If customer service gets great lip service at your bank, but short shrift from IT, there might be a good reason: lack of solid and usable metrics behind the business case.
This article was originally published in BAI Banking Strategies on April 22, 2013
Providing superior customer service has been a key differentiating strategy for many financial institutions. After all, we are in a service business and service quality matters. But measuring the payoff has been elusive. We know it’s the right thing to do but can we measure how our investments in customer service really translate into bottom line impact with the same discipline that we apply to other aspects of our business?
One problem is the way we describe service quality. “Wow,” “delight” and “Disney-style” are usefully descriptive adjectives but what do they really mean in a service context and how do they impact the bottom line? An even bigger issue, in our experience, is the lack of disciplined metrics and financial models that link these investments to financial return. How can management measure the return on investment (ROI) from the human, Information Technology (IT) and capital resources required to attain higher levels of service?
As with any other investment, management needs tools to quantify impact and prioritize investments in a disciplined way. Without them, we are forced to navigate by touch and feel, responding by instinct and emotion to determine what customers want and value, rather than managing with facts and metrics.
Branch acquisitions can be a fast route to market share, but today there are more reasons than ever for buyers to approach branch for-sale signs with a long checklist and a cautious attitude.
This article was originally published in BAI Banking Strategies on March 15, 2013
BY TOM ZAYKO, Director, Peak Performance Consulting Group
With the expansion of digital channels, a decline in branch traffic and the current industry focus on controlling costs it’s not surprising that some financial institutions are reducing their branch network. In 2012, over 700 branches were closed. Institutions with large branch networks, such as Bank of America Corp., HSBC and SunTrust Banks Inc., have all announced significant branch closings.
Community banks see this as an exciting opportunity to acquire attractive sites and expand market share – and, in many cases, it can be. But given limited capital and changes in the ways consumers and businesses are using branches, how should banks approach this opportunity?
Our view is that too many institutions become enthralled with the real estate “deal” and sometimes overlook strategic implications of their investment. Competition for an attractive property in an appealing market makes it easy for buyers to be seduced by aspects of the branch that ultimately will have little to do with whether it will turn a profit.
While physical branch presence is still valued by consumers and businesses, its utility is declining. The trend is undeniably moving toward greater use of non-branch channels, such as the call center, online and mobile. That raises the relative cost of the branch per customer served and makes for a tougher business case for a branch buyer.
As we see it, a “look-before-you-leap” approach is in order:
Ned Miller and his team at MZ Bierly Consulting have worked with several of our clients and we are always impressed by their business banking acumen.
Guest post by Ned Miller, MZ Bierly Consulting
They don’t spend enough time with average performers. Sales Managers like to hang around with their best people; high performers remind them of themselves! (They also have massive recognition needs—”Hey, boss, let me tell you what I just did…”) Chronic low performers also command attention—often an exercise in futility. Who gets left out? The 70% of the sales team whose performance could probably benefit most from coaching.
This article was originally published in BAI Banking Strategies on February 15, 2013
As customer transaction activity declines in branches, hyper-local sales and marketing strategies are required to bolster branch network profitability.
Former U.S. Speaker of the House Tip O’Neill famously coined the phrase “all politics are local”, expressing the need for successful politicians to understand and reflect the concerns of their local constituents. And the same sentiment couldn’t be more true for banks and bankers. In this era when consumers and small businesses are migrating away from physical bank branches, it is even more critical for banks to be relevant to the communities they serve.
It is clear that customer still value branch presence. Almost two thirds of consumers identify branch convenience as the primary reason for choosing their bank. But it is also clear that channel preferences are changing. Transactions conducted in bank branches are declining 5% to 6% per year due to direct deposit, debit, electronic bill pay, remote check capture and other methods of check displacement. And shrinking branch traffic means fewer sales opportunities, with new accounts opened per branch full-time employee (FTE) declining year over year.
While retail branches may have diminishing value for transaction processing, they remain the primary driver of customer acquisition and consultative sales. Most new household relationships are still opened face-to-face, not through remote channels. Business customers are also dependent on branch-based services.
There is a valid argument about optimal branch network configuration, i.e. the appropriate number of branches and the mix of self-service vs. in-person delivery. But there is no doubt that physical presence to serve geographically defined communities and trade areas is still basic “table stakes” for being in the game.
Tom Zayko and Ric Carey, Directors at Peak Performance Consulting Group, were interviewed recently by SNL Financial. To them, banks are overemphasizing expense reduction efforts at the cost of engaging with customers — interactions that could lead to greater, more profitable relationships. Zayko and Carey propose leveraging the branch network to make it a more effective transaction point with customers, marrying data about channel usage and current products to customize offerings. They encourage banks that have been focused on cost cutting through branch optimization and investments in technology to try a different tactic: talking to retail and small business customers and tailoring services and packages to their needs.
This is a modified version of the SNL Financial article.
What is your read on 2013 so far and what do you think will be an area of interest for banks?
We are continuing to see mobile devices, like Square and Intuit’s GoPayment, displace traditional credit card terminals. While initially targeted at smaller merchants, they are now moving upstream.
The mobile wallet (using smartphone applications for payment) looks to be the next frontier for smartphones as a means of payment by the consumer. Starbucks, for instance, allows customers to pay for their purchases using Square Wallet — the same company that offers the Square card reader. There are also efforts under way by some companies to allow consumers to use their smartphones at a cash register as a substitute for a credit or debit card.
Jerry Siebenmark of the Wichita Eagle/McClatchy News Group wrote about these trends recently (with some nice quotes from us).
Although the ultimate winning technology is unclear (EMV? NFC?) it is clear that people are using mobile phones to make payments and transmit them in some way. For banks that make money from merchant processing, Square and other card readers threaten to take business away from them, or dilute the number of players in that space. Longer term, it also changes how consumers use bank branches – it is one more service that lessens businesses’ and consumers’ need to use a bank facility.