The Schwab Pricing Tsunami: What it Means for Strategic Marketers

Remember that old adage: “Loose lips sink ships?” Well, the word is out: the high seas battles between the trading ships known as Schwab, E*Trade Financial and TD Ameritrade have begun. And if you are a strategic marketer, your periscope is watching this duel closely.

Last week, these three online trading juggernauts announced commission-free trading. For some online firms, this created a single-digit hit to revenue projections. For others, double-digit dips are underway. In fact, TD Ameritrade’s stock price plummeted more than 25% in response to this bold pricing strategy.

Suddenly their revenue structures are dramatically different, and their course towards profitable growth is unclear.

Nimble “Zodiac boats” such as Robinhood, Acorns, and M1 Finance are running circles around these established players. These VC-funded startups began to offer free trades in 2013. They may be cash-burning, unprofitable startups—but that could soon change.

Think about that. It took Schwab SIX YEARS to raise their periscope and act on the threat.

If you were the CMO of any of these established online trading firms, what new revenue-generating strategies would you recommend? How long would you wait?

Consider these three proactive pricing strategies to stay afloat:

Activate recurring revenue waves (subscription). SaaS companies have deployed this strategy for nearly a decade. Adobe led the charge when they dropped support for Creative Suite Software. They essentially forced their customers to switch to a subscription model. Netflix, Weight Watchers, Peloton, and others have mastered the strategy (although some of their other business strategies have not been consistently successful). If you want a masterful, in-depth study of this pricing strategy, grab a copy of The Membership Economy: Find Your Super Users, Master the Forever Transaction, and Build Recurring Revenue by Robbie Baxter. She teaches us why many of today’s customers no longer want the burden of owning products. They want special access.

Go deep. Look for underserved sub-market segments who have money to invest in solving big problems. Listen to how your customers describe their niche. In lieu of calling themselves a food and beverage industry member, they will specify “fast-casual.” Or “fast fashion” (H&M) versus “retail.” These segments share common unsolved problems. If you step forward and help them address it, they can become fiercely loyal to you for years to come!

Watch for how Schwab progresses with its new revenue model by going deep into a new sub-segment. In July, they purchased USAA’s wealth-management services.

If you pride yourself on being a sales-driven company, beware. Stay on guard. When the leadership team announces that they will be focused on a specific industry segment, sales teams could easily take you off course, leading to longer sales cycles and resource fatigue.

Consider “rescue-crafting.” In the naval realm, these can be 2-person inflatables. They may also include larger Naval, fire rescue or Coastguard ships with advanced imaging technology that can spot submerged items.

In the business world, you might identify smaller startups whose profits are tanking. Perhaps they are losing customers because they grew too quickly. In other cases, they need a cash infusion or a market share boost.

In the case of ailing Hertz Rent A Car, they discovered in 2016 that a subset of ride-hailing drivers were ideal prospects. These drivers prefer not to pay liability and damage protection, standard maintenance and roadside assistance costs.

In lieu of going head to head with these disruptive ride platforms, Hertz and Avis forged rental partnerships with Uber and Lyft to serve these drivers. Now, this subsegment is considered a significant and profitable growth accelerant. By year-end, Hertz plants on having 50,000 vehicles in its ride-share fleet. In this case, speedboats Lyft and Uber may just prevent the huge cruise ships from capsizing.

In times of rapid disruption, these three pricing and partnering strategies could be your lifeline—and save you from a price plunge.

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