InStore Banking: Core Competence in Daily Execution

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In-Store Banking Core Competence in Daily
Execution

• Margaret Kane
• President and CEO
• Kane Bank Services
• 488 Hopkins Road
• Sacramento, CA 95864
• 916-488-0660
• margaretkane_at_earthlink.net
• www.kanebankservices.com

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• Todays Topics
• Whats New This Decade
• Keys to In-store Success
• In-store Banking Success Model
• Strategic Alignment
• Sales Management
• Human Resources
• Network Integration
• Sales Process
• Marketing Excellence
• Role of the Champion

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Whats New This Decade

• Its back to basics
• Cashless branch delivery has largely failed
• Large in-store programs sharpen their focus on
  tried and true activities
• Wal-Mart has grown and has opened up its network
• Its inability to expand its banking through its
  TD partnership leads it to focus on leasing space
  once again
• Face-to-face personal service is no longer
  shunned
• Executives wake up to the fact that customers
  want to use tellers they want transactional
  convenience

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Whats New This Decade

• In-store banking has entered a period of
  stability and maturity
• Big players stay big
• Few new big entrants into the market
• Citizens expands
• Retail practices have more cache
• Success of Commerce Bank has indirectly
  legitimized in-store banking
• Retail practiceslonger hours, selling stages,
  and straightforward product lines
• are now mainstream
• Deeper understanding of the value of checking
  accounts
• Fee income is prized
• DDA is the gateway to the overall customer
  relationship

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Whats New This Decade

• In-store practices have slowly worked their way
  into the mainstream
• We have hardly noticed the range of is impact
• The changes have been evolutionary not
  revolutionary

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Old News Questionable Strategies Are Now
Mainstream
The strategy is a very simple one. It revolves
around convenience. The thing that we do here
that makes us successful is that we are open
seven days a week and 360-plus days a
year. Lynn Nagorska, president of TCF
Financial They view the grocery store markets
as a convenience and a deposit gatherer and
thats all that they worry about doing there.
Most other banks dont think grocery stores are
sexy enough because you cant sell trust and
investment management there, you cant sell
commercial loans there Timothy Willi, an
analyst at A.G. Edwards and Sons Inc. TCF Plans
to Stock Up on Store Branches, American Banker,
September 12, 2000.
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Past Weaknesses Can Now Be Seen As Strengths

• Although 3 in 10 consumers have used a
  supermarket branch, less than 10 have opened an
  account or applied for a loan at a supermarket
  branch.
• Synergistics Report, New Directions for
  Branches and Banking Centers, October, 2000
• The results reveal, at least from the consumer
  perspective, that supermarket branches are
  transaction facilities, not sales centers. It is
  clear that branch planners must reassess their
  objectives and tactics regarding supermarket
  banking.
• William H. McCracken, CEO of Synergistics
• New View Supermarket branches can have a
  powerful impact on the network
• The whole of greater than the sum of its parts
• There is less pressure to extend hours to the
  traditional outlets
• New View People who use branches are more likely
  to make use of alternate banking channels such as
  ATMs, the telephone, and the internet.

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Past Weaknesses Can Now Be Seen As Strengths

• These outlets are good at serving younger and
  lower-income peoples transaction needs but have
  not evolved into the selling channels many banks
  had hoped they would be.
• New View In-store branches allow banks to
  acquire customers that they might not otherwise
  have access to
• Those with incomes of 15,000 to 24,900 are
  more apt than wealthier consumers to visit
  supermarket branches more frequently.
• New View Account base is a good source of fee
  income
• Source In Brief Store Branches Sales
  Disappoint, American Banker, November 7, 2000

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In-store Banking Success Model
Sales and Delivery Processes
Management Processes
1 Strategic Alignment Channel Strategy Products
and Pricing Goal Congruence Organizational
Structure Facility Design 2 Sales
Management Daily Disciplined Processes Observe,
Assess, Coach, Reinforce Sales Tracking Recognitio
n Programs Compensation 3 Network
Integration Channel Roles Channel and Network
Managers Delivery Costs 4 Sales
Process Multi-Channel Approach Sales Tools and
Creating Sales Opportunities Scripting and Sales
Models Best Practice Models 5 Marketing
Excellence Branding Strategy POS Materials Sales
Campaigns Advertising 6 Human Resources Channel
Specific Recruitment Job Descriptions and
Performance Evaluations Dedicated Training Career
Path
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Strategic Alignment

• Channel Strategy
• Products and Pricing
• Goal Congruence
• Organizational Structure
• Facility Design

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Strategic Alignment Channel Strategy
Value proposition to the customer is
convenience The beauty of supermarket banking
is that it brings banking to the consumer. Sooner
or later the light goes on for consumers. The
question is Am I going to two places to both
bank and shop or just one? Inevitably they will
choose convenience Dennis Hudme, SVP of CFS
Bank, Westbury, NY Value proposition to the bank
is sales Winners in the supermarket banking
business focus on a core set of behaviors that
lead to the ongoing acquisition of new customers
to the bank and the ongoing cross-sell of those
customers.
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Strategic Alignment Products and Pricing

• The products and pricing must support the
  convenience strategy and the daily process of
  sales execution
• Best in class institutions focus on a
  straightforward and simple product set
• Free checking accountsSavings products with
  attractive ratesHome Equity loans/lines
• Product design should encourage electronic
  delivery
• Customers must be encouraged to use alternative
  channels
• Profitability is about deposits
• 80-85 of retail bank profitability is driven by
  depositsIn-store banking must be operated as
  the low cost channel for deposit acquisition

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Strategic Alignment Goal Congruence

• Front-line goals, expectations and rewards must
  support the channel strategy
• Common disconnects between strategy and execution
• Strategy based on customer deposit
  growth Incentives / tracking / management
  focused solely on unit productivity
• Best institutions connect strategy and execution
• Reward new customer acquisition
• With customer incentives
• With sales incentives
• Focus on growth of deposit and loan products

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Strategic Alignment Organizational Structure

• A key requirement is organizational focus in
  must have areas
• Marketing Human Resources Performance
  Information Operational Differences
• Various, successful organizational structures
• Dedicated channel team Geographic management
  with specialized or dedicated staff support

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Strategic Alignment Organizational Structure
Emerging In-store banking program
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Strategic Alignment Organizational Structure
Mature In-store Banking Program
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Strategic Alignment Facility Design
The facility should support the strategy
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Strategic Alignment Facility Design
The facility should support the strategy
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Sales Management

• Daily, Disciplined Processes
• Observe, Assess, Coach, Reinforce
• Sales Tracking
• Recognition Programs
• Compensation

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Sales Management Daily, Disciplined Processes
Daily sales activities and behaviors aisle
promotions / visitations telemarketing product
focus Consistent scripting for customer
interaction Do you have ____? Where do you
keep____? Where do you bank? Use of customer
profiling Understanding how customers manage
their money, borrow their money and save their
money. Planned, on-going customer contact
processes
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Sales Management Observe, Assess, Coach, Reinforce

• Constant observation of selling behavior on the
  part of branch managers
• Regular branch visitation by market managers
• Quarterly staff assessment process
• Supervisors who lead by example and show
  employees how to do it
• Reinforcement of agreed upon behaviors
• Regular Focused Coaching

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Sales Management Sales Tracking

• On-going sales reporting and tracking is critical
• Two types of reporting informal and formal
  (official)
• Informal reporting
• sales officers need to proactively report sales
  dailybranches need to roll up this
  information to the market managerssuccess
  stories should be voicemailed or emailed daily
  Aisle contacts per day, quality conversation per
  day follow-up leads, number of new DDA
• Formal reporting
• weekly cumulative sales reports that result in
  QTD totals

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Sales Management Sales Tracking

• Best practices in individual sales reporting
• Sales officers are ranked on QTD production in
  key product areas DDA Services Direct
  Deposit, Debit, Online, Bill pay
  usage Business products
• Savings and Investment Products Equity
• Best practice in branch sales reporting
• Branches are ranked on QTD growth and sales
  against targets in key product areas Deposit
  growth Loan growth or loan originations Sale
  s production Transactional efficiencies

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Sales Management Recognition Programs

• Formal and informal recognition processes
• Informal recognition
• voicemails, emails, thank-you notes from
  supervisors, executive managementsmall gifts,
  lunches, movie ticketsinvitations to speak at
  meetingsarticles in newslettersframed
  customer letters
• Formal recognition
• Top 10 of employees and branches receive
  quarterly recognition
• Known Performers The results of 70 of the top
  10 becomes the benchmarkCustomer service
  excellence awards

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Sales Management Compensation

• Be careful what you pay for you will get the
  behavior you incent
• Individual goals versus team goals
• Example of an individual
  compensation matrix

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Human Resources In-store Banking Success Model

• Channel Specific Recruitment
• Job Descriptions and Performance Evaluations
• Dedicated Training
• Career Path

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Human Resources Channel Specific Recruitment

• Need balance between a banking orientation and a
  retail sales orientation
• Use of sales propensity and behavior modeling
• Group interviews
• Interview scripts
• Recruit in non-bank environments
• Extra focus on hiring employees who want a
  professional career
• College educated
• Clear-cut explanation of sales expectations
• Expect to hire 1 out of 10 resumés 1 out of 5
  interviews

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Human Resources Job Descriptions and Performance
Evaluations

• The best systems integrate job descriptions and
  performance evaluations
• Emphasis on the following areas
• Growth or profit contributionSales of key
  productsCustomer service and retentionLeadersh
  ip and human resourcesOperational
  integrityTransaction managementRetailer
  relationships
• Performance rated in relation to goals,
  standards, or expectations each quarter

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Human Resources Dedicated Training

• Mix between pre-work, classroom, in-store
  activities
• New hire training should be 2 to 3 weeks
• Needs to be driven by line managers and their
  expectations, not just staff managers
• What do you do to be successful
• Goals, activities What will you be managed to
  do

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Human Resources Career Path

• Best in class organizations have a defined path
• Employees should be able to move from channel to
  channel
• Two years in an in-store branch is a long time
• Have to allow people to move on to traditional
  and to move back to in-store

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Human Resources Career Path
Financial Services Representative at In-Store
Assistant Manager at In-Store Branch Manager at
In-Store Retail Branch Manager Market Manager or
Business Banker
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4
Network Integration

• Channel Roles
• Channel Manager and Network Manager
• Delivery Costs

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Network Integration Channel Roles
Best in Class institutions do differentiate
channel roles In-store branches acquire new
households grow deposits and loans by cross
selling customers educate customers on
electronic delivery provide expanded banking
hours Traditional branches grow deposits and
loans by cross selling customers educate
customers on electronic delivery sell a
complete range of complex products provide full
range of customer service
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Network Integration Channel Managers and Network
Managers

• Debate over the benefits of managers who manage
  dedicated channels versus managers who are
  responsible for markets
• Focus on what needs to be accomplished first and
  foremost
• There is a clear-cut need for focus and
  specialization this does not imply dedicated
  management
• There is a clear-cut need for an integrated
  presence in a market, but this does not imply
  integrated management

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Network Integration Delivery Costs

• Managing the customer interaction is extremely
  important
• Educate on ATMs, online, debit
• Multi-channel delivery systems are expensive
• Studies show that costs can go up as much as 23,
  average transactions up 60
• In-store is the most expensive channel for
  transaction processing
• When transactions are above 12, 00015,000 per
  month, sales suffer

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Sales Process

• Multi-channel Approach
• Sales Models
• Scripting
• Best Practice Models

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Sales Process Multi-channel Approach

• Channels should support each other
• Traditional branches should promote in-store at
  new account openingIn-store should introduce
  traditional branches for higher touch service and
  sales
• Product offers should also be consistent

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Sales Process Sales Tools and Creating Sales
Opportunities
Use all sales methods that the store environment
offers Telemarketing standards for number of
calls madeAisle promoting standards for
quality contactsATM sales specific product
offersTeller line sales use customer database
to understand needsPromotion tables overall
awareness buildingPublic address system
branches need on-going approved scripts
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Sales Process Scripting and Sales Model

• Train employees what to say when
• Use a sales model
• Create interestExplore needsRecommend and
  obtain agreementDetermine next steps
• Getting the right balance between needs
  assessment and product pushing

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Sales Process Best Practice Models

• Tell, show, share
• Formalize process of sharing best results
• Give best practice awardsInvite employees to
  share best practices at meetingsShare success
  stories at all meetings

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Marketing Excellence

• Branding Strategy
• POS Materials
• Sales Campaigns
• Advertising

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Marketing Excellence Branding Strategy

• Importance of a strong brand
• Use of retail brands
• Wal-Mart Money Center
• First Market Ukrops
• Retailer brands may have a competitive advantage
• Customers are willing to use non-financial
  institutions for their financial needs
• Negative brand image of financial institutions in
  general

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Marketing Excellence Point of Sale Materials
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Marketing Excellence Sales Campaigns

• Keep it fresh make the routine exciting
• Change promotions every six weeks
• Special sales, gifts with purchase

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Marketing Excellence Advertising

• Lend credibility to the channel
• Promote the network whole is greater than the
  sum of all of its parts
• Use retailer vehicles wherever possible

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Marketing Excellence Advertising
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Retail Store Partners

• Alliance should exist at all levels
• Manager to ManagerDistrict Manager to Market
  ManagerCorporation to Corporation
• Establish regular meetings
• Focus on joint market programs
• Take ideas to them
• Its hard work

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The Champion

• Without a champion, someone to take ownership and
  drive the effort, it will fail
• The champions role
• Evangelize the mission and strategyDevelop the
  point of view and pull it all togetherAssume
  responsibility for all aspects of the In-store
  Banking Success ModelKeep driving to the
  future stateDeal with internal barriers to
  successCollaborate with all managersStay the
  course
• Who is your champion?
• Winners in the supermarket banking business
  focus on a core set of behaviors that lead to the
  ongoing acquisition of new customers to the bank
  and the ongoing cross-sell of those customers.

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In-store Banking Success Model
Sales and Delivery Processes
Management Processes
1 Strategic Alignment Channel Strategy Products
and Pricing Goal Congruence Organizational
Structure Facility Design 2 Sales
Management Daily Disciplined Processes Observe,
Assess, Coach, Reinforce Sales Tracking Recognitio
n Programs Compensation 3 Network
Integration Channel Roles Channel and Network
Managers Delivery Costs 4 Sales
Process Multi-Channel Approach Sales Tools and
Creating Sales Opportunities Scripting and Sales
Models Best Practice Models 5 Marketing
Excellence Branding Strategy POS Materials Sales
Campaigns Advertising 6 Human Resources Channel
Specific Recruitment Job Descriptions and
Performance Evaluations Dedicated Training Career
Path