This article was originally published in BAI Banking Strategies on Nov. 21, 2012
Effective bank-at-work programs require a target market strategy, relationship sales process, segmented offers and deep penetration of the employee base.
“Bank at Work,” or workplace banking, is not a new concept but it’s one that may deserve a second look from growth-starved bankers since best-in-practice banks have embraced this strategy to drive as much as between 40% and 60% of all new consumer accounts. And the time is definitely right for this renewed attention. Fewer customers are coming into bank branches as preferences shift to alternative channels. At the same time, traditional media and direct response is becoming less efficient as a means of acquiring and converting prospects. In this environment, bank-at-work can be a highly effective and efficient acquisition channel by reaching prospective customers at their workplace.
Our analysis of over 20 workplace banking programs suggests a clear roadmap for building successful programs. We surveyed a broad spectrum of financial institutions, from Top 10 to super-community banks. Some had developed highly innovative solutions that enhanced their ability to penetrate the bank-at-work channel. Others, who were equally effective, simply maintained a clear eyed focus on basic executional excellence.
One clear lesson: not every company is a strong prospect for bank-at-work programs. This should be no surprise; nearly every institution we surveyed claimed to have a strategy that targets certain industry groups, or companies of a certain size. We were surprised, however, at how few banks actually executed effectively against this strategy.
Best-in-class institutions identify the type of industry, mix of higher wage (managerial) vs. lower wage employees and the size of company they want to focus on based on their customer strategy. They not only provide overall strategy guidance and direction, but typically pre-select specific company targets that fit their profile for quality accounts.
By contrast, we found that banks with lower performing programs leave far more local discretion for targeting accounts. Without a clearly defined process and strategy, they were more likely to succumb to pressure to boost the raw numbers of new companies acquired into the program and employee accounts opened. They usually defaulted to calling on local targets of opportunity, such as retailers and other companies with a high mix of lower wage, more transient employees. This resulted in smaller average account balances, acquired with discounted bank-at-work pricing, which is not a prescription for success.
Traditionally, banks have targeted their own business banking customers and relied on commercial lenders and relationship managers for introductions and access. Some banks we spoke to even defined their primary target market as their own commercial relationship managers. While leveraging these internal resources will certainly enhance effectiveness, few banks in our survey made this work seamlessly. Operating silos and limited cross line-of-business access to commercial banking relationship databases can create barriers that are difficult to overcome.
On the other hand, our analysis also indicates that an over-reliance on a strategy that focuses only on cross-selling the bank’s own customers can create limitations. The best targets for bank-at-work may not be your corporate customers. The most successful institutions in our survey did not let this become a barrier, however. They defined their target market and focused on the specific companies they wanted to penetrate, irrespective of whether they were a customer of the bank. Of course, if they were, all the better.
While commercial relationship managers can provide effective avenues for introductions to targeted companies, their principal contacts at those companies may not be the decision maker for bank-at-work programs. Workplace banking is first and foremost an employee benefit and that means the decision maker is often the Human Relations (HR) director whose motivations for “buying” employee benefit programs is usually heavily weighted toward customer service, quality of life improvement, reduced absenteeism and other non-financial factors. In addition, companies may already have corporate programs with non-bank providers for retirement planning and investment that are targeted at more highly compensated executives, limiting the bank’s opportunity to penetrate this lucrative segment.
Best practice banks segmented their offers to address the needs of all levels of employees: senior management, middle management and the broad (mass) employee base. But more importantly, they provided specific packaged benefits that differed from the traditional branch offering. After all, if the answer to the question “What do my employees get if we sign up with you” is essentially “The same as everyone else, but with a discount” then all you’ve done is cut your pricing. Financial institutions with strong bank-at-work programs have proven that it is not necessary to offer pricing incentives if the program benefits are well designed. Non-financial benefits are not only more appealing to corporate decisions makers but also enable financial institutions to maintain pricing discipline.
Selling bank-at-work programs to corporate decision makers and coordinating service delivery strategies takes a higher level of skill than traditionally found in most branches, and that’s why the most successful companies in our survey relied heavily on specialists who focus exclusively on this channel. They were responsible for signing up and on-boarding companies that fit the target profile, coordinating with commercial relationship managers and managing ongoing strategies to create deep penetration of the management and employee base. As one senior manager at a large financial institution put it, “Branch managers simply don’t have the skills – you need specialists.” Branch staffers are more likely to be utilized to support ongoing service delivery, such as providing regular on-site support to sign up new employees and service existing customers.
Finally, as the old saying goes, you get what you measure. Critical to ultimate program success is a holistic dashboard that looks at all the key elements, such as target companies acquired, percent of company employees acquired by segment, average balance account, program profitability and return on investment (ROI).
In summary, there is a definable roadmap for success in workplace banking. It requires focusing on a specific target strategy and supporting it with the right sales resources. Integration with corporate banking relationship management can significantly improve results but is not the only avenue to success. Creating long term value requires an employee segmentation strategy to achieve a balanced mix of account relationships, with benefits for all staff levels. Ultimately, achieving the very real economic potential of this channel requires moving beyond the initial company sign-up to a long term, disciplined channel strategy that builds deep penetration of the employee base and high share of their household financial relationships.