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As consumers and small businesses shift to alternative channels, it is critical that financial institutions improve the operational and sales efficiency of the brick and mortar channel. That means fine tuning every point of contact to optimize effectiveness.

 

Financial institutions of all sizes are facing challenges to their retail branch system. j0177737Technological innovation, starting with the introduction of ATMs, then internet banking, and most recently mobile banking, has resulted in declining branch usage. Consumers and businesses don’t need to go to the bank as frequently as they did in the past now that routine monetary and service transactions can be easily handled on a personal computer or smartphone.

 

Consumers want branches, but declining usage is reducing sales opportunities and revenue growth. As routine servicing and monetary transactions continue to migrate out of the retail branch, the fundamental nature of bank branches must undergo a dramatic transformation.

 

The bottom line is that, with fewer teller transactions, branches must become more efficient as sales and marketing centers. This can be achieved through greater micro-market targeting of marketing messages in order to maximize the sales opportunity from limited branch traffic and to optimize trade area sales penetration.

 

Up to now, many financial institutions have employed a one-size-fits-all strategy. Branches are often similar in size and style with limited differentiation. More importantly, marketing strategies are frequently implemented uniformly across the network with limited variation of messaging based on unique branch or trade area characteristics.

Improve Revenue with Targeted Strategies

 

Moving forward, financial institutions need to adopt a more sophisticated “Rubik’s Cube” approach where messages are specific to the trade area market opportunity. This should form part of a comprehensive system that uses both market and internal data to create a sales and marketing protocols

 

It is critical to have a comprehensive view of the opportunities in each trade area in order to inform both sales and marketing strategies. At leading institutions this goes beyond basic demographic data to include specific product messaging based on: trade area lifestyle segmentation; product-specific growth opportunities (which products are under-penetrated within the trade area); and day-part customer arrival information (which messages are most effective at which time of day).

 

The table below reflects a very simplified, high-level summary view of an analysis conducted for a regional bank. This formed the basis for coordinating product messages and message styling (language, family depiction, etc.)

SIMPLIFIED TRADE AREA ANALYSIS EXAMPLE

Characteristic

Branch 1

Branch 2

Branch 3

Branch 4

Wealth Segmentation

Affluent

Mass Market

Lower Mass

Young Urban

Lifestyle Segmentation

Older, family and retired

Family lifestyle, children at home

Young families, retired

Singles, small families, LGBT

Racial/Ethnic Mix

88% Caucasian, 9% Asian

63% Caucasian, 17% Hispanic

47% African American, 23% Hispanic

55% Caucasian, 19% Hispanic, 8% African American

Business Density

Moderate

High

Low

Very High

Primary growth opportunity

Investment

Basic banking

Basic banking

Business Banking

Secondary growth opportunity

Personal loans

College Savings, Home Improvement

Money transfer and other fee based services

Home purchase

 

Getting Started

 

Conceptually it makes sense to have a comprehensive view of trade area opportunities as a basis for defining targeted messaging strategies. But how should you get started?

 

Banks normally have a wealth of information on customer and branch characteristics. It’s likely that you already have most of the information you need, and certainly it is readily available from external sources. The challenge is finding and organizing this into a useful scheme that can then be used to drive the creation of hyper–localized messaging at the branch level.

 

The first step is to create a meaningful framework for obtaining, organizing and using your data. Start by determining the categories of information that will be most helpful in differentiating branches for messaging purposes. Looking beyond basic customer demographics, here are some questions you might ask:

 

  • Does your bank already use a customer segmentation methodology that can be applied to the branch network to identify and target particular segments and needs by location? If not what customer data do you hold that could be leveraged to create locally relevant messaging?

  • Do you hold data about the branch itself that could be leveraged? For instance availability of specialist staff, upcoming events, queue durations at different day parts or branch service levels?

  • Is there data on the wider branch catchment area that could create meaningful local messages – such as number of local businesses helped by the branch team, or distance to the nearest alternative branch?

  • Do you have a way of measuring the potential growth in products and services in the local market, so you can focus your efforts on those where customers have a propensity to buy vs. those which may be over-penetrated?

  • Do you have a process for defining branch trade areas so you can assure the data you measure, and the outputs you deliver, are specific and applicable to each location?

By asking these and similar questions you can identify specific data that can form the basis of a targeted strategy.

 

It’s important that the strategy reflects your broader marketing objectives and can be practically implemented. When localized and relevant messaging acts to support wider marketing and sales goals, you have the greatest opportunity to maximize effectiveness.

Summing up

 

Despite all the discussion about “the death of branches”, the fact remains that bank branches are here to stay. There are approximately 97,000 FDIC insured bank branches in the United States, and about the same number of credit union facilities. Even assuming an aggressive 1% annualized decline, the bank branch will still be the dominant financial services distribution channel for the foreseeable future.

 

As consumers and small businesses shift to alternative channels, it is critical that financial institutions improve the operational and sales efficiency of the brick and mortar channel. That means fine tuning every point of contact to optimize effectiveness.

 

 

 

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