Banks today need to produce higher revenue and returns while, in most cases, operating with either the same or fewer resources. That is difficult to accomplish, but doing more with less has become a mantra at many banks focusing on productivity and that may be a good thing. One commercial banking executive recently mentioned that getting rid of poor performers not only improved productivity but also enhanced credit quality as those mediocre lenders, scrounging for any leads they could find, would propose weak deals and, thereby, waste time.
Management continues to invest in upgrading personnel, whether by bringing in new hires or establishing training programs that are intended both to remove reticence about calling and develop the banker (either a business specialist or branch officer) to engage in conversations that result in offering “solutions” to the customer or target. All good stuff.
Despite this effort, banks continue to bemoan their lack of productivity and the apparent inability of sales personnel, in particular branch personnel, to identify and close business loan transactions. For example, one bank we know, after it invested in training and put a heightened focus on business banking, found that close to half of its branches generated zero (that’s right zero) loan volume in the year after its new program began. Yet, for various reasons, more banks are pushing greater sales responsibilities to the branch.
One factor in subpar results centers on those being targeted. Bankers note that the standard credit reports they rely on (often with self-reported information) contain inaccuracies and very incomplete information. In many cases bankers continue to pursue the wrong prospects with the wrong products, hence, poor productivity and lackluster results. Besides being mentored on how to recognize opportunities and how to sell, bankers will also benefit from being given clear, specific (by name) direction on whom to call on rather than being given a list of largely unscreened “targets.”
Here are six diagnostic questions each senior banker should address as part of his or her sales effectiveness effort:
- What is your lost wallet share for current business customers, that is, how much business and which products are being lost to competitors?
- What percentage of your business customers are single-product households. At many banks upwards of 20-25% are one-product users.
- How dependent are you on a small number of customers for your revenues? We find that concentration risk is greater than banks think.
- Do you know how many consumer DDAs currently housed in your branch in fact belong to business customers?
- Which are the highest priority targets (and why) as the bank enters new markets?
- Does your internal Early Warning System (EWS) provide substantial comfort that you will be able to anticipate and proactively deal with a credit problem? Or, at some level, are you kidding yourself?
Most banks have addressed each of these issues with anecdotes and sketchy initiatives rather than with rigorous analysis and decision making. The good news is that high quality data sources and modeling capabilities now exist that can result in clear priority setting for bank marketing efforts:
- Analysis is available today that can tell you the products that are being provided by competitive banks to your current customers. There should be no higher priority than selling more to your (we hope satisfied) current customer. Again, however, many banks fail to identify the wallet share opportunity they are leaving on the table and instead try to gain new customers, a tougher road to success.
- Those entering new markets or considering new specializations can qualify targets based upon industry, location, and a much more sophisticated level of risk rating than has previously been available.
- Typically, within the consumer bank, between 10-20% of the DDAs categorized in the branch as consumers are in fact businesses. Identifying them both allows the bank to provide the optimal product to their current customers and sell additional products to the business and the business owner. Remarkably, many banks are failing to identify and capture this revenue opportunity, assuming customers are too insignificant to care about, a dangerous assumption.
- While portfolio quality has improved across the board, banks must remain vigilant against the type of quick deterioration that took many by surprise only a few years ago. Going beyond internal and sometimes subjective efforts, banks should access third-party analysis as part of their EWS process. Such an approach can be an important element in demonstrating your proactive response to risk management to regulators and making their reviews more successful.
Leveraging the information now available allows for an improved targeting in the calling effort, limits the list of excuses available to sales staff, and reduces cost. One veteran banker who was an early user of these capabilities told us that he was able to reduce his marketing costs by 30% because he could replace his bank’s scattershot approach with a more laser-like focus.
FIC, working with two established leaders with decades of experience in providing data and analytics to the business community, has recently developed Business Performance Accelerator (BPA). The quality and depth of information available is impressive. BPA directs banks in determining which customers and prospects to target and which products to emphasize. FIC can now work with you to quickly develop a specific approach for your sales and branch personnel that provides them with pre-screened customers and prospects that reduce the costs and wasted efforts of a scattershot calling program. The net impact: more quality revenues with reduced costs. What more could a bank ask for in today’s increasingly competitive and opportunity-constrained environment?