Understand the implications of a mindshift from branch centric to customer centric.

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3 Discuss the dramatic changes that are occurring in financial services and identify the key drivers of that change. Understand the implications of a mindshift from branch centric to customer centric. Understand why Market Segmentation and Customer Experience Management have become essential to competing in the financial services arena. Gain insight into the Parallel Transformation Strategy and how to use it to find the balance between providing stability and promoting change in an industry experiencing disruption.

4 Understand how to use the Parallel Transformation Strategy to define the role of the branch and the role of electronic delivery going forward.

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6 Lance Kessler & Associates Marketing Consulting and Training Transforming Your Bank to Customer Centric Financial Services Industry: Issues & Trends 1. For every Starbucks store in the United States, there are bank branches. a) 3 b) 6 c) 9 d) According to an ABA survey, which one of the following banking methods ranked the highest and was preferred by 31% of customers? a) Branches b) Mobile c) Internet d) ATM 4. Within just ten short years, we ve gone from percent of our day-today transactions being done over the counter at the branch to % of our day-to-day transactions now going through the Internet, mobile, call center, and ATM. a) 65% b) 75% c) 85% d) 95% 5. In 2006, 70% of checking consumers said they would prefer to make deposits with a teller in the branch. In 2014, % of checking consumers prefer to make deposits with a teller in the branch. a) 65% b) 54% c) 35% d) 25% Issues and Trends in the Financial Services Industry 2015

7 Lance Kessler & Associates Marketing Consulting and Training Transforming Your Bank to Customer Centric 6. % of all banking products are sold in the branches. a) 30% b) 40% c) 50% d) 60% 7. % of U.S. consumers prefer to talk to a person vs. purchasing a banking product online. a) 43% b) 57% c) 66% d) 71% 8. % of U.S. consumers believe they will use their branch as often or more often in five years time. a) 45% b) 52% c) 66% d) 78% 9. According to a McKinsey Study conducted in 2014, % of consumers interact with financial institutions through multiple channels. a) 15% b) 25% c) 55% d) 65% 10. % of small businesses are in the branch monthly. a) 60% b) 70% c) 80% d) 90% Issues and Trends in the Financial Services Industry 2015

8 Lance Kessler & Associates Marketing Consulting and Training Transforming Your Bank to Customer Centric 11. In 2009, FDIC-insured institutions operated 99,550 banking offices, which was an all-time high. The number of banking offices declined by % between 2009 and a) 4.8% b) 7.3% c) 11.5% d) 23.2% % of consumers over 50 years of age visited a branch within the last 30 days. % of consumers under 30 years of age visited a branch within the last 30 days. a) 50% b) 42% c) 33% d) 24% 13. There are 100 million people in the U.S. that are over 50 years of age. They control approximately % of the disposable income in the U.S. a) 40% b) 50% c) 60% d) 70% 14. % of millennial Internet users do in-branch banking (not including the ATM). a) 32% b) 45% c) 53% d) 76% Issues and Trends in the Financial Services Industry 2015

9 Lance Kessler & Associates Marketing Consulting and Training Transforming Your Bank to Customer Centric 15. % of millennials would rather go to the dentist than listen to what their banks are saying. a) 52% b) 63% c) 71% d) 84% 16. % of U.S. adults who had a negative experience with an organization or company indicated that they would spread the word about the bad experience. a) 51% b) 63% c) 72% d) 84% % of companies believe that they are delivering a superior customer experience. % of customers perceive their experiences as superior. a) 8% b) 20% c) 32% d) 44% Issues and Trends in the Financial Services Industry 2015

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11 Source: Only the Paranoid Survive Andrew S. Grove

12 Positive (Growth Opportunity) Opportunities Negative (Threats-Pain-Fear) Threats External Forces Drivers of Change Conditions

13 Organizational Environment Industry Environment Contextual Environment Source: Adapted from Monitor Group Global Business Network High Org Influence Some Org Influence Less or No Org Influence Competitive Strategy Products & Services Customer Experience Delivery Channels Costs & Pricing Industry Dynamics Customer Behaviors Competitor Moves Other Stakeholder Developments Political Environment Economic Environment Technology Advances Cultural/Social Change

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15 ATM Kiosk Call Center Credit Debit Card Online Banking Mail

16 Branch Banking Web Site ATM Face-to-Face Video Teller Machines Credit Prepaid Debit Cards Online Banking Call Center Mobile Banking Smart Phone/Tablet

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18 Customer-Centric Self-Test Customer Familiarity 7 or 8 Misaligned Customer- Centric 6 or less Aimlessly Wandering Misdirected 6 or less 7 or 8 Organizational Engagement Source: Adapted from Forrester Research, Inc. Scoring: 0 = Disagree with statement 1 = Somewhat agree with statement 2 = Mostly agree with statement Customer Familiarity 1. Our company has a clearly defined set of target customer segments. 2. Employees across the company share a consistent and vivid image of target customers. 3. Market research is used to fully understand the needs and behaviors of target customers. 4. Decision-making processes systematically incorporate the needs of target customers. Total Customer Familiarity Organizational Engagement 1. Senior executives regularly interact with target customers. 2. Senior executives consistently communicate the importance of serving target customers. 3. Employees across the company are recognized and rewarded for improving the experience of target customers. 4. The quality of interactions with target customers is closely monitored. Source: Adapted from Forrester Research, Inc. Total Organizational Engagement

19 Identify Your Target Market(s) Understand What Your High Priority & Priority Customers Value Allocate Resources So You Can Differentiate Yourself with Your High Priority & Priority Customers Make Your Marketing Dynamic & Adaptive with Your High Priority & Priority Customers

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22 Sales & Service Building Relationships Touchpoints: Human Engagement Digital Engagement

23 Human Engagement Digital Engagement

24 In the branch environment, banks need to shift from focusing on transactions to meaningful interactions. In all customer contact situations, bankers need to understand the customer and his/her situation in a way that allows them to create real, differentiated value that is perceived by the customer.

25 The Challenge with Digital Engagement The bank needs to figure out how to fit into the context of the customer s life rather than expect the customer to fit into the context of the bank s physical presence. The bank also needs to remove the obstacles/friction wherever feasible and make it as easy for the customer as possible.

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27 Identify key variables/drivers that you can deliver that will differentiate you in the marketplace Define from the customer perspective Put into written form

28 Customer Research Attributes Important to Customers Trust Responsive Customized/Individualized Respect Caring Guidance/Good Advice

29 Responsive to customers individual needs Received special treatment from someone who respects them and cares Trust us and our advice today and in the future Viewed as trusted financial advisor

30 Customer Perspective: When we are successful in creating a superior customer experience, our customers will feel we have been responsive to their individual needs. They will feel like they have received special treatment from someone who respects them and cares, and they will trust us and our advice today and in the future. We will be viewed as their trusted financial advisor.

31 Branch Banking Experience Face-to-Face Experience Call Center Experience Online Experience (Website, Online Banking, & Mobile Banking)

32 1. Customer pulls into the parking lot / drive-in 2. Customer walks into the branch / up to ATM 3. Customer goes to teller line to ask / conduct transaction 4. Customer needs to meet with someone / conduct transaction 5. Customer directed to appropriate person 6. Customer meets with appropriate person 7. Service need addressed / sales process applied 8. Service solution / sales process completed 9. Follow-through 10. Follow-up

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34 Customer Experience Customer Satisfaction Customer Retention Customer Experience Score Net Promoter Score Employee Goals $ Loan Goals $ Deposit Goals $ Fee Income Goals # of Accts/Services Per HH Criteria for Success/Measures

35 Critical Improvement Issues Low Performance. Individualized Solutions. Special Treatment. Financial Advisor High Importance. Caring.. Responsiveness Trust. Respect High Performance High Leverage Issues Low Priority Issues Low Importance Low Leverage Issues

36 Overall Customer Base Accounts Balances Existing Customer Base Accounts Balances New Customer Base Accounts Balances Checking Accounts Accounts Balances High Priority Customers Accounts Balances Existing High Priority Customers Accounts Balances New High Priority Customers Accounts Balances High Priority Checking Accounts Accounts Balances

37 Branch Employees Scored on Defined Customer Experience Behaviors Each branch position is shopped & given Customer Experience Score Individual branch position shopping scores are totaled to achieve monthly overall branch Customer Experience Score Each branch is rated and ranked on Customer Experience Score

38 How likely are you to recommend Encore Bank to a friend or colleague? 10 = Extremely Likely 0 = Not At All Likely Promoter Passive Detractor Promoters Detractors = Net Promoter Score Source: The Ultimate Question, Fred Reichheld/ Satmetrix Systems, Inc. and Bain & Company

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40 Provide Stability Promote Change Source: Linkage, Inc.

41 Reposition the Role of the Branch Transformation A Transformation B Greater Integration Among Delivery Channels Reposition the Role of Electronic Banking

42 Overriding Question: How do you evolve the branch system so that the bank can effectively compete long-term? Who owns the branch system going forward? (Retail Banking? Business Banking? Wealth Management? Retail Investments Services? Insurance Services? Should it be some combination of these lines of business?) Gain clarity of insight into who wants to use the branch and for what purposes going forward. (High priority customer segments, Priority customer segments, Everyone else)

43 How do you consistently deliver the predetermined customer experience in the branch so that it will differentiate the bank? How should the branch be organized? (Clearly defined organization chart) What type of financial services providers will staff the branch? What will be the role of transactions in the branch? What will be the role of sales in the branch? What will be the role of service in the branch? How should staffing levels compare to what they are today? What should the compensation structure be for branch employees? What type(s) of physical branch (including layout) will be used?

44 How should digital devices and electronic delivery channels be coordinated with and/or integrated into the branch experience?

45 Overriding Question: How do you evolve the electronic products & services, digital devices, and electronic delivery channels so that the bank can effectively compete long-term? What unmet needs do existing and prospective customers have in today s environment that can be solved with digital solutions? (High priority customer segments, Priority customer segments, and Everyone else) How do you consistently deliver the predetermined customer experience through electronic delivery channels so that it will differentiate the bank? How will the bank decide which electronic products & services, digital devices, and electronic delivery channels to invest in?

46 The bank needs to figure out how to fit into the context of the customer s life rather than expect the customer to fit into the context of the bank s physical presence. What will be the role of sales related to digital devices and electronic delivery channels? What will be the role of service related to digital devices and electronic delivery channels? How will you build relationships with customers who primarily use digital devices and electronic delivery channels to do their banking?

47 How should digital devices and electronic delivery channels be coordinated with and/or integrated into the branch experience?

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49 How will you capture and use customer data resulting from their use of the branch, electronic products & services, digital devices, and electronic delivery channels? How do you make sure all of the delivery channels work together seamlessly to deliver a superior customer experience?

50 Lance Kessler & Associates Marketing Consulting & Training 6206 Charing Cross Mechanicsburg, PA Telephone: