiting for a perfectly complete product, startups will bring a minimally viable product or service to a small audience, gather feedback based on user experience, and rapidly iterate from there. Rather than launching a completely developed product or service that may fall flat, this rapid testing and iteration kill faulty ideas early while sharpening what works for their customers. Through this process, failed ideas are not seen as an indicator of management issues or incompetence, they’re seen as a chance to learn and improve.

It all comes down to one guiding principle: Successful startups have deep empathy for the consumer. In his book “Creative Confidence,” Tom Kelley says, “Empathy means challenging your preconceived ideas and setting aside your sense of what you think is true in order to learn what actually is true.”

Brands can no longer rely on the old model of developing a product or service and then telling the consumer that they need it. Increasing digitalization and continued distrust of the financial industry mean that big legacy brands need to act with empathy. Instead of putting the product or service first, put empathy for the customer first. Build trust and an emotional connection through transparency and creating services that truly make a meaningful difference in their lives.

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