However, in the recent years, India's banks and specialized players in the financial industry seem to be convinced of the business benefits in leveraging each other's strengths: banks had reach, and specialized players had non-banking financial products that the banking population wanted. Hence, by forging B2B partnerships, banks today sell insurance, mutual fund, derivatives, and many other many specialized financial products.
But, did banks think thoroughly in terms of what VALUE their B2B partnerships going to add to their products and services, is a big question mark.
Banks have their own gross products: advances, deposits, fee-based services, treasury and cash management services, and so on. But they also have what can be called as subtle products - the intangible factors like "customer trust", "customer experience", "ambiance", "friendliness of staff", etc that hugely influence buying decision of customers.
In the case of banks, "customer trust" is one of the subtle products. In India, banks are the largest mobilizers of deposits and savings, because they - especially public sector banks - traditionally enjoy enormous customer trust.
When banks forge B2B partnerships they should think of value-addition that is going to happen to their gross as well as subtle products. When banks sell a third-party product, it can help banks fill a few gaps, but it can also erode the value of subtle products.
Writes Mr Joiel Akilan, Executive Director and Chief Representative – India, BBVA, a multinational Spanish banking group, in a newspaper article: "Well respected banks lost their credibility by selling products such as complex derivatives or collateralised debt obligations which neither understood by them nor their customers." The banks, he believes, have actually "mis-sold products which were of no use to customers".
Barista and Penguin Books
Let us look at a case of how B2B co-creation can impact business, by analyzing Barista India, one of India's leading specialty coffee chain, had recently entered into a partnership with Penguin Books. As per the arrangement, Barista would host Penguin's book launch events in its store. The authors will be available to interact with, and autograph books for, Barista's customers.
Obviously, the Penguin partnership is not going to do anything to Barista's main product: cappuccino, for instance. But it can add value to Barista's subtle product: "in-store customer experience". Coffee and books have some connections: it is rare to find someone read something without something to eat/drink.
Though for a specialty coffee house like Barista, coffee is a core gross product, they don't sell just that. According to a Rabo Bank report: "Rajaccino, The Rise of Coffee Culture in India", coffee beans account for just 8% of the sale price of a coffee product like cappuccino. Then what are customers paying for? "Sourcing of other beverages, food, and merchandising all form an essential part of the coffee shop experience," the report says. Clearly, the in-store experience of customers is a subtle product for specialty chains that have established themselves as hangout places. And bringing books into table does add value to customer experience, the subtle product.
It seems financial professionals who are teasingly referred to as bean counters can get some inspiration from people who grind coffee beans and expand the horizon to look at partnership opportunities to co-create subtle products such as: customer trust, reach of bank branches, and in-bank customer experience. Even when they pursue partnerships for co-creating gross financial products, care should be taken that such partnerships do not mess with their subtle products.