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Getting Your Bankers to Stop Selling Products and Start Building Relationships

Posted By Theodore A. Rosen, President, Expert Business Development, LLC, Thursday, January 16, 2014
Updated: Friday, January 10, 2014

Traditionally, banking has focused heavily on responding to customers and prospects in an effort to fulfill their needs. This reactive model grew out of the concept of the bank branch as the primary source of leads and business development opportunities. A customer or prospect would wander into the branch and a Customer Service Representative (CSR) would provide the ideal or optimal solution. Even dealing with small to midsize businesses, bankers were generally reactive as opposed to proactive.

In the world of commercial banking, the traditional Commercial Real Estate (CRE), bankers were similarly reactive. When a builder or developer had a project or a "deal” they chased it down and did their best to convert it to a sale. Those bankers focusing on the Commercial and Industrial (C&I) market, on the other hand, had to be much more relationship-oriented to develop and retain customers. Today, these skills are in great demand.

Over the last two decades, the world has changed. For a variety of reasons, including the rise of electronic banking and intense pressure from non-traditional bank (e.g., Ally, ING, Schwab) and non-bank (e.g., Costco, Walmart, AAA) competitors, consumers and businesses have a lot of alternatives to banks with bricks and mortar in their community. These competitors, along with the huge money center banks, can offer customers products and technology that would create a competitive challenge for any community bank.

"Often bankers who are traditionally product-focused fail to recognize that, with small and midsize businesses, relationship can almost always trump products."

Since community banks will never be able to outperform their large competitors based on branches or products, the one way that they can most effectively compete is by providing service and creating relationships. To further corroborate this notion, all one has to do is listen to the feedback that my colleagues receive every day. My firm’s primary business is commercial relationship building. In that context we make over 5,000 appointments each year for bankers to meet with business owners and CFOs who might be actively seeking or at least open to a new banking relationship. We usually get feedback from the decision-makers as to what their issues or concerns are regarding their current bank. The overwhelming majority express disappointment in a relationship that is either nonexistent or not very good.

In helping our bank clients build commercial relationships for the last 20 years, we have found that the key to building business relationships is understanding that they are fundamentally similar to personal relationships. Specifically, they must be earned and are not automatically created, even when the bank is already doing business with a customer. Often bankers who are traditionally product-focused fail to recognize that, with small and midsize businesses, relationship can almost always trump products. Business relationships, like marriages, require constant nurturing and attention and taking them for granted often heralds the beginning of the end in both contexts.

We have identified seven stages in commercial relationship building which reflect the same dynamics that are characteristic of a personal relationship:

  1. Engagement
  2. Discovery
  3. Common Interests
  4. Shared Values
  5. Trust
  6. Commitment
  7. Resilience

For each stage, there tare actical approaches that can enhance and accelerate the process. Here are two pieces of tactical advice that will go a long way in building and deepening relationships:

· After meeting with a customer or prospect, and especially after the first meeting, send the person with whom you met an email picking up on some part of the conversation related to either their business or their personal life. For instance, if they share with you that they like to take their family skiing to Maine, find an article on the Web that might pertain to one of the major Maine ski resorts expansion. This simple act speaks volumes about you in that a) you listened, b) they are important to you, not based on your words but rather on your actions.

· In every meeting with the customer or prospect or a referral source for that matter you should be "planting a seed”. This could be to bring in a new product to an existing customer or to move the sales process along for a prospect. Obviously, it is imperative that the "planted seed” is memorialized somewhere, in a CRM system, on a manila folder or in a Daytimer (in descending order of desirability), so that you can act on it in the following meeting or conversation. As is the case in the prior example, this this also speaks to your ability to listen and your commitment to follow up, both of which can be important differentiators when compared to the great unwashed masses represented by your competitors.

On Friday, January 24th, I will be making a presentation of this topic at NEFMA’s Winter Conference in Woodstock, VT. In that presentation I will be expanding upon the brief coverage that this article has provided and will share with the attendees more tactical approaches to help bankers create, deepen and expand relationships with customers, prospects and referral sources.

The interactive presentation will be at 1 PM, leaving plenty of time to get home for dinner.

Ted Rosen is president of Expert Business Development, LLC, based in Bala Cynwyd, PA and is a frequent presenter at banking conferences. The firm helps community and regional banks develop and expand commercial relationships and is a member of NEFMA.

Tags:  commercial banking  relationship 

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Don't Ask What They Want, See What Decisions They Make

Posted By Jeff Steblea, M.A., Vice President, Research Analysis & Management Market Street Research, Friday, January 10, 2014
Updated: Thursday, January 9, 2014

Successful banks and credit unions have learned the importance of research. From customer satisfaction surveys to analysis of big data, a regular regimen of industry research is integral to brand assessment and strategic planning for an organization's future. But unfortunately, most questions used in banking industry research do not effectively tell you how consumers decide which banks or credit unions to use.

"Only by understanding what consumers would sacrifice can you truly understand what matters to them in choosing a bank."

In an ideal world, we’d all like to live just down the street from a bank with the highest level of personal service, the lowest fees on accounts, a robust online banking platform, the highest rates, and the largest ATM network. And that's just for starters! If you ask consumers how important each of these factors are in deciding which bank to use, they will usually say that ALL of them are highly important.

"Only by understanding what consumers would sacrifice can you truly understand what matters to them in choosing a bank."

So how do consumers really decide which bank to use? They’re going to have to make some trade-offs. They might decide that a bank's ATM network is the most important criterion for them. Or maybe they like to bank in person at a nearby branch where they are treated like family. This is the power of conjoint analysis--it demonstrates the real-world trade-offs consumers make when considering a decision. Only by understanding what consumers would sacrifice can you truly understand what matters to them in choosing a bank.

To conduct conjoint analysis, you begin by coming up with three to five attributes you want to test against each other. These attributes are the criteria you think consumers are likely to weigh when selecting a bank, and should vary based on the competitive landscape in your market area.

Next, you assign levels to each of these attributes. For example, the levels for location might be "located nearby” and "located farther away.” For personal service, the levels might be "excellent personal service” or "average personal service.” It is important not to assign levels that represent extremes; the choice you are providing to consumers highlights the advantage they stand to gain--the exceptional over the merely average.

At this point, you take these attributes and, using a statistical software program, combine them into a limited number of scenarios. The scenarios describe the possible configurations of these exceptional and average attributes. You then present consumers with each scenario and ask them how likely they would be to use the bank described by each scenario. For example, you might open by asking the consumer to imagine that they have moved to a new state and there are a variety of banks they can use. The first bank is farther away, has excellent personal service, average fees on accounts and services, and a larger ATM network. The next bank is located nearby, has excellent personal service, low or no fees on accounts or services, and a smaller ATM network. You proceed through each of the possible combinations, asking the consumer after each one how likely they would be, on a 10-point scale, to use the bank described by that scenario.

After collecting the data, you derive a rating for each of the attributes, and this rating shows us the relative importance of each attribute. By presenting consumers with a series of such scenarios, you get them to think actively about the trade-offs they are willing to make and their answers reveal the true underlying preferences that guide their banking decisions. Finally, in analyzing the data, you can conduct a market segmentation analysis based on the attributes that are important to different types of consumers. This analysis can show you, for example, how large the ATM-driven segment of the market is, as well as the prevailing demographic characteristics of consumers in this segment.

Tags:  market research 

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UDAAP and New England State Counterparts: A Primer for Marketing Professionals in Banking

Posted By By Matthew P. Coletti, Esq. MBA, Friday, December 20, 2013
Updated: Thursday, January 30, 2014

Is obtaining a competitive advantage or meeting revenue goals an achievement if done at your consumers’ expense through utilizing questionable practices?Most banking institutions are not intentionally unscrupulous, but rather unaware of the extent of their exposure to UDAAP risk through seemingly benign channels. This may be true because business units do not communicate, standards are too subjective, or consumer behavior is too unpredictable. Regardless, Marketing professionals, together with Compliance and Legal professionals, can effectively mitigate risk by monitoring industry trends, setting standards by which to measure internal processes and practices, then building compliance programs to control for conduct and monitor compliance.

To effectively capture UDAAP risk, a marketing compliance program should include controls for preventing, identifying and remedying perceived or actual "abusive” practices as set forth within the Dodd Frank Act (See 12 USC § 5531(d)(1) and (2) and 5536). "Abusive” practices are those which, in sum: (1) materially interfere with a consumer’s ability to understand a product or service’s terms or conditions, or (2) take unreasonable advantage of a lack of understanding of the consumer, an inability of the consumer to protect his or her interests, or a consumer’s reasonable reliance on another acting in their interest. The subjectivity of this standard presents as a challenge, particularly in light of minimal administrative guidance. For this reason, oversight is essential.

"Think in terms of protecting the least sophisticated consumer from the perspective of the most sophisticated plaintiffs’ consumer protection attorney."

In marketing campaigns, emphasis should be placed on clarity, transparency, and consumer interest while eschewing small print and inconspicuous language. Word choice and physical arrangement is critical to achieve accurate representation of product specifications. Avoid overly suggestive or vague trigger words, such as "free,” "no cost” or "rates as low as.” Heightened scrutiny should also extend to: (1) those vulnerable classes of persons, such as the elderly or military borrowers; (2) fee or income generating products or services, particularly overdraft programs and supplemental credit card products; and (3) third party vendor conduct. Before publishing or distributing any campaign materials, have them reviewed by Compliance or Legal professionals against a checklist for UDAAP and other related regulations. Be sure to retain documentation of any reviews conducted. Further, the complexity of this analysis is amplified when marketing materials are introduced into the interactive communication environment of social media.

Moreover, when reviewing items internally under UDAAP analysis,think in terms of protecting the least sophisticated consumer from the perspective of the most sophisticated plaintiffs’ consumer protection attorney. This is especially important where nearly all state UDAAP-type statutes permit a private cause of action as a consumer remedy, unlike the federal UDAAP models. Often, state statutes are more encompassing than UDAAP which compounds the need for hyper-vigilance. Otherwise, remedies under UDAAP are more likely to come in the form of civil money penalties or restitution to consumers. Locally, Maine, Vermont and New Hampshire have relatively stringent monetary penalties under statute whereas Rhode Island is the only state to have none.

Finally, some other sources of authority to build awareness include: Section 5 of the FTC Act; Regulation AA; MAP Rule, state statutes and regulations, such as Conn. Gen. Stat. 42-110a et seq., Mass. Gen. Laws c. 93A and 209 CMR 32.00 et seq., and current case law relating to each. Most recently, the FFIEC issued valuable guidance relating to social media usage. Ultimately, those institutions with a culture of awareness emphasizing positive customer experience will achieve a competitive advantage.

Tags:  compliance  UDAAP 

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Just who (or what) is Simon Pearce?

Posted By NEFMA, Wednesday, December 18, 2013

Simon Pearce is a highly talented entrepreneur and master craftsman of glassblowing and pottery. An Irish-American, he learned his craft in Kilkenny Ireland and opened his first US factory in Quechee, Vermont in 1981. The facility, powered by hydroelectricity on the Ottauquechee River, also includes a showroom, fabulous restaurant and glass-blowing demonstrations.

Simon Pearce glass is highly collectible and coveted among those who appreciate fine craftsmanship. His works have been gifted to foreign dignitaries and presenters of the Academy Awards.

Lucky for us he chose New England to start his business and our Winter Conference is being held right around the corner–how convenient!

Take a tour at Simon Pearce on Thursday, January 23 from 1:00 to 2:00 p.m. and join us later in the evening to hear our guest speaker, Clay Adams, CEO of Simon Pearce.

Want to learn a little more? Check out this video by Vermont Spotlight.

Tags:  conference 

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Bank & Credit Union Marketing Budgets

Posted By NEFMA, Monday, November 25, 2013

From The Financial Brand

What budgetary challenges do your institution face heading into 2014? The Financial Brand shares the findings from an early September budgeting survey of 80 financial institutions. The results reveal concerns about reaching growth goals, measuring ROI and the problems with how yearly budgets are set. Also included is a simple guideline to help determine the appropriate marketing investment based on an institution’s asset size.

Click here to find out more

Tags:  budgeting 

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