Keeping Small- Business Banking Customers Loyal

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1 Keeping Small- Business Banking Customers Loyal

2 Small-business customers offer a rich source of untapped revenue for banks. Indeed, small businesses are a major part of the US economy, and while individually small, collectively they are a large opportunity. Their main challenges include managing costs tightly, looking for opportunities to generate new revenue, and staying solvent in this difficult economy all of which can be addressed with help from banks. Banks have come to recognize the smallbusiness opportunity, both in terms of companies business value and the personal wealth of small business owners. This opportunity also is becoming more important to banks as federal regulations drive up the cost of banking operations and reduce certain fees for consumer services. Small businesses have the potential to help banks compensate for this lost revenue. However, retaining small-business customers and increasing the amount of business they do with a bank have become more difficult in recent years. Historically, banks have tethered their services through the branch model. Yet small businesses no longer are dependent on branches, performing many banking activities (including deposits, payroll and payments) on their PCs. Thus the connection between small businesses and bank branches is being stretched or even broken. Furthermore, recent national attention to fee increases for checking accounts and debit card usage by the major national banks is causing some small business customers to re-examine their primary banking relationships. At the same time, technologies such as software tools, websites, and social media have enabled small businesses to compare financial services products and prices more readily and have given these organizations greater choice. 2 Keeping Small-Business Banking Customers Loyal

3 Three vital steps to connecting with small businesses In short, when considering the smallbusiness market, banks face two major challenges. One is building a distinctive brand that deepens the entire small-business relationship by taking advantage of the bank s scale. The second is re-building loyalty among existing small-business customers and deepening the bank s relationship with them, using a strong brand to foster a single, satisfying relationship rather than multiple, transactional interactions with several financial institutions. In Accenture s view, banks have an opportunity to address these two challenges and, in the process, gain market share and expand their business with small-business customers by creating greater client centricity, mapping the client journey, and harmonizing their operating model. Creating greater, more relevant client centricity Until recently, bank client segmentation generally has been driven by geography, size and SIC codes. Today, banks must evolve, supplementing such traditional attributes with more relationshipbased characteristics such as sales and service style preferences. Likewise, while banks sales efforts historically have been product-driven, they now must move toward a needs-based, solutionoriented approach. Focusing more closely on small-business customers needs with a multi-dimensional view will allow banks to capture new clients and retain existing ones, as well as cross-sell within and across business units. Importantly, there are differences between attracting and retaining small-business customers. For example, it can be easier to communicate attributes such as price or convenience to prospects than such things as service and expertise, which may be more compelling to current clients. 3

4 Mapping the client journey Banks should understand the client journey, focusing on clients entry points and on the pathway to developing deeper relationships. Banks should know where to engage a client during the start of a new relationship and how to win them from the competition. For example, customers who start out with loans or credit cards can be more difficult to convert into broader customers than those who start with a transaction and deposit relationship. Furthermore, for every business strategy a bank has, it must know whom to target and how to target them. Greater granularity and knowledge of the prospect pool or existing customer base is important. Consider, for example, a bank that is attempting to acquire new small-business customers and has identified these customers typical entry point: a need for top-notch working capital management. There are several high-potential pathways the bank could take to forming deeper relationships with these prospects. It could, for instance, target a serviceoriented segment of prospects who want a combination of high service levels and business expertise delivered primarily through a face-to-face relationship. The bank also could target local loyalists dissatisfied with their existing banks and seeking a prudent, responsive local bank. Another pathway could involve targeting new small businesses experiencing high growth, which seek quality service and business expertise delivered through personal interactions or a cyber-based relationship model. Cross-selling existing small-business customers may involve another set of high-potential pathways. For instance, the bank could meet the savings and investment needs of existing working capital customers by supporting their growth though a disciplined and prudent approach to investment. The bank also could provide its customers with an entire set of working capital management products, or better meet the needs of existing working capital customers by providing dependable, reliable business services delivered by experienced teams. Harmonizing the operating model Institutions need a distinctive brand proposition and the ability to deliver that proposition that can change customer behaviors, reflect customer needs and preferences, and align to bank capabilities, and that is competitively dynamic. Achieving this requires two major tradeoffs to be harmonized: local, general relationships versus specialized, national capabilities; and face-to-face interactions versus the use of remote channels. For instance, Ally Bank markets itself as a hassle-free, online bank offering basic financial products and services. It excels in providing competitive pricing for CDs and fixed-income products, and its business and operating models match the bank s lean approach. In fact, it has no branches, cutting overhead by relying on online transactional services. As such, Ally Bank is a great match for the cyber-oriented, service sensitive small business owner segment. Another operating model challenge: The small business market is fragmented, making it harder for an organization to coordinate. The challenge is ensuring the operating model remains intact, and does not become embroiled in one-off exercises. However, most banks tend to sub-optimize around products such as checking accounts, or around specific channels (e.g. business bankers), rather than looking at the integrated operating model and economics. 4 Keeping Small-Business Banking Customers Loyal

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6 Accenture s small business optimizer approach Indeed, banks cannot map every customer pathway given the sheer organizational effort and coordination required to do so. Instead, banks should cultivate an awareness of their strengths and value proposition, and develop optimized offerings that match their ability to deliver. Accenture s Small Business Optimizer approach can help banks achieve these goals. By teaming with Accenture, banks can use sophisticated analytics to target key segments of the small-business market, leverage interactive channels to deliver offers in more tailored and cost-effective ways, and build the capabilities required to deliver their chosen brand proposition, whether that is an integrated multi-channel customer experience, a better website experience, or something else entirely. Accenture s approach exploits six different leverage points across the three key steps in the customer relationship process, thus empowering banks to capitalize on opportunities more effectively. Identify and engage potential customers For instance, as a bank identifies and engages potential customers in discussions, Accenture can help it make the most of its customer data. Most banks have a limited or incomplete understanding of their customers, mainly because they struggle to achieve a single view of customers across all lines of business, and because their customer data is not designed to support segmentation. Accenture applies its patented Customer Account Record (CAR) approach to this challenge, creating a rich, 360-degree view of every customer. CAR is enhanced with third-party data on customer needs, behaviors, demographics, and life stages. Accenture also can help strengthen segmentation which, today, many banks base on only a handful of variables. The resulting segments tend to be too large to drive any kind of discrimination at the campaign level (for example, all restaurants in Minnesota do not behave the same). Using CAR, Accenture can create macroand micro-segments that enable a bank to understand customer needs and preferences and conduct personalized communication with each customer. Executing campaigns to engage customers and make timely, relevant offers Once banks have forged customer relationships, Accenture can help make the most of them. Banks typically have limited ability to identify small-business targets with high need, interest and likelihood to buy a product, and they rarely conduct extensive testing of campaign elements to assess their impact. Furthermore, most banks do not use the results from campaigns to inform the development of future campaigns. In Accenture s approach, propensity to buy models are built at the micro-segmentation level to ascertain a customer s probability of buying additional products. Based on ROI derived using product data and propensity to respond, Accenture helps banks design and execute campaigns. Working with Accenture, banks integrate what they learn from each campaign back into the propensity model, so, with each campaign, the model becomes stronger and more effective. Capturing opportunities to serve the customer Accenture also works with banks to take advantage of each opportunity to serve their customers. One aspect of this is lead generation process improvement. Many banks do not provide intensive training or process improvement to sales reps to optimize returns from leads, nor do they have formal systems for sharing best practices across sales reps. Accenture can help, providing pre-campaign and in-flight training and guidance to help banks maximize the return from targeted leads. Accenture also partners with banks to identify and quickly disseminate best practices to all appropriate parties, fostering greater overall value. Lead management is another area in which Accenture can add significant improvement. In the typical bank, campaign leads are passed to sales without any guidance and with almost no customer-specific insight or enrichment, thereby hampering success rates from the start. Accenture helps banks route leads to bankers enriched with insight and sales guidance, thus making the discussion more relevant and timely for the customer. Lead tracking and learning provides additional improvement opportunities for Accenture clients. Banks often wait until campaigns are completed to evaluate them, compromising their ability to improve the campaign s impact in real-time and integrate campaign lessons into future campaigns quickly. Accenture s approach supports real-time campaign monitoring, so banks can quickly and continuously adjust and improve a campaign while it still can have an impact on results. When banks team with Accenture, insights are fed directly to bankers desktops leveraging tools like Salesforce.com, which many banks already use for their small-business sales forces. 6 Keeping Small-Business Banking Customers Loyal

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8 A modular approach Of course, it is rarely possible or desirable to address all of these opportunities at once. Indeed, most banks benefit from a series of focused, integrated modules that drive significant performance improvement using each lever described above. Accenture can design, pilot and roll out such modules rapidly and efficiently across a bank s footprint. When doing so Accenture delivers significant, rapid performance uplift by combining many of a bank s existing tools and capabilities with Accenture s own strengths, and by calling upon Accenture s proven experience in the smallbusiness market. Each module can provide a bank s smallbusiness organization with an integrated, turnkey solution service focused on a specific performance lever: Enriched, targeted information and leads are routed to bankers with insights and sales guidance, increasing conversion rates and satisfaction levels Coordinated multi-channel support is provided to ensure each customer is handled seamlessly and effectively in the research, sales, and initial serving processes Real-time monitoring is provided to support fast-paced, continuous improvement, with insights and suggestions fed directly to the small-business banker s desktop or remote device. This rapid feedback loop not only empowers the bank to replicate best practices more quickly, but also enables it to exploit market or competitive opportunities more effectively Robust, industry-leading training, including pre-campaign and in-flight training and guidance to help the bankers maximize returns from targeted leads. Best practices are identified and disseminated quickly in short training modules, using digital and mobile approaches Ability to quickly measure and track sales force effectiveness to create a more focused and engaged smallbusiness workforce that can achieve and exceed revenue objectives Many banks initially choose to develop modules focused on deepening relationships with existing customers, and then quickly progress to develop other modules sequenced by their potential impact on the bank s overall performance: First priority: Deepen customer relationships, with an initial focus on deposit and investment products and services, followed by fee-generating business services Second priority: Acquire more new, attractive customers through enhanced referral management, better digital recommendation tools, and improved mining of existing affluent and wealth management clients Third priority: Improve small-business banker portfolio and lead management practices across the key attributes of leading book management Fourth priority: Strengthen conversion of small-business customers into affluent and wealth management personal customers Fifth priority: Enhance retention of attractive customers through differential and proactive servicing approaches Sixth priority: Improve the conversion of small business employees into personal customers of the bank At most banks, Accenture proposes piloting each module in at least three distinct market areas to test its impact and to quickly develop insights and actions that would help improve each module s performance. For instance, one pilot might be in a region in which the bank already has a strong presence, thus gauging its ability to grow its existing market share. Another pilot could be in a region in which the bank is not one of the top three providers, which would help it assess the potential to significantly grow its market share. A third pilot might take place in an area comprising smaller towns, in which the competitive mix is skewed toward community banks. 8 Keeping Small-Business Banking Customers Loyal

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10 Achieving real-world value Accenture s analytics-based approach has delivered significant business benefits for many companies. For instance, during a pilot test at 39 bank network branches, an Italian bank achieved an 82 percent total contact rate for wealth and business banking clients, and an approximately three-fold reduction in churn among highand medium-risk clients. A UK insurer generated more than 90 campaign ideas, an incremental present value of new business premium (PVNBP) of more than $30 million, an estimated benefit of $55 million from its ongoing campaigns, and an anticipated volume increase of 167 percent. A large German bank used Accenture s approach to achieve a 45 percent lift in request generation and a 165 percent increase in its appointment rate, and it generated additional revenue of more than $9 million in just four months, while identifying a potential $75 million in incremental annual revenue. And in the US, a large financial institution partnered with Accenture to identify an opportunity to expand its current portfolio by more than 30 percent. The company also found ways to boost revenue by 19 percent for equity and option transactions and achieve 10 percent growth for managed advisory programs, amounting to $172 million annually. 10 Keeping Small-Business Banking Customers Loyal

11 Conclusion Small businesses represent an important opportunity for banks pursuing high performance in today s challenging environment. Small businesses are ready customers for banks, with a need for help with cost containment, revenue generation, and liquidity. Taken together, the host of small businesses add up to a rich opportunity which is particularly attractive to many banks given the challenges they face in terms of reduced fees and more stringent regulations. However, connecting with small businesses has its challenges. They are adept at online banking and, thus, less tethered to a given bank s branch network and brand. They also cannot be assumed to be loyal and pay close attention to things like fees and penalties that will impact their bottom line. The key to success for banks: Building a strong, distinctive brand that encourages small-business customers to create deep and lasting relationships. This approach allows Accenture clients to stand out from the pack of financial institutions currently courting small businesses, win the best new customers, and keep them for the long term. In short, by working with Accenture, banks can take advantage of the big opportunity of small business, thus accelerating their ongoing pursuit of high performance. Accenture can help. Accenture s Small Business Optimizer approach empowers banks to create richer, stronger relationships with small businesses, from identifying and engaging potential customers, to providing those customers with timely and relevant offers, to capturing each and every opportunity to serve them and deepen their bond with the bank. 11

12 About the authors Jeffrey Brown is a Managing Director in Accenture s Financial Service practice. He assists leading financial services clients to develop and scale new business and operating models across a wide range of customer segments and channels by better utilizing their data and analytic capabilities and by leveraging their digital and mobile channels. Jeffrey is based in Charlotte, NC. jeffrey.brown@accenture.com Tom Schapira is a manager in Accenture s Financial Service practice. He brings over 10 years of global consulting experience to wealth and asset management clients, private and retail banks on corporate strategy, developing new growth opportunities and operations optimization. Tom is based in Chicago, IL. tom.c.schapira@accenture.com About Accenture Accenture is a global management consulting, technology services and outsourcing company, with more than 246,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world s most successful companies, Accenture collaborates with clients to help them become highperformance businesses and governments. The company generated net revenues of US$25.5 billion for the fiscal year ended Aug. 31, Its home page is This document is produced by Accenture as general information on the subject. It is not intended to provide advice on your specific circumstances. If you require advice or further details on any matters referred to, please contact your Accenture representative. Copyright 2012 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.