NEW YORK -- More than 250 commercial banking executives in a recent survey ranked customers knowing they have more bargaining power than ever before as the most critical challenge facing their banks.

Simon--Kucher & Partners, a consulting firm on pricing strategy, surveyed commercial bankers to find out the most important trends in the industry and which strategies managers use to increase profitability during these turbulent times. Customer bargaining power ranked above decreasing liquidity or higher costs, the data showed.

When asked how their organizations are dealing with the increased customer bargaining power, most executives listed lowering rates and increasing advertising efforts to gain new customers. However, by doing this, managers are only making the situation worse.

"Instead of focusing more on prices, decision makers should emphasize the value they deliver and develop new segment-specific price structures that make them less comparable to the competition," said Jens Baumgarten, partner and head of Financial Services North America for Simon-Kucher & Partners.

Customer bargaining power has increased due to regulatorychanges and access to information, which has increased price transparency, the survey revealed. As the economy worsens, competitors also are promoting heavily on price.

Instant Insights /

Commercial Bankers Rank Customer Bargaining Power Biggest Challenge

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