A visit to Chase and Umpqua branch-of-the future prototypes in San Francisco highlights two very different visions of the future of banking.
This article was originally published in BAI Banking Strategies on February 21, 2014
Few topics in banking inspire as much commentary as branch-of-the-future concepts, since it’s now generally accepted in the industry that today’s branch model is fated to go the way of the typewriter after the word processor made its debut. Everyone, it seems, has an opinion on what that future branch should look like.
Some clues to that format are likely contained in branch-of-the-future prototypes that some institutions are beginning to roll out. During a recent visit to San Francisco, I took the time to visit two of them operated by New York-based JPMorgan Chase & Co. and Portland, Oregon’s Umpqua Bank. Here, in the hopes of bringing the discussion back to street level from the 30,000-foot conceptual stage, are my impressions of these current efforts.
BY DAVID KERSTEIN AND RIC CAREY
Customer service programs that fuel measurable profitability improvement are those that are integrated into a bank’s overall operating rhythms.
Well executed service quality programs can have a significant positive impact on revenue and bank earnings. So why do so many banks believe they provide excellent customer service but still experience lackluster customer retention numbers, ho-hum net promoter scores and limited business growth?
The answer just might be that many customer service programs are not fully integrated within the total bank’s culture. It is often hard for financially-oriented senior managers to quantify the bottom line impact of specific service initiatives and tie them back to revenue performance. As a result, service is emphasized and is important, but remains just one item on a list of multiple priorities.
By contrast, at the most successful institutions, service quality permeates throughout the organization. It is not just a branch or call center program but rather a broad corporate strategy that includes a 360 degree integrated process that insures overall alignment with organizational objectives.
And it pays off, as can be seen by analyzing the performance of banks with a superior focus on customer service. They outperform peers in customer retention, depth of relationship and, most importantly, growth and profitability that result from deeper and more profitable relationships.
I grew up in a retail household. My father owned a small chain of retail stores, which my brother now runs. My daughter was store manager, and top salesperson, at a national chain of women’s apparel. I was the deviant in the family who became a banker.
It has become common for bankers to adopt the language of retailing. Banks refer to branches as “stores”. Wells Fargo talks about “sales per sq. ft.” of selling space. Although I spent many years running retail branch networks for some of the largest U.S. banks, I really learned the language of retail at the kitchen table.
Retailers know their sales numbers every day. The first question my father would ask was “did you make your number”, that is, were same store sales equal or better than last year (same week, same month, same year to date). You make your number, then you make goal, then you make stretch. And since every week stands by itself, it’s easy to bring large annual sales goals into bite size, achievable daily or weekly chunks — my daughter told me she was working extra hours because “we’re $2,000 behind stretch for the week”.
Retailers inherently understand the value of cross-sell. They think about “units per transaction”. “Do they need socks with those shoes?”, my father would ask. Then he would remind me how the customer would appreciate the extra service, and how much incremental profit was generated from simple add-on sales. Like McDonalds, super-size it.
Finally, successful retailers have a method to the way they sell. I asked my daughter why she was so successful at sales, and she explained “We have a sales protocol based on the best practices of our top sellers and our service promise. It lays out when to greet a customer, how to present products to them, how to cross sell additional units. I follow it, and it works. Others don’t, and they don’t sell as much.”
So…what’s all this got to do with banking?
Insist on a basic sales and service process. Expect that your branches will be merchandised correctly, that customers will be greeted, that tellers will prompt for needs and refer, and that platform reps will conduct a financial checkup with every sales and service transaction. Conduct mystery shops (just like most department and specialty stores) to insure it is followed.
Know the numbers — every day. If you wait until the end of the month or the end of the quarter, it will be too late to do anything about it. “How did we do today? How much do we have to do tomorrow?”
Make goals easy to understand. The Gap couldn’t function if there were separate branch sales goals for flat front khakis, pleated front, traditional jeans, etc. Many banks have so many product sales goals that they are confusing, and result in product push vs. relationship development. Have some primary goals, like total new primary checking household and total new loans, then some secondary ones (like unit cross sell and referrals) that help you get to heaven only after basic volume targets are achieved.
Give everyone their role. As a new accounts representative, I may not understand how I’m supposed to “grow average branch deposits $X million by year end”, but I can understand “open 3 new accounts every day.” If you only sell 2 today, then you need 4 tomorrow. Easy to understand, and easy to figure out how to get the one more sale needed to make goal for the week.
- Make your selling process an extension of your service. Too often we tend to think we are either in sales or service, but in reality we are all in both. If you have good service and competitive products, you should be looking out for more ways to serve your customers. And if you don’t have the quality of service or products that you’d feel comfortable recommending to your customers — then you have a deeper problem that needs immediate repair.
The small business market is large and very profitable. The average small business relationship generates 50% more revenue than retail “affluent” customers because deposit balances tend to be higher, and because business owners tend to consolidate their personal and business accounts at the same institution.
In most respects, small businesses behave more like consumers than middle market companies. 92% of small businesses are owner managed and they are heavier than average users of bank branches. Retail branch distribution is key to acquisition and retention of small business accounts — 56% of all new small business banking relationships are acquired through retail branches.
Distribution convenience is a key reason why 62% of business owners ultimately consolidate their accounts. However, business owners are almost 40% more likely to combine their relationships at the bank where they have their personal accounts, rather than the other way around.
One of our clients developed a very successful strategy to acquire small business accounts and grow revenue. The first step involved identifying business owners who had either a business or a personal relationship with the bank, but did not have both. Products were created which recognized both the combined business and personal relationships, and provided incentives for consolidation.
A similar effort was undertaken to identify businesses that were not customers but were located within the trade area of the bank’s branches. Different sales and marketing strategies were created based on the estimated profit potential of the relationship. Specific sales actions (who would call, how often) were key to this institution becoming the leading small business bank in their market – and growing branch generated small business revenue 41%.
Do you have the right strategies to grow small business relationships?
Simplify. Make it easier for both your customers and branch staff by offering small business accounts that mirror your consumer accounts.
Consolidate business and personal relationships. Identify customers who have either a business or personal relationship with the bank, but not both. Create target marketing and relationship recognition programs to consolidate relationships.
Create targeted new customer acquisition programs. Identify prospects in your trade area who are not customers. Leverage new data tools to predict which financial institution they currently use, and model potential account profitability — then fine tune sales prospecting to acquire your best prospects.
- Create focused distribution strategies. Improve the effectiveness of your small business distribution. Clearly identify your target market, then map the location of every target prospect. Create small business hubs based on customer and prospect concentrations — and develop distribution strategies that will extend your reach and market share.
After peaking at 99,550 branches in 2009, the banking industry has pulled back on bricks-and-mortar offices, with a 3.2 percent decline over the last 5 years. While the data establishes a quantifiable decline in bank branches, it does not indicate the beginning of the end of bank branches, a subject of speculation in banking circles since ATMs started showing up in large numbers in the 1970s.
I think that for almost all of my career, I’ve heard it’s the end of branches, and it hasn’t happened. Will the number will continue to shrink? Yes. Is it going to go down significantly? I don’t think so.
Jerry Siebenmark of the McClatchy Newspaper Group wrote an interesting article on this subject (with some nice quotes from us). For the full text, go to http://dld.bz/cSK5g
Two very different banks appearing at BAI Retail Delivery 2013 show how marketing success depends on utilizing each institution’s competitive advantages.
(This article was originally published in BAI Banking Strategies on October 25, 2013)
Big banks, small banks. Occasionally the differences are glossed over. Small bank leaders may overestimate their ability to replicate a large bank technology play. Large bank leaders may underestimate how impersonal the bank might look to someone accustomed to a true community bank.
But just as often, the differences are exaggerated, as in: It takes huge scale for a bank to afford sophisticated marketing. Or: Large banks’ customer-centricity programs are but a pale imitation of community banks’ natural customer intimacy.
The truth is more elusive, as will be demonstrated in a session at the upcoming BAI Retail Delivery 2013 entitled “Changing the Rules: Marketing Strategies that Grow Sales and Revenue.” In this presentation, moderated by me, two very different banks demonstrate that the ability of any institution to thrive depends entirely on what each does with its natural competitive advantages and how it shores up its disadvantages. Rockland Trust in Eastern Massachusetts has just under $6 billion in assets and 77 branches. At the far side of the size spectrum is Fifth Third Bank, the country’s 12th largest with $123 billion in assets and more than 1300 banking offices in 12 states.
Both institutions were bent on achieving significant improvements in sales and revenue, and among their first commitments was that of listening carefully to their customers before making product, service and price decisions. On paper, “listen to our customers” sounds the same at both institutions. But how this maxim played out had very little in common – except in stellar results for both.