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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
Improving Customer Relationships
• 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
Improving Customer Relationships
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
Peak Performance Consulting Group, Inc. | 512-607-6332 | page 3
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
www.ppcgroup.com page 4
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
www.ppcgroup.com
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
www.ppcgroup.com
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
www.ppcgroup.com
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
www.ppcgroup.com
Alternative Consumer and Small Business Segmentation Strategies
Segment plan options: Demographics Behavioral Contribution tiering Life cycle Needs based segmentation
www.ppcgroup.com
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?
www.ppcgroup.com
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%
www.ppcgroup.com page 12
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
www.ppcgroup.com page 13
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 Med High Low Med High Low Med High
Low Value
Low Med High Low Med High Low Med High
Delivery Channel
Based on Delivery Channel Preference – Overlay of Value and Potential
www.ppcgroup.com
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
www.ppcgroup.com
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
www.ppcgroup.com
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
www.ppcgroup.com
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?
www.ppcgroup.com
Building the Value Proposition
www.ppcgroup.com
PRODUCT SERVICE DELIVERY COMMUNICATION
Target Segment
Building the Value Proposition
Product Product package Product sophistication Package pricing
Service World class or basic Service channels provided Proactive or reactive
Building the Value Proposition
Delivery Branch Relationship Manager Telephone On line / E Mail Remote
Building the Value Proposition
Communication Proactive or Reactive Mass marketing Targeted marketing In-Person, phone, e-mail Event, Educational or conference based Annual profile Centralized vs. Branch execution
Building the Value Proposition
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
www.ppcgroup.com
Small Business – Branch Customer – High Value
Building the Value Proposition
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
www.ppcgroup.com
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
www.ppcgroup.com page 30
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
www.ppcgroup.com page 31
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
www.ppcgroup.com
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
www.ppcgroup.com page 34
$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?
www.ppcgroup.com page 35
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
www.ppcgroup.com
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
www.ppcgroup.com
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
www.ppcgroup.com
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
www.ppcgroup.com page 41
% 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.
Source: Cornerstone Advisors
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.
Source: Cornerstone Advisors
2007
10
6
3
2010
7
4
2
Top 25%
Median
Bottom 25%
Branch Placement Strategies
Peak Performance Consulting Group, Inc. | 512-607-6332 | page 46
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
Peak Performance Consulting Group, Inc. | 512-607-6332 | page 47
St. Charles
Prytania
Claiborne Carrollton
Palmetto
Average Household Income by Census Tract
Strong banking opportunity
Peak Performance Consulting Group, Inc. | 512-607-6332 | page 48
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?
www.ppcgroup.com
There is always a better way. -Thomas Edison
Neighborhood Store
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
www.ppcgroup.com page 59
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.
www.ppcgroup.com
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
www.ppcgroup.com
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
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
www.ppcgroup.com page 67
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
www.ppcgroup.com
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
www.ppcgroup.com
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
www.ppcgroup.com
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
Consumer and Small Business Marketing Strategies
Small Business Marketing Direct mail Television Newsprint Telemarketing New Branch – Anniversary Cold calling Educational based marketing Business partnerships Advisory boards
Consumer and Small Business Marketing Strategies
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
www.ppcgroup.com
Tell your story
www.ppcgroup.com page 80
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
www.ppcgroup.com
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
www.ppcgroup.com
Enhancing Customer Experience
Source: Lafferty Group International Academy of Retail Banking
Desired Customer Service Quality Varies with Customer Segment
Customer Segment Service Quality Expectations ?
Mass Segment Mobile / Remote Segment Affluent Segment
Enhancing Customer Experience
Source: Lafferty Group International Academy of Retail Banking
Desired Customer Service Quality Varies with Customer Life Cycle
Customer Lifecycle Service Quality Expectations ?
Young Adult (unmarried)
Middle-Aged Family (with Children)
Retired Couple
Enhancing Customer Experience
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
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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
Enhancing Customer Experience
‘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
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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
www.ppcgroup.com
Enhancing Customer Experience
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
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
www.ppcgroup.com page 91
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
Source: Lafferty Group International Academy of Retail Banking
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
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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
Source: Lafferty Group International Academy of Retail Banking
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
Source: Lafferty Group International Academy of Retail Banking
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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
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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
Source: Lafferty Group International Academy of Retail Banking
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
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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
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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!
www.ppcgroup.com page 107
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
Source: Lafferty Group International Academy of Retail Banking
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…)
Source: Lafferty Group International Academy of Retail Banking
Branding
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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
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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
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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
Improving Customer Relationships
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.
Peak Performance Consulting Group, Inc. | 512-607-6332 | page 115
Thank You and Good Luck
Ric Carey, Director Peak Performance Consulting Group 205 N. Lotus Beach Dr. Portland, Oregon 97217 503-789-8790 ric.carey@ppcgroup.com www.ppcgroup.com
www.ppcgroup.com page 116
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