iPhone App...Deal Makers... And Not Being the Next Big Fish

I want to start by sharing a story of two technology sales reps that after having landed a large contract with a credit union for a conversion were awarded to an Alaskan fishing trip. This had become almost a ritual for this sales team as year after year they were able to land the “big fish” contracts. The two friends excited about the upcoming week hired a bush pilot to fly them to a scenic lake for their Alaskan adventure.

Days later after having had both an enjoyable and successful outing the men radioed the pilot to return and retrieve them. On arrival the pilot quickly informed the two salesmen that his small plane would not support them, their equipment, and the added weight of all the “big fish” they had caught. A second flight would be required.

Now, the two sales pros were not interested in paying for a second round-trip. So after quickly conversing between themselves they promised to pack tightly and offered a bonus payment, against his better judgment the pilot reluctantly agreed to attempt the flight.

The sales reps leaned forward and grinned knowingly as the pilot struggled to force the aircraft into the air. Seconds later the plane stalled and crashed into a large, flat marsh at the end of the lake.

Fortunately there were no serious injuries, and after regaining their senses, one of the sales representatives shook his head to clear the cobwebs asked the other, “What happened?” The second also shaking his head replied, “We crashed on takeoff—about a hundred yards from where we ended up last year!”

Too often this same insane cycle of repeating past patterns of behavior, like the two sales reps, is followed by fast talking vendors as they look to create robust margins by selling that there is an easier way, a shortcut or modification that no one else knows about . They pitch a new flavor of Kool Aid that everyone will want to drink.

A recent example of this that comes to mind was when a colleague of mine described talking to a mobile vendor about getting an iPhone app for his financial institution. The institution had a fair amount of online banking penetration and was looking to expand its mobile offering. The price for the iPhone app was “free”. Now of course there would be monthly service fees but the installation would be at no cost.

What was the price of the monthly service fees? The cost was only 1.75 per user per month. The institution had around four to five thousand (paraphrasing here as I can’t remember the exact amount) online banking users hitting the web browser using an Apple product. Real cost of the “free” iPhone app was only 94,000 per year (4500 x 1.75= 7875 x 12 months) the cost for five years was only 470,000 dollars!

I realize everyone is excited about the buzz in new mobile technology. In fact in the first quarter of 2010 over thirty banks or credit unions launched new iPhone applications.

The value proposition for new mobile applications varies depending on who you are talking to. Early adaptors and tech centric advocates will swear it is worth any cost. On the other end of the spectrum those business line owners of brick and mortar branch networks will say it is a waste of capital. My opinion is that the value of the application is somewhere in between.

The real question is what do you need the application to do? Is the primary value for app the marketing buzz it will create? Are you simply looking for a cool factor that will resonate with a younger demographic? Maybe you simply need an iLobby application that links remote deposit capture and branch location to your existing mobile banking solution.

Knowing what you are trying to achieve helps you understand the value you expect for the initial investment and the ongoing variable cost. If the whole goal is to increase your mobile usage and to build up your member self access channels then you have to ask yourself does your basic mobile solution offer the features and benefits you need to accomplish that?

Much like the bush pilot who was lured with false claims and then crashed into the marsh we need to have a real understanding of what the sales reps are trying to bring onto the plane. For most credit unions a 500,000 dollar iPhone application that mimics their existing mobile solution is a weight that will only end with the plane crashing to the ground.


Practical Advice:


Do you see an advantage to be a first mover on expensive tech or is there an advantage to having a fast follower strategy that adopts tech after first movers pay for infrastructure build out ?