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Improving Customer Relationships

Ric Carey, Director Peak Performance Consulting Group Graduate School of Banking at Colorado Boulder, Colorado July 22 – 25, 2013


• This course will focus on the intricacies of relationship banking as it applies to Retail and Small Business customer segments

• Subjects that will have a meaningful impact on your institution as you strive to sustain excellent financial performance

• Investigate alternative strategies and tactics to achieve market superiority and to remain relevant to your customers

• Understand the dynamics of many integrated systems, products, delivery channels, customer segments, marketing strategies, branching models, customer profitability and differentiation strategies.

Peak Performance Consulting Group, Inc. | 512-607-6332 | page 1

Improving Customer Relationships CURRENT MARKET ISSUES FACING FINANCIAL INSTITUTIONS

4-5% reduction per year

Online banking, mobile

banking, & remote deposit

Branches

& ATMs are 65% of cost structur

e

Reg E. to decrease

fee income by 19% or

$7.9B


How do we get better at understanding our customers and improving customer relationships? By selecting the appropriate Consumer and Small Business

segmentation By creating value propositions to integrate products, service, delivery

and customer communication By providing seamless delivery through all bank delivery channels By providing exceptional customer service through well trained and

empowered staff By creating Marketing programs that target the right customer with

the right product through the right delivery channel By building Brand Value By creating a differentiated delivery model By providing for a well trained staff


Improving Customer Relationships - Agenda

Day 1 Consumer and Small Business

Segmentation Building the Value Proposition

Day 2 Customer, Product and Segment profitability. Alternative Branching Strategies New Branch designs Branch Technology Impact of Mobile Banking

Day 3 Staffing models Predictive modeling and Data Base

management Marketing strategies Service quality programs

Day 4 Sales management and Training Differentiating your Institution

– Product, Technology, Service Quality, Convenience, Price, etc.

Brand as an Asset

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Improving Customer Relationships: Changing Paradigms

The Old Paradigm Mass Marketing Everything to Everyone Relationship Management/Credit Focus Product Sales Focus

The New Paradigm

Targeted Segment Driven Marketing Credit and Wealth Management Focus Predictive Modeling and the Neural Network Segment Value Propositions Total Customer Relationship Management

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What Can Segmentation Research Provide?

Better understand client and prospect opportunities Demographics Profitability Product usage Attitudes Behaviors

Utilize data to improve effectiveness and efficiency Target the right prospects Build deeper relationships with the right customers Align products and services with expected profitability

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Developing Your Segmentation Plan

External Analysis: Small business definition Market research Competitive environment

Internal Analysis: Profitability measures Householding efficiency Organizational structure Marketing support Client management process Delivery channels Products, packaging and training Sales force expertise and incentive plans

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Segmentation Goals

Segments are sufficient size Market demand and market potential can be measured Members of the segment are reachable Members’ behavior similar within segment and differ from other segments Ease of implementation at local level Deliver the right products and services to the right clients using the right delivery channel at right cost

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Alternative Consumer and Small Business Segmentation Strategies

Segment plan options: Demographics Behavioral Contribution tiering Life cycle Needs based segmentation

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Alternative Small Business Segmentation Strategies Typical Small Business Segment plan options:

Small Business segmentation plans normally center around Demographics, Profitability/Loan-Deposit size, Delivery Channel preference or Life Cycle Demographics: Industry, Annual Revenue, Age,

Number of Employees Profitability: Current Profitability, Loan size,

Deposit size Delivery Channel Preference: RM, Branch, On

line, Remote RM Life Cycle: Start up, Growing, Mature

Small Business Segments: Defining the Size of the Sector

Number of employees? Owner focus and management structure?

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0% 20% 40% 60% 80% 100%

Number of Employees

Employment Size of Employer and Nonemployer Firms

0 (Sole Proprietor) 1 to 4 5 to 9 10 to 19 20 to 99 100 to 499 500+

All Firms: 27,281,452

Source: US Census Bureau, Statistics about Business Size

Nonemployers Small

Employers Corporate

Firm Type Number of Firms Sole Proprietor 21,351,320 1 to 4 employees 3,617,764 5 to 9 employees 1,044,065 10 to 19 employees 633,141 20 to 99 employees 526,307 100 to 499 employees 90,386 500 employees or more 18,469

Nonemployers

Small Employers

Corporate


Small Business Demographics

Emerging (sub-set of

other categories)

$100K Or Less

$101K - $500K

$501K - $2MM

$2MM - $10MM

Median Sales 120,000 50,000 300,000 920,000 4,320,000

Market Size 6% 25% 35% 23% 11%

Median No. of Employees 2 3 3 9 25

Median Years in Business 2 16 16 17 23

% Minority Owned 55 30 27 15 17

% Corporations or LLC 22% 39% 67% 80%


Small Business Product Usage

89.0%

36.8% 35.6%32.0%

29.3% 29.1%26.7%

21.4%19.2%

17.7%15.7%

14.1%11.9%

9.2% 8.8%5.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

BusChkg

PersCreditCard

Line ofCredit

BusCreditCard

BusSavings

TransactSvc

Veh Fin O wnerLn

EqpFinance

Trust Leases O therCm Ln

CashMgt

ComMortg

CreditSvcs

Broker


Sample Small Business Needs Based Segmentation Plan

Banking Center Relationship Management

Remote Relationship Management

PROFITABILITY

High Value

Low Med High Low Med High Low Med High

Medium Value


Low Value


Delivery Channel

Based on Delivery Channel Preference – Overlay of Value and Potential

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Sample Small Business Client Management Plan based on Client Profitability

Current Customers (29,594 Households) Small Business

Sub-groups Sales Size

Annual Pre-Tax Contr.

Group A ANY >$1000

Group B >$1MM <$1000

Group C $500K-$1MM <$1000

Group D 0-$500K <$1000

Prospects (62,000 Households) Small Business

Sub-groups Sales Size

Annual Pre-Tax Contr.

# of HH’s Within Group

Group A >$1MM >$1000 6,200

Group B $500K-$1MM <$1000 15,500

Group C 0-$500k <$1000 40,300

Small Business Client Group: Sales size up to $5MM; Loans < $175K or Loans + Deposits < $275K

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Small Business Segmentation Strategies

Which Small Business Segmentation Strategy would work best in your organization? Why?

What changes would need to be made to the following areas in your organization to make the plan successful?

Small Business network and staffing Branch network and staffing Loan processing / approval Training Relationship management Product set Incentive programs Online / mobile

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Alternative Consumer Segmentation Strategies Typical Consumer Segment plan options:

Consumer Segment plans center around Life Cycle, Demographics, Product, Delivery Channel, Profitability or Income/Employment Life Cycle: Minor, Student, Young adult, Maturing

adult, Senior Demographics: Age, Rural, Urban, Home

ownership, renter Product: Loan or Investment driven, Balance

driven Profitability: Current and/or Potential Profitability Income/Employment: Professional, Laborer, etc.

18

Consumer Segmentation Strategy based on current consumer loan and deposit balances

Segment A PREMIER TOP 20%

Segment B MASS MARKET 80%

Segment C HIGH VALUE PROSPECTS

Segment D MASS MARKET PROSPECTS

Characteristics Deposit and Loan consumer households that fall within the top 20% of balances

All remaining consumer households

Target the top 20% of consumer prospects that model to be high value potential

Remaining 80% of consumer prospects

% of clients

Estimated at 13,800 consumer households or 20% of consumer clients

Remaining 80% of consumer clients

% of profitability

Estimated at 85 to 90% of consumer profitability Potential for growth is excellent

Estimated at 10 to 15% of business profitability. Potential for growth is excellent plus

80% of potential profitability

19

Consumer Segmentation Strategy based on Life Cycle

Segment A Student

Segment B Young Adult

Segment C Maturing Adult

Segment D Senior

Characteristics Age 18 to 23 Basic deposit needs On-line Mobile focus Student loan

Age 23 to 40 Deposit, loan and home mortgage focus Growing family

Age 41 to 60 Building wealth Investment focus Empty nest

Over 60 Retirement package Social Security

% of clients

10% 30% 30% 30%

% of profitability

5% 35% 35% 25%

Numbers for example only

20

Consumer Segment Deposit Analysis

Total deposits = $708MM (includes savings, time and DDA)

Top 2% - 1,112 clients = 32.5% of total deposits Top 10% - 5,565 clients = 71.9% of total deposits Top 20% - 11,130 clients = 86.7% of deposits The average household deposit balance for the top 10% of clients is $87,691 The average household deposit balance for the top 1% of clients is $268,140 Actual data, bank source disguised

21

Consumer Segment Loan Analysis

Total loans = $743MM Top 10% - 1,243 clients = 36% of total loans Top 20% - 2,110 clients = 57.2% of total loans

The average loan balance of the top 10% of clients is $214k The real estate loan balances distort the true consumer loan concentration. Without R/E loans, the top 20% would equal >80% of total loans Actual Data, Bank source disguised

Consumer Segmentation Strategies

Which Consumer Segmentation Strategy would work best in your organization? Why?

What changes would need to be made to the following areas in your organization to make the plan successful?

Branch network and staffing Loan processing / approval Training Relationship management Product set Incentive programs Online / mobile

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Improving Customer Relationships Building the Value Proposition

Products What products will be featured for the consumer or small

business customer segment? Service What level of customer service will be provided – Premier

or 1-800 anybody? Delivery How will you deliver products and services to this

segment? Relationship manager, branch, alternative delivery, etc.

Communication How will you communicate with this customer segment?

Personalized or call center?

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Building the Value Proposition

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PRODUCT SERVICE DELIVERY COMMUNICATION

Target Segment



Product Product package Product sophistication Package pricing

Service World class or basic Service channels provided Proactive or reactive


Delivery Branch Relationship Manager Telephone On line / E Mail Remote


Communication Proactive or Reactive Mass marketing Targeted marketing In-Person, phone, e-mail Event, Educational or conference based Annual profile Centralized vs. Branch execution


PRODUCT SERVICE DELIVERY COMMUNICATION • Basic Business or

Analysis Checking Package

Sweep

• Personal Investment Package

• Retirement Plan

• Credit Line

• Credit Card

• Merchant Services

• Personal Banking Package

• Differentiated Telebanking Service #

• Access to Financial Consultant

• Red Carpet Branch Service

• Retention and Cross Sell Focus

• Assigned Relationship Manager and/or Small Business RM

• All Delivery Channels Made Available

RM

Branch

PC

Telebanking

• Personalized DM from Relationship Manager

• Financial Profile Conducted Annually

• Phone Contact through Branch Manager

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Small Business – Branch Customer – High Value



PRODUCT SERVICE DELIVERY COMMUNICATION • Basic Service

Package

Basic Checking

OD Protection

Credit Card

Debit Card

Mortgage

Savings/MMA

• Call Center Premier Line

• Personalized service

• Online Access

Balances

Transfers

Products

Education

• Personalized through Branch Delivery Channels and On Line

Branch

Online

Telebanking

• Personalized through Branch staff

• Utilize Next Product Purchase Model

• Direct contact

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Consumer – Young Adult - Current High Value


Risk of Undifferentiated Sales & Service Delivery

Market Segments

Relationship Mgt./Team Approach

Branch Delivery Mobile Delivery

High Value Customers

Retention Risk

Retention Risk

Medium Value Customers

Expense Risk Retention Risk

Low Value Customers

Expense Risk Expense Risk



Day 1 Consumer and Small Business Segmentation Building the Value Proposition

Day 2 Customer, Product and Segment

profitability. Alternative Branching Strategies New Branch designs Branch Technology Impact of Mobile Banking



Day 4 Sales Management and Training Differentiating your Institution


Brand as an Asset


Deposit Balance Deciles

75%

16%

6%2% 1% Negative<1%<1%<1%<1%

Top 2nd 3rd 4th 5th 6th 7th 8th 9th Bottom

/ 32

Source: FMCG case study analysis over the last three years of multiple BHC’s household-level customer databases

Avg. balance / HH: $22k Median balance / HH: $1k % consumer

& small business deposit

balances

Avg. deposits / HH ($000): $160 $35 $10 $5 $2 $1 <$1 <$1 <$1 <$0

Over 90% of consumer and small business deposit balances are held in the top two deciles

Household Rankings: Profitability Mix

DecilePre-Tax Net

IncomeAccts

per HH HH Accounts Deposits Loans IncomeLoan Loss

Total Cost

Pre-Tax Net

Income Teller ATM ACH

Top 10% $17,695,659 7.42 2,950 21,896 $149,574 $43,195 $8,270 $214 $2,057 $5,999 $884 $8 $410% to 20% $4,077,625 5.13 2,950 15,132 $38,210 $14,687 $2,513 $79 $1,051 $1,382 $468 $9 $320% to 30% $1,904,370 4.22 2,950 12,449 $20,318 $9,447 $1,491 $51 $795 $646 $368 $9 $230% to 40% $926,835 3.27 2,950 9,655 $11,155 $4,753 $896 $31 $552 $314 $257 $6 $240% to 50% $492,784 2.18 2,950 6,432 $5,467 $2,264 $521 $15 $339 $167 $155 $4 $150% to 60% $183,407 2.40 2,951 7,077 $5,510 $2,470 $497 $15 $420 $62 $209 $4 $160% to 70% ($103,113) 2.41 2,950 7,119 $4,586 $4,232 $413 $13 $435 ($35) $226 $5 $170% to 80% ($648,781) 3.31 2,950 9,768 $8,223 $4,043 $679 $24 $875 ($220) $477 $10 $280% to 90% ($1,978,168) 3.79 2,950 11,190 $13,268 $9,353 $1,041 $52 $1,659 ($671) $842 $10 $390% to 100% ($6,345,352) 5.04 2,950 14,870 $19,379 $15,172 $1,320 $85 $3,387 ($2,151) $1,355 $9 $4

Average $549 3.92 $27,604 $10,961 $1,764 $58 $1,157 $549 $524 $7 $2

Total $16,205,266 29,501 115,588

Transaction Cost Per HHIncome Per HHBalances Per HH

Actual data, bank source disguised

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Profitability Ranking Drives Client Management Programs

$1,983

$490

$237 $108 $30

($30) ($200) ($600)

($2,000)

$6,000 $1,000 $0

$500

$1,000

$1,500

$2,000

Best 2 3 4 5 6 7 8 9 Worst

RETAIN AND EXPAND

MIGRATE TO “A” STATUS REDUCE COSTS;

PRICE FOR VALUE RECEIVED


$500 $300 $150 $60

Improving Customer Relationships Through Packaging and Cross Selling

Clients unaware of all products offered Cross Sell Ratios are low 30% of Small Business Households are single

product DDA or Loan 25% of Consumer Households are single product

Enhance Retention 80% to 92% with one additional credit or

investment product Enhances Profitability?


Dec. March June Sept. Dec.

Deposit Only A 81.89 83.92 80.48 82.63 84.45B 81.4 67.04 71.54 75.53 79.03C 85.12 70.56 65.37 75.18 77.59D 74.82 74.75 72.05 75.04 77.25

Total 76.02% 75.92% 73.20% 76.18% 78.36%

Loan Only A 78.05 89.47 81.58 80.7 78.95B 85 70.37 62.96 75.31 77.78C 52.63 51.52 57.58 59.6 69.7D 66.99 56.94 66.67 67.68 70.02

Total 67.51% 58.85% 67.19% 68.35% 70.65%

Deposits & Loans A 92.65 92.92 93.12 93.27 93.15B 96.56 90.24 85.37 85.37 89.02C 98.7 97.32 95.97 92.84 93.96D 93.62 92.42 91.07 91 91.33

Total 93.53% 92.60% 91.61% 91.55% 91.81%

A 94.46 91.11 93.33 94.57 94.44B 91.18 100 100 100 100C 100 100 75 83.33 87.5D 92.17 92.75 91.1 92.09 91.6

Total 93.02% 92.44% 91.77% 92.88% 92.55%

Total Segment A 88.29 89.19 87.92 88.91 89.55B 86.8 73.33 74.87 78.46 81.79C 89.5 79.15 75.83 80.41 82.94D 82.07 81.04 79.56 81.21 82.64

Total 83.27% 82.47% 81.04% 82.64% 83.95%

Deposits, Loans, & Other Accounts

Sample Small Business Annualized HH Retention Analysis

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Improving Customer Relationships Alternative Branching Strategies

Discussion Topics Trends in branching in the US Branch transaction levels Branch Placement Alternative Branch designs

– Suburban and Rural – Urban – Fully automated Branch – Community Branch

Impact of Mobile Banking

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Alternative Branching Strategies

The Debate Continues…. “The branch is dead” “The branch is alive, long live the branch” “Mobile banking will eliminate the branch” The branch of the future will handle more sophisticated transactions Branches are closing Branches are opening

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Bank Branches per Adult (in 000s)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

Mexico Germany Canada UK US Spain France

Source: World Bank

Net Change in Branch Offices

/ 40

-298

376

734

1205 998

1180

577 509

1212

1994

2258

2710 2522

1889

387

-1030

-316

-867

-1500

-1000

-500

0

500

1000

1500

2000

2500

3000

Source: FDIC Summary of Deposits

Customer Transactions

Source: American Banker customer survey 2011


% of Consumer Deposits Through Tellers(1)

/ 42

Source: Gordon Smith, “Consumer & Community Banking” 2/26/13, J.P. Morgan & Chase, SNL Financial

Monthly Branch Activity

Source: Cornerstone Advisors

Bottom 25%

Median

Top 25%

Retail Checking Accts Opened 11.3 16.9 25.0 Business Checking Accts Opened 2.4 3.2 4.6 Direct Consumer Loans 1.9 4.2 7.2 Small Business Loans 0.3 0.6 1.0

15.9 24.9 37.8

Monthly Branch Activity: New Retail Checking Accounts/Branch/Mo.


2007

35.0

18.7

13.6

2010

25.0

16.9

11.3

Top 25%

Median

Bottom 25%

(29%)

(10%)

(17%)

Monthly Branch Activity: Direct Consumer Loans/Branch/Mo.


2007

10

6

3

2010

7

4

2

Top 25%

Median

Bottom 25%

Branch Placement Strategies


Carrollton

St. Charles

Prytania

Claiborne

Palmetto

Excellent distribution coverage

Small market share – 3 branches are new

Primary competition clustered in same locations as Iberia

Garden District/Uptown branch coverage: ½, ¾ and 1 mile trade areas

Low/mod with pockets of affluence:

Detailed database – we know: Every resident

(including financial purchase propensity and wealth indicators)

Every business (name, type, size, etc.)

Every business owner Matching segments with programs (examples): Low/Mod Students Affluent Business


St. Charles

Prytania

Claiborne Carrollton

Palmetto

Average Household Income by Census Tract

Strong banking opportunity


Number of Businesses by Census Tract

St. Charles

Prytania

Claiborne Carrollton

Palmetto Greatest opportunity in

St. Charles and Prytania trade areas

Carrollton has next highest opportunity (but smallest number of consumer HH)

Look Familiar?

Improving Customer Relationship Alternative Branch Designs

Traditional Full service branch Citi’s fully automated branch Wells introduces the Neighborhood Branch in D.C. How do we determine the most appropriate branch design to meet our customer expectations? What activities will need to take place within our branch in the future? Investments Loans Education Insurance Other?

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There is always a better way. -Thomas Edison

Neighborhood Store

Branch Automation

The new branches tend to have a few features in common, most meant to cut labor costs: "Instant issue" machines that make debit cards right away, free Wi-Fi and ATMs that offer extra functions, including the ability to withdraw coins and $5 and $1 bills. Wells Fargo is adding an ATM feature that lets customers track their average monthly withdrawals and tells them how close they are to limits they set for themselves. At new JPMorgan branches, customers will eventually be able to log in to ATMs with a tap of their phone, no debit card needed. Bank of America announced that it will start to overhaul its ATMs with a "human touch." The most notable change in the new machines is that they'll be equipped with video screens connected to off-site tellers, which will let customers talk to tellers even at times when the branch is closed. The video screens will look blurry unless they're viewed straight on, and headsets will be provided. Staff writer Jim FuquayRead more here: http://www.star-telegram.com/2013/04/13/4772553/branch-of-the-future.html#storylink=cpy


Branch Technology

Teller Cash Dispensers Automated Staging systems Interactive ATM with Video – Giant i-Pad Community Interactive Video ATM’s dispensing bus passes, stamps, gift cards, etc. Customer Identity analysis upon entering Branch Automated loan application system Opening room video to Mortgage, Investments and Small Business lending Interactive coin machine, coffee service, discover local music, etc.

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Impact of Mobile Banking

Mobile banking is on the rise People who switch banks are disproportionately young and in urban areas who want online and mobile banking The debate: Is Mobile a sales/delivery channel or a service channel for bank/customer service communication? Social Media’s impact on banks

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Annual Switching Rates

% of Consumers Who Switched Primary Banks

Source: “How Mobile is Driving Bank Market Share Changes” March 2013, AlixPartners

Likelihood to Switch Primary Banks to Get Access to Mobile Banking

% Extremely Likely or Likely to Switch Primary Banks for Mobile Banking Among Smartphone/Tablet Owners 4Q11-4Q12

Source: “How Mobile is Driving Bank Market Share Changes” March 2013, AlixPartners, AlixPartners Financial Services Tracking Study

Preferred Features When Choosing A New Primary Bank

Among Smartphone/Tablet Owners Who Switched Primary Banks in the Past Year, 4Q12

Source: “How Mobile is Driving Bank Market Share Changes” March 2013, AlixPartners, AlixPartners Financial Services Franchise Health Study 2012

Demographics of Bank Switchers

/ 65

4Q12

Source: “How Mobile is Driving Bank Market Share Changes” March 2013, AlixPartners, AlixPartners Financial Services Franchise Health Study Q4 2012

Annual Switching Rates

% of Consumers Who Switched Primary Banks

Source: “How Mobile is Driving Bank Market Share Changes” March 2013, AlixPartners






Day 4 Sales management and Training Differentiating your Institution


Brand as an Asset


Staffing Models

Retail Branch

– Predictive models – Part time vs. Full time – Branch manager with multiple branch assignments – Job specialization – Universal Associate

Small Business Business Development officers Business Relationship managers Branch support

– Multiple branch coverage Centralized Small Business location

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Improving Customer Relationships “Intelligent” Information to Drive Targeted Marketing Strategies

Predictive Modeling for product use propensity – next product purchase Modeling for High Value prospect identification Modeling for High Value potential within existing client base – to include share of wallet calculation Predictive Modeling for high loan/deposit balances, life cycle and credit risk

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Data Warehouses & Modeling to Support Strategy

Channel Preference

Product Design

Response Models

Next Product Purchase Models

Service Network Configuration

Current Profitability

Future Profit Potential

Client Acquisition Model

Sales Tracking

Segment Performance

Sales Management

Outputs

Transaction Accounts

• Cash Flow Patterns

• Revenue

• Purchase Patterns

• Delivery Channel Usage

• Payables Data

Modeling

MCIF-MIS

• Industry

• Revenue

• Ownership

• Employees

• Location

• Products Used

• Balances/Fees

• Profitability

Purchased Data

• Risk

• Other Financial Products

• Preferences

• Model Providers

Inputs/Source

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71

Improving Customer Relationships through Targeted Marketing Strategies

Developing your Marketing Plan – Discussion topics

The key objectives The 4 P’s of marketing The Marketing process Consumer Marketing Tactics Small Business Marketing Tactics

Source: Lafferty Group International Academy of Retail Banking

Every marketing activity you undertake should help you to achieve at least one of these four results: 1. You retain existing customers 2. Your customers make another purchase. 3. Your customers purchase more of the same product 4. You win new customers.

Some Key Objectives of Marketing

Source: www.is4profit.com

The 4P’sof marketing: Product, Price, Place, Promotion

Source: Wikipedia, attainmarketing.com

The Marketing Mix…

Retail Banking Trends Impacting Marketing Some Key Industry Issues • Technological convergence • Information technology combined with digital explosion

and the introduction of mobile devices • Banking technology – hi-tech to hi-touch in the

information age (customer first) • Customer mobility – borderless banking – anytime • Internet – www entering the global economy • Balancing customer-centricity and remote channels • New industry competitors

75

1. Analyze the market—look for opportunities 2. Develop a marketing strategy

a) Develop your unique sales proposition b) Define target markets c) Determine the marketing mix (4P‘s)

3. Create a marketing plan 4. Execute the plan 5. Evaluate, redesign and optimise (marketing audit)

Source: Lafferty International Academy of Retail Banking

The Marketing Process

The Marketing Process

“Half the money I spend on advertising is wasted; the problem is, I do not know which half.” ----- Lord Leverhulme

(founder of Unilever)

77

Consumer and Small Business Marketing Strategies

Consumer Marketing programs Direct mail Television Newsprint Telemarketing New Branch – Anniversary Cold calling Event marketing Handshake marketing – Random acts of Kindness

78


Small Business Marketing Direct mail Television Newsprint Telemarketing New Branch – Anniversary Cold calling Educational based marketing Business partnerships Advisory boards


Small Business Marketing Profiling of high value clients Modeling the best prospects Execute based on delivery channel preference Business development officers Vs. BRM Handshake marketing Business displays Special day’s

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Tell your story


Improving Customer Relationships through Service Quality programs

Can Service Quality really improve customer relationships? What is most important to mass market and high value customers? Price, Convenience, Relationships, Products,

Technology, Service Quality ?? Is there a correlation between Excellent Service Quality and financial return? Read Measuring the payoff from customer service by

David Kerstein, BAI April 19,2013

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Service Quality programs

Can Service Quality really improve customer relationships?

Do all customer segments expect superior customer service? Can we afford to provide superior customer service to all customer segments? Creating Loyal Customers should be our goal

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Enhancing Customer Experience


Desired Customer Service Quality Varies with Customer Segment

Customer Segment Service Quality Expectations ?

Mass Segment Mobile / Remote Segment Affluent Segment



Desired Customer Service Quality Varies with Customer Life Cycle

Customer Lifecycle Service Quality Expectations ?

Young Adult (unmarried)

Middle-Aged Family (with Children)

Retired Couple


Retail banking customer objective: ‘get more for less’

Customers get and want to receive more:

• Products and services

• Channel access and convenience

• Personalised service

Customers give

up and want to sacrifice less:

• Time • Money • Safety

More Less

Products, Services

Access

Service

Time

Money

Safety

Customer relationship view: maximise solutions, access and service; minimise the time, money and safety they give up

Source: ‘Developing Relationships with Multichannel Customers,’ FIS Consumer Insight Report, December 2010

85

Service Quality Program Enhancing the Customer Experience

Measuring, Tracking and Rewarding Customer Service Social media as a service tracking mechanism Twitter, Facebook, Blogs, YouTube, they are talking about you Taking proactive action to respond to service issues within social media Should social media be used to sell products – to communicate promotions?

Service Quality Program - Bank program example

Return on Quality – Measuring Service Quality

Every Branch ranked monthly on performance Every department measured monthly by front line staff Elements Customer Retention Customer Service Surveys

– New Account, New Loan, Transactional In Person Shops Sales Effectiveness Ratio New Deposit and Loan Accounts per FTE

Impacts Team Incentive awards monthly


‘Customers who choose to stay with their current primary bank for additional products are most driven by positive past experience and perceptions that their bank is more focused on customers than on profits.’ Rockwell Clancy Vice President J.D. Power & Associates

Source: ‘Retail Bank Customers Show More Interest in Shopping Around for Banks,’ Bank Systems & Technology, 3 March 2011

88

Enhancing the Customer Experience

Measuring customer reaction to and acceptance of a service experience approach is vital Movement toward customer loyalty is a strong measurement of success Net Promoter Score as a measurement of customer loyalty

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Net Promoter scores provide better insight into customer advocacy and loyalty

Q. Would you recommend us to a friend?

Extreme likely Extremely unlikely

10 1

s

10 – 9 8 – 7 6 - 1

Promoter Passive Detractor Source: “net promoter score – A Premier Bain & Company, bain.com 18 December 2009






Day 4 Sales Management and Training Differentiating your Institution


Brand as an Asset


Improving Customer Relationships through Sales Management

Why do companies have sales managers? It’s simply to develop people to produce business Activity coaching – time management Pipeline coaching – strategy Finding more opportunities – support Call preparation and review Joint calling – feedback Team meetings


Sales Management Activity Coaching – Time Management

This is a one on one process Coaches need to review individual sales staff on a regular basis Asking the right questions about how they are spending their time

With whom How often Why

The sales leader/coach has the responsibility to for knowing how their team is utilizing their time

Productive vs. unproductive activities Source: Lafferty Group International Academy of Retail Banking

Sales Management Pipeline Coaching - Strategy

Must help build the pipeline and move potential business to closure Will support building the pipeline and creating more business and revenue Aid in identifying non-performers

Sales Management Finding More Opportunities

Sales Managers must be sales leaders The goal is to teach team members to create demand Must contribute to help each sales team member be successful

Sales Management Call Preparation and Review

The best performers are well prepared for all customer calls The best coaches review call plans and rehearse to make sure their staff is prepared for success Make sure the right support staff is included

Loan administrator Mortgage officer Investment representative Senior executive when warranted

97

Sales Management Joint Calling and Feedback

A requirement to understand the effectiveness of a sales officer Provides a format for coaching and for providing an analysis of their performance Places pressure on sales staff to be their best

Sales Management Team Meetings

Must be focused on creating more business / revenue Consistency of time and location Each sales staff needs to participate and address their pipeline

Number of calls Goals Approach Action plan


Sales Training

Product knowledge – Know what you are selling Know what potential targeted customers are seeking Create a buying environment Know how and when to close the sale How to develop and maintain a relationship


100

Sales Training

Product Knowledge – know what you are selling Understand the benefits of bank products Understand the drawback of each product

Know how like segment customers have benefited from the product

Testimonials have power

101

Sales Training

Know what potential Targeted Customers are Seeking Understand how potential customers will use your products What are they trying to achieve? Sell the benefits of the product to reduce price sensitivity Know the customer segments that will most benefit from this product


Create a Buying Environment

Understand different personality types Myers Brigg’s personality analysis ENTJ vs. ISFP

Merrill-Reid Social Styles Driver, Analytical, Supportive, Promoter

Principal reasons for buying Profit, Pleasure, Pride, Fear of Loss, Avoidance of Pain, Desire for Approval

Selling vs. Buying Source: Lafferty Group International Academy of Retail Banking

Understanding the Sales Cycle

• Get in-depth knowledge of your product offering

• Understand what the product does for your customer

• Search for suitable customers

• Prepare your conversation guide

• Source: Lafferty Group

• Use the right questions to understand the real needs

• Listen for clues to satisfy the customer’s life needs

• Offer the product

• Illustrate / Demonstrate the benefits

• Highlight the positive features

• Minimize the negative features

• Modern collaborative selling principles assume that objections do not arise if proper research, needs analysis, interview and empathic discussion has taken place. This is the point for clarification of details of the offer.

• Close the sale now

• If not possible, find ways to realize that closure in the future

1. Preparation

2. Introduction

3. Interviewing

4. Presentation

5. Clarification

6. Close

Listen to Clues to feed the Relationship

7. Follow-up

• Keep the relationship alive by establishing ongoing meaningful contacts

• Initiate contact with customer

• Introduce yourself

104

Improving Customer Relationships Creating a Differentiated Organization

Can your Institution be everything to everyone? How will you compete?

Branch Convenience Superior Products Channel Technology Price – Loans, Deposits, Services Customer Service Quality Our People

105

Basic Requirements for creating a Differentiated Organization

It starts at the top Begins with creating a Culture Built into every program Training Rewards/Incentives Marketing message Branding

Requires constant nurturing Integrated with the hiring process Customer Service Quality Our People

Basic Requirements for creating a Differentiated Organization

An example of a Unique Culture around Service Quality Keys to the Culture 1. Solid 2. Genuine 3. Exceptional 4. Connected 5. Resilient 6. Different

Cultural Enhancement Department A Culture of empowerment and thinking differently

Make it accessible and fun!


Brand Value

Brand as an Asset One of the most important elements in marketing is to build the BRAND Establishes the NAME (reputation) of the Bank A Brand is the personality, character and look and feel of a company or product Brand requirements: A common voice A common look and feel Integrated throughout the company A part of everyone’s responsibility


Brand Value

Brand as an Asset In terms of: physical, emotional transactional service, product quality

That is a measure of its VALUE

Source: Lafferty Group, International Academy of Retail Banking

110

Overview • Branding is about differentiation • Brand is ‘image’ • Brand needs to convey your value proposition—should

support USP (at an overall or product level) • Not just a logo but also the response (the emotional and

intellectual responses it elicits) • Development and execution (program execution, look

and feel, advertising, etc…)


Branding

111

Branding ‘Value Chain‘

Execute Branding Program

Develope Brand Design

& Image

Determine the Value

Proposition for the Business

Business

Marketing (USP)

Promotions, Place

Advertising

Sales Customer Interaction, Behaviours

Products Design Quality, Pricing

Stage 1

Stage 2

Stage 3

Brand Building

112

Some Key Principles • Keep it simple • Be different—being ‘unique’ is important • Quality must come through • Credibility (substance)—claims need to be proven (give

customers a reason to believe) • Focus—all things to all people does not work! • No excuses—stand behind the promise…

Brand Development (Stage 2)

Source: Greg Stine, The Nine Principles of Branding, Polaris, Inc.

113

Some Key Principles • Coordination among departments critical • Coordination among channels critical • Use word-of-mouth—best advertising is word-of-mouth • Evaluate, test and try • Involve customers (feedback and ideas) • Reinforce image from Stage 2… • …and also use opportunity to build!

Branding Program Execution (Stage 3)

Source: Greg Stine, The Nine Principles of Branding, Polaris, Inc

114

Brand as an Asset • As established, one of the most important elements in

marketing is to build the BRAND • Establishes the NAME (reputation) of the Bank • In terms of:

• physical, emotional • ‘transactional’ • service, product • quality

• That is a measure of its VALUE

Brand Value

Source: Greg Stine, The Nine Principles of Branding, Polaris, Inc


In Conclusion: The Banking Industry is in desperate need of new and innovative thinking to improve our financial performance. We need to become better at selecting priority customer segments, understanding our customer‘s needs, and become more adept at selling to those needs. We must become better at targeting our limited marketing dollars and resources against the best opportunities. We need to integrate our products, service, delivery and communications throughout our institutions and provide seamless quality service via all delivery channels. We must build our Brand to be considered relevant to our customer base. We can not continue to be all things to all people.


Thank You and Good Luck

Ric Carey, Director Peak Performance Consulting Group 205 N. Lotus Beach Dr. Portland, Oregon 97217 503-789-8790 [email protected] www.ppcgroup.com


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