Lecture Materials

BANK MARKETING

Lance Kessler President

Lance Kessler & Associates Mechanicsburg, Pennsylvania

lekessler@aol.com 717-766-1005

August 1, 2017

Graduate School of Banking at the University of Wisconsin - Madison

August 1st The Path to Superior Lance Kessler Execution

August 2nd Marketing Planning: Tom Hershberger Developing an Effective Marketing Plan

August 3rd Building and Sustaining Jack Hubbard a Relationship Development Culture

Bank Marketing

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Graduate School of Banking at the University of Wisconsin - Madison

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Identify the four phases in the path to superior execution for every organization.

Understand the dramatic changes that are occurring in the financial services industry and the effect those changes are having on the competitive landscape.

Explain how the organization’s competitive strategy relates to its market efforts.

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Describe market segmentation and how it relates to an organization’s marketing, sales, & service efforts.

Identify the key factors necessary for your organization to reach superior execution.

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The Path to Superior Execution

The Changing Environment

Developing Strategy

Building Structure

The Challenge is Execution

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The Changing Environment

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Issues and Trends in the Financial Services Industry 2017

Lance Kessler & Associates Marketing Consulting and Training

_____________________________________________________________ The Path to Superior Execution

Financial Services Industry: Issues & Trends

1. Net income for 2015 was $163.3 billion for all FDIC-insured financial

institutions. Did net income increase, remain flat, or decrease for all FDIC-insured financial institutions in 2016?

a) Increase b) Remain flat c) Decrease 2. From 2014 to 2015, FDIC-insured bank deposits grew at 5.2%. From December 31, 2015 to December 31, 2016, FDIC-insured bank

deposits grew at ______%. a) 2.6% b) 3.8% c) 5.2% d) 6.8% 3. From 2014 to 2015, total loans for all FDIC-insured banks grew at 6.4%. From December 31, 2015 to December 31, 2016, total loans for all FDIC-

insured banks grew at ______%. a) 2.6% b) 3.8% c) 5.3% d) 8.2% 4. As of December 31, 2016, noncurrent loans decreased to ______% of all

loans outstanding. a) 1.41% b) 1.86% c) 2.51% d) 3.44%

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Issues and Trends in the Financial Services Industry 2017

Lance Kessler & Associates Marketing Consulting and Training

_____________________________________________________________ The Path to Superior Execution 5. According to an ABA survey, which one of the following banking methods

ranked the highest and was preferred by 55% of customers? a) Branches b) Mobile c) Internet d) ATM 6. Within just ten short years, we’ve gone from 50-60 percent of our day-to-

day transactions being done over the counter at the branch to ______% of our day-to-day transactions now going through the Internet, mobile, call center, and ATM.

a) 65% b) 75% c) 85% d) 95% 7. According to Accenture Research, ______% of Millennial respondents in

the United States say they would be willing to make the switch to do their banking with Google or Amazon.

a) 34% b) 41% c) 50% d) 65% 8. ______% of consumers rate locational convenience as the primary

determinant in choosing a bank. a) 44% b) 51% c) 64% d) 79% 9. ______% of consumers want the human touch to remain a part of

customer service while the complexity of the service request is shown to heavily influence the preferred channel.

a) 43% b) 56% c) 67% d) 79%

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Issues and Trends in the Financial Services Industry 2017

Lance Kessler & Associates Marketing Consulting and Training

_____________________________________________________________ The Path to Superior Execution 10. ______% of Millennials demonstrated basic financial literacy. a) 24% b) 31% c) 44% d) 49% 11. There are 100 million people in the U.S. that are over 50 years of age. They control approximately ______% of the disposable income in the U.S. a) 40% b) 50% c) 60% d) 70% 12. When business customers were asked to rank what they find most lacking in their bank’s business services, which of the following items was ranked #1? a) Poor omnichannel experience (access over web, mobile, etc.) b) Lack of modern services such as video, etc. c) I feel my bank does not know me very well as a business customer d) Understaffed in terms of specialists 13. ______% of business executives rate their organization’s ability to act on

insights derived from customer data as “poor” or “very poor.” a) 12% b) 33% c) 42% d) 54% 14. A ______% increase in customer retention will increase profits

somewhere in the range of 25% to 95%. a) 5% b) 8% c) 17% d) 20%

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Issues and Trends in the Financial Services Industry 2017

Lance Kessler & Associates Marketing Consulting and Training

_____________________________________________________________ The Path to Superior Execution 15. 50% of financial institutions think they’re relationship-focused and

providing the desired type of financial consultation and advice.

______% of account holders at those financial institutions agree. a) 13%

b) 25% c) 36% d) 42%

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Source: Only the Paranoid Survive – Andrew S. Grove 13

Call Center

ATM

Credit

Online Banking Mail

Kiosk

Debit Card

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ATM

Online Banking

Credit

Face-to-Face

Call Center Mobile Banking Smart Phone/Tablet

Video Teller Machines

Branch Banking

Web Site

Prepaid Debit Cards

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Developing Strategy

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Low-Cost Position Uniqueness Perceived

by the Customer

Broad Target

Narrow Target

1. Cost Leadership

2. Differentiation

3a. Cost Focus 3b. Differentiation Focus

Competitive Advantage

Strategic Target

Source: Michael E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance. 18

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Identify the Key Drivers that will result in a Superior Customer Experience

Define from the Customer Perspective

Put into Written Form

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Attributes Important to Customers ◦ Trust ◦ Responsive ◦ Customized/Individualized ◦ Respect ◦ Caring ◦Guidance/Good Advice

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Responsive to my individual needs

I received special treatment from someone who respects me and cares

I will trust the bank and its advice

I will view my Encore Bank banker as my trusted financial advisor

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Customer Perspective:

When Encore Bank is successful in creating a superior customer experience, I (as a customer) will feel the bank has been responsive to my individual needs. I will feel I received special treatment from someone who respects me and cares, and I will trust the bank and its advice today and in the future. I will view my Encore Bank banker as my trusted financial advisor.

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Customer-Centric Self-Test

7 or 86 or less

7 or 8

6 or less

Misaligned Customer-Centric

Aimlessly Wandering Misdirected

Organizational Engagement

Customer Familiarity

Source: Adapted from Forrester Research, Inc.

Scoring: 0 = Disagree with statement 1 = Somewhat agree with statement 2 = Mostly agree with statement Customer Familiarity 1. Our company has a clearly defined set of target customer segments. 2. Employees across the company share a consistent and vivid image of

target customers. 3. Market research is used to fully understand the needs and behaviors of

target customers. 4. Decision-making processes systematically incorporate the needs of target

customers. Total Customer Familiarity Organizational Engagement 1. Senior executives regularly interact with target customers. 2. Senior executives consistently communicate the importance of serving

target customers. 3. Employees across the company are recognized and rewarded for improving

the experience of target customers. 4. The quality of interactions with target customers is closely monitored. Total Organizational Engagement Source: Adapted from Forrester Research, Inc.

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Loans

Deposits

Fee Income

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Retention ◦ Retaining the customers you already have

Penetration ◦ Generating new business from existing customers

Acquisition ◦ Generating new business from new customers

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ATM

Online Banking

Credit

Face-to-Face

Call Center Mobile Banking Smart Phone/Tablet

Video Teller Machines

Branch Banking

Web Site

Prepaid Debit Cards

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Human Engagement Digital Engagement

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In the branch environment, banks need to shift from focusing on transactions to meaningful interactions.

In all customer contact situations, bankers need to understand the customer and his/her situation in a way that allows them

to create real value that is perceived by the customer.

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The bank needs to figure out how to fit into the context of the customer’s life rather than expect the customer to fit into the

context of the bank’s physical presence.

The bank needs to also remove the obstacles/friction wherever feasible and make it as easy for the customer

as possible.

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How do you make sure all of the delivery channels work together seamlessly to deliver a superior customer experience?

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Building Structure

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Organization Structure Human Resources Support

Issues Training Marketing Database Product Management &

Development Process

Relationship Sales &

Service Process Technological Support Market Segmentation

Approach Marketing Planning Process Measurement

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Strategy

Structure & Processes Targeted Customers

Targeted Customers

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A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing action. Generally three criteria can be used to identify different market segments:

1) Homogeneity (common needs within segment) 2) Distinction (unique from other groups) 3) Reaction (similar response to marketing)

Source: Adapted from investopedia.com 40

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Profitability of the

Existing Customer

Base

The General

Marketplace

The Existing

Customer Base

Market Segmentation Framework

Prioritize Market

Segments / Marketplace

Potential

Analyze Segment & Customer

Profitability

Analyze Customer

Penetration & Retention

Levels

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• Where a person stands in their family life cycle determines their financial needs

• The three factors which identify a customer’s life cycle are: –Age – Income –Presence/Absence of Children in the Household

• Each family life cycle segment has unique financial core need(s)

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• Stage I—Younger Empty Nest – Head of Household under 35

years old – No children living at home

• Stage II—Younger Full Nest – Head of Household under 35

years old – Children living at home

• Stage III—Mid Empty Nest – Head of Household age 35 – 54 years old – No children living at home

• Stage IV—Mid Full Nest – Head of Household age 35 -

54 years old – Children living at home

• Stage V—Older Empty Nest – Head of Household age 55

years or older – No children living at home

• Stage VI - Older Empty Nest

Retired – Head of Household age 65

years or older – No children living at home – Retired

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1 5 9 13 17 21

2 6 10 14 18 22

3 7 11 15 19 23

4 8 12 16 20 24

Under $25K $25K- $50K $50K- $75K $75K Plus

Young Young Mid Mid Older Empty Older Empty Empty Nest Full Nest Empty Nest Full Nest Nest Employed Nest Retired

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The General

Marketplace

Market Segmentation Framework

Prioritize Market

Segments / Marketplace

Potential

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15 $90,594 14.9% 7.7% $20,357 6.6% $37,348 5.0% 64 6

A C F B D G E H I J

A = Segment Number B = % of Total HHS this Segment Represents C = Average HH Loan Balance (HHS Using) D = Average HH Deposit Balance (HHS Using) E = Average HH Investment Balance (Total HHS) F = % of Total Loan Balances this Segment Owns G = % of Total Deposit Balances this Segment Owns H = % of Total Investments this Segment Owns I = Priority Rating J = Priority Ranking

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The General

Marketplace

The Existing

Customer Base

Market Segmentation Framework

Prioritize Market

Segments / Marketplace

Potential

Analyze Customer

Penetration & Retention

Levels

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15 $90,594 14.9% 7.7% $20,357 6.6% $37,348 5.0% 64 6

A C F B D G E H I J

A = Segment Number B = % of Total HHS this Segment Represents C = Average HH Loan Balance (HHS Using) D = Average HH Deposit Balance (HHS Using) E = Average HH Investment Balance (Total HHS) F = % of Total Loan Balances this Segment Owns G = % of Total Deposit Balances this Segment Owns H = % of Total Investments this Segment Owns I = Priority Rating J = Priority Ranking

15 $19,474 20.6% 14.8% $ 9,746 10.1% $20,581 12.4% 56 4

Overall Bank Marketplace Bank Customers

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Profitability of the

Existing Customer

Base

The General

Marketplace

The Existing

Customer Base

Market Segmentation Framework

Prioritize Market

Segments / Marketplace

Potential

Analyze Segment & Customer

Profitability

Analyze Customer

Penetration & Retention

Levels

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15 14.8% $102 11.3%

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A B C D E F

A = Segment Number B = % of Total HHs this Segment Represents C = Average HH Profit (Dollars) D = % of Total Profit this Segment Generates E = Priority Rating F = Priority Ranking

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Older Empty Nest Employed

55-64 years old Income: $25,000+

No Children at Home

Older Empty Nest Retired 65+ years old

Net Worth: $90,000+ No Children at Home

Mid Empty Nest/ Mid Full Nest 35-54 years old

Income: $25,000+

Young Empty Nest/ Young Full Nest 18-34 years old

Income: $25,000+

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Core Needs

Sales & Service Needs

Delivery Channel Preferences

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The Challenge is Execution

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Under $25K

$25K-$49K

$50K-$75K

Over $75K

#1 YOUNG EMPTY NEST

1 5 13 17 21

2 6 14 18 22

3 7 15 19 23

4 8 16 20 24

Senior Relationship Manager

Relationship Manager

Relationship Manager

Relationship Manager

Relationship Manager

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#2 YOUNG FULL NEST

#3 MID

EMPTY NEST

#4 MID

FULL NEST

#5 OLDER EMPTY NEST

EMPLOYED

#5 OLDER EMPTY NEST

RETIRED

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Mid Empty Nest / Mid Full Nest

35 – 54 Years Old

Household Income: $50,000+

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Preparing for Retirement

Financing Children’s Education

Paying Off Debt (Mortgage & Other Debt)

Helping Elderly Parents

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Ease of doing business—low-touch methods Strong desire to stay in control Desire variety of options and supporting information Accumulating funds in 401(k) and pension plans Saving/investing for retirement & paying college expenses Need help in planning for retirement (concerned about outliving

their retirement dollars) need someone with expertise they can trust

Want convenient, quick, hassle-free credit

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Older Empty Nest Retired ◦ Traditional branch banking

Older Empty Nest Employed ◦ Mixed channel user

Mid Empty Nest/Mid Full Nest ◦ Mixed channel user

Younger Empty Nest /Younger Full Nest ◦ Self-service banking

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Shawn Bennett Male Age - 51

You proactively contact

him for a face-to-face appointment

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Level of Intensity

Consultative Selling (Focused on Customer Needs) Hard Sell (Pushing Products)

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Date of birth Annual household income Marital status Children in the household (Yes or No) Occupation

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Shawn Bennett Male Age - 51 ___________________ ___________________ ___________________ ___________________

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Strategy

Structure & Processes Targeted Customers

Targeted Customers

Employee Behaviors

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(1) Engaged employees work with passion and feel a profound connection to their company. They drive innovation and move the organization forward.

(2) Not-Engaged employees are essentially “checked out.” They’re sleepwalking through their workday, putting time – but not energy or passion – into their work.

(3) Actively Disengaged employees aren’t just unhappy at work; they’re busy acting out their unhappiness. Every day, these workers undermine what their engaged coworkers accomplish.

Source: Gallup Management Journal’s semi-annual Employee Engagement Index 71

(1) Engaged Employees _____% _____%

(2) Not-Engaged Employees _____% _____%

(3) Actively Disengaged _____% _____% Employees

Source: Gallup Management Journal’s semi-annual Employee Engagement Index

General Workplace

Financial Services

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Key Measures

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Revenue Generation Profitability

Customer Satisfaction Employee Satisfaction & Engagement

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& Loyalty

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Job for Brutal Life Accountability

1 2 3 4 5 6 7 8 9 10

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Responsiveness Focus Alignment/Integration Engagement/Passion Measurement Leadership/Accountability

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Lance Kessler & Associates Marketing Consulting and Training

6206 Charing Cross Mechanicsburg, Pennsylvania 17050 Office: 717-766-1005 Mobile: 717-580-2050 E-mail: LanceKesslerConsulting@gmail.com

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