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This article was originally published in The Financial Brand on March 6, 2014 and was co-authored by David Kerstein, President of Peak Performance Consulting Group, and Nancy Radermecher, President of JohnRyan

 

Here’s how to make use of sophisticated branch data analysis in the creation of targeted marketing messages, and why this is important in adapting the branch for the future.

 

The Branch Transformation Imperative

Consumers are changing the way they bank. Research by the Philadelphia Federal Reserve Bank and others indicates check-writing activity has been declining at a rate of 5-7% annually, creating less demand for branch monetary transactions. Meanwhile, routine transactions that had been branch-centric are being disintermediated by the Internet, mobile and call centers.

 

According to a report by FMSI, branches process roughly half the transactions they did 20 years ago, with branch transaction volumes declining by 45.3% since 1992. This figure is likely to be considerably higher for banks that have aggressively implemented alternative channel delivery strategies.

 

Although consumers are using branches less, they still place a high value on bank branch convenience. Local branch presence is a primary reason consumers choose a bank, while customers consider easy access to branches and ATMs one of the features they value most.

 

Financial institutions face a basic conundrum: 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.

 

Branches will still be the primary vehicle for customer acquisition and consultative sales, but they must adapt to focus less on teller transactions and more on more complex advisory services. Successful financial institutions will implement more robust front line tools to enable staff to deliver better customer service, stronger profitable cross-sell, and achieve greater share of wallet.

 

The bottom line is that, with fewer teller transactions, branches must become more efficient as sales 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.

 

Improve Revenue With Targeted Strategies

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.

 

Usually, messaging is two-dimensional (for example, Spanish language signage in selected locations). But “best practice” institutions are improving revenue by tailoring messaging in a more efficient and impactful ways.

 

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 messaging 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 promotions and sales goals, you have the greatest opportunity to maximize return on marketing investment.

 

Turning targeted strategies into local messaging

The use of more sophisticated branch data analysis to define a targeted content strategy is the first stage in adapting the branch to become more efficient sales center in the face of reduced branch traffic.

 

But how do banks go beyond this to bring hyper-localized messaging strategies to life across the branch network?

 

Digital signage has long been heralded as the answer. With its promise of centralized content control and high speed and cost efficient delivery of messages to market, digital signage appears to offer the perfect means of delivering locally tailored messaging at the branch level.

 

Yet, many banks have struggled to successfully achieve the highly granular message targeting promised by the medium. Affordably achieving high levels of granularity at scale, within the rigid security and operation confines that typify financial institutions has proven more complex than many banks originally expected.

 

In part two of this series we explain how banks can successfully overcome this complexity and use digital signage to deliver meaningful message relevancy by sophisticatedly harnessing bank data.

 

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.

 

Today, financial institutions have the opportunity to define highly effective strategies that are localized to the branch level. With the implementation of digital messaging infrastructure, these messages can be delivered to the right place, at the right time, to maximize sales and marketing impact.

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