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Differentiation great in theory, but tougher in execution. Banks basically more similar than dissimilar. Can community banks differentiate themselves from larger banks based on price? This often is a futile if not self-destructive practice, although not always. What about differentiation through service excellence? Certainly, but few are not trying to do this. Clearly the challenge in differentiation through service is providing services your competitors cannot or will not provide. How about differentiation of products? Are there products community banks can offer that larger banks don't have and won't offer? Absolutely. Differentiation through price, service and product is attainable by community banks if they leverage their size advantage.
Community banks, by virtue of their size, have a distinct advantage over their large bank competition. As Johnathan D. Holtaway states in the National Banking Report: "There is no question size counts, but it is equally obvious that excessive size can dampen creativity and create inefficiencies to the extent that some very large companies become competitive dinosaurs. Also becoming increasingly evident are some of the advantages of specialization over a more conglomerate approach to the delivery of financial services."
Differentiation from large banks can be achieved when community banks leverage their size advantage to develop niche products and services. Community banks need to become "financial boutiques," acutely sensitive to the particular needs of their defined customer base. In-house check printing...
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