By Mary Beth Nelsen
"Find the Money” has become the new reality game of the banking industry. Financial prognosticators forecast continued fierce competition for deposits and loans, driven by the shape of the yield curve and margin compression. Financial institutions have responded with tempting rate offerings, targeted marketing and creative relationship packages, all designed to lure customers – to attract and increase profitable relationships.
The good news is that the opportunity for growing relationships is there.
• The average number of products used is nine-plus per household:
• A typical consumer uses three to four
• 20 percent of customers seek a new financial institution every year; and
• Over 75 percent of business comes from
To successfully handle opportunities, the financial industry has invested considerable resources to develop sales cultures with skilled staff, yet have achieved limited success:
• The products per customer are still around 2.2;
• The number of single-account customers is still high and even growing in some institutions; and
• The majority of sales representatives open the same number of accounts (plus or minus two) per day as in 1982.
The greatest opportunity for increasing profitable deposits and loans with significantly lower acquisition costs walks in and out of bank lobbies every day. Existing customers make up almost 90 percent of lobby traffic. It costs over six times as much to attract a new customer than to retain an existing one – far more if you factor in time and effort. Satisfied customers are far more receptive to buying additional products and services. Retention is a key as well – it’s hard to cross-sell to ex-customers. The durable goods industry claims it needs to sell to at least 65 percent of its existing customers to remain profitable; this number soars to 85-90 percent in the service industry.
Everyone knows the right buzzwords: Growing from within. Mining your base. Customer relationship management. They’re the terms du jour, the titles of 40-page best sellers with 15 words on a page. Everybody reads the books – or at least skims the chapter headings – but to make a real difference, the buzzwords have to be turned into performance.
The first step in growing customer relationships is to examine current relationship-building opportunities. What is the bank’s current household share? Wallet share? How many single-product relationships? How often are opportunities presented via service requests and what are the results?
Some banks have found that, on average, only one in 50 routine service situations result in a sale. Even banks with highly skilled staff in product inquiry sales are only closing on sales in one of 35 service situations. What impact would it have on the bottom line if that number were merely doubled to two?
Relationship growth opportunities are hiding in plain sight. So why aren’t banks capitalizing on what is right under their noses? Because people don’t know what and they don’t know how.
The No. 1 excuse bankers give for not selling in service situations is “the customer didn’t come in to buy – he just needed help. If he wanted to buy something, he’d say so.” A classic case of sales avoidance, by the sales person!
Even after decades of training, many bankers still consider “sell” a dirty four-letter word, a not-so-subtle euphemism for pushy – a pejorative wholeheartedly deserved if the objective is to sell just to meet a sales goal. But most banks are focusing on better things, like needs-based selling and relationship-building, with the belief that bankers understand the difference.
Not so fast.
Many bankers view these newer sales development efforts as just more euphemisms for product-pushing, a Trojan horse full of pushy salespeople. Same old sales approach, just cleverly disguised. Changing this perception requires a significant shift in attitude and understanding.
The key word is help. The issue is not whether bankers want to help their customers; it’s how they define help. Bankers cultivate relationships by earning their customers’ trust. As a result, the customers perceive the bank as a place they can trust to recommend appropriate financial solutions for their individual needs.
When bankers are put in positions where they perceive a conflict between helping the customer and meeting sales goals, they will balk. For them, it’s a values conflict. By protecting their customers from sales probes, they think they’re helping them avoid the dreaded product push. These bankers need help understanding that selling an account or service that makes the customer’s life easier, safer or more financially rewarding is helping the customer. At the very least, the banker may be able to provide a service solution, such as internet banking for a customer who frequently needs a special statement or an automatic payment for someone who runs into late charges because they have trouble remembering to mail a payment.
The service visit is also a good opportunity for a financial tune-up; a chance to assess whether the customer’s financial needs are being effectively met. Often the customer does not see the connection between needs and new products. Similarly, the customer may not understand the benefits of existing products. If a customer’s primary bank isn’t staying on top of her financial needs, there are plenty of competitors out there who are more than willing to step into the breach. Satisfying customer needs is a mutually beneficial solution for the customer, the banker and bank.
Once bankers understand they are helping customers by exploring relationship-building opportunities in service situations, they need to be able to perform at a higher sales skills level. Most financial institutions have provided some degree of foundation sales skills, which enable people to sell basic accounts and services in product-inquiry situations. To effectively sell in service situations, both foundation and higher-level sales skills need to be firmly in place. The development process for establishing higher-level skills is the same as for foundation skills:
• Establish service situation sales standards;
• Assure that goals are consistent with
• Determine appropriate measurement tools;
• Identify additional skill development needs;
• Provide customized skills training;
• Reinforce and coach skills development;
• Provide appropriate recognition and
• Establish accountability.
The last step in this process – establishing accountability – is the key to successful implementation of a relationship-building program. Strict adherence to operational standards have and will continue to be mandated by banking regulations. Audits insuring adherence to these standards are routine. Yet many banks falter when it comes to establishing and holding people accountable for adherence to comparable service and sales performance standards. As a result, customers get an uneven experience and many relationship-building opportunities are lost. Where’s the logic in rigidly controlling copy paper use to reduce expenses, while allowing a lack of skills usage to leave a potential $50,000 deposit relationship on the table?
The bank with the competitive edge will be the bank that successfully incorporates service, sales and operational standards as integral, essential parts of the bank’s culture. It will define customer service as far more than filling an order or satisfying a routine service, and it will provide its staff with the tools necessary to achieve a mutually beneficial solution for the customer, the banker and the bank.
It just might be the bank that wins the game.u
Mary Beth Nelsen is senior vice president of Fairmont. Contact her at (203) 732-3065.