The Many Faces of Sales Enablement: How to Drive Revenue Through Retention Ma...
FIS Small Business Webinar October 12 2016
1. Packaging Banking
Services for Small
Business Success
Learning from the experience of others
Marc Wall, IBS Product Line Manager
Chris Wallner, Small Business Banking Executive
October 12, 2016
3. Role of small business in the U.S. economy
Small business market attractiveness
3
• Small businesses are key drivers of
the U.S. economy. As defined by the
U.S. Small Business Administration,
small businesses account for:
• over 99% of all employer firms in the U.S.
• over 98% of all employer firms in high tech
• nearly half of private sector jobs
• two-thirds of newly created jobs
• nearly 98% of exporters, and
• export 34% of known export value
99.7%
of U.S. employer firms
63%
of net new private sector
jobs
41%
of private sector payroll
97.7%
of firms exporting goods
34%
of exporting value
98.5%
of all employer firms in
high-tech
Source: SBA https://www.sba.gov/sites/default/files/advocacy/SB-FAQ-2016_WEB.pdf
Note: Small businesses defined as independent business having fewer than 500 employees
4. Small business market attractiveness
Average per relationship value by product usage segment
• Chart summarizes AVERAGE monthly value for 33,128 small business customers
• Value for each usage segment includes contributions for all services used by the customer
• Most attractive margins are from large loan customers with or without a checking account
• Checking only clients generate a much lower, but respectable $38 per month
AVERAGE MONTHLY Value by Product Usage Segment
4
5. Small business market attractiveness
Monthly value by proxy client sales size
Average Monthly Value by Product Usage by Proxy Client Sales Size
• As expected, average client net value is directly proportional to the size of the business
relationship
• Micro business checking only clients drive $19 per month, the largest relationships $503
5$500K Sales <$3M Sales >$3M Sales
6. 65%
29%
11%
Q. How important is increased success in
the small-business and middle-market
space to the overall success of your
institution?
Extremely important/critical
Important
Moderately important
Source: Aite 2015
Small business and IT priorities
Small business market attractiveness
6
67%
27%
6%
Q. . When it comes to new technology
buying decisions, which of the
following is your bank’s highest
priority?
Technology that improve customer experience
Technology that grows revenue
Technology that helps manage / cut costs
Source: Aite 2015
7. 7
“While a lot of the talk of the next wave of fintech are
usually referred to in the context of consumer banking,
banks also need to think about delivering these
services to small and midsize business customers, or
run the risk of losing them. Delivering tech innovation
to these businesses – typically defined as firms that
employ less than 1,000 people – represent a big
opportunity for banks”
William Sullivan
Head of Global Financial Services Market Intelligence at Capgemini
9. Small business insights – customer perspective
What is the potential?
9
• Small business owners choose their primary bank based largely on location
convenience—and then rarely switch.
• A typical owner does not have a Chief Financial Officer to optimize a banking
relationship; business owners “just want a checking account that works right the
first time and every time” and leaves them free to focus on their business.
• A typical small business owner, on any random day, is simply not “open-to-buy.”
• Minimal motivation to change/preference for status quo – “Set and forget” mentality
• Blurred lines between personal and business banking – many small business
owners use personal accounts for business purposes and vice versa.
• Customers value acknowledgement of total banking relationship, business, and
consumer.
• Resistance toward anything appearing complicated.
Source: Oliver Wyman
http://www.oliverwyman.com/insights/publications/2013/feb/a-profit-growth-strategy-for-small-business-banking.html#.V9sJo5grKUk
http://www.oliverwyman.com/content/dam/oliver-wyman/global/en/files/archive/2013/Small-Business-Banking-Challenging-Conventional-Wisdom-to-Achieve-Outsize-Growth-
and-Profitability.pdf
10. Small business insights – bank perspective
What is the potential?
10
• 20% of businesses generate 95% of total segment profit. The key is identifying and
targeting the 20%!
• The majority of small business free checking relationships generate minimal
revenue and a significant portion of those lose money on a marginal cost basis.
• Most banks have yet to “crack-the-code” on cross-selling savings accounts,
merchant services, cards, and other products that generate real revenue streams.
• Small business owners spend very little time worrying about optimizing their
financial service costs, and the hassle associated with switching banks greatly
outweighs the potential savings. In fact, more than 80% would stay with their
current bank if a $10 fee was imposed on their account.
• How many of your small business loan customers do not have a checking
relationship?
• Bankers are more excited about financial products than customers – keep the
product simple!
12. How to realize small business market potential
12
Relationship Value Management helps
financial institutions…
• Increase deposits, grow fee based
income and attract new small
business customers by rewarding
benefits based on customer behavior
• Encourage small business customers
to stay with their financial institution
and become more profitable
• Offer the right combination of
products, services, fees and rates to
achieve the best financial results
• Creates structure to enforce pricing
discipline and stops revenue leakage
13. More Behaviors = More Benefits
“The more you do, the more you get”
Dynamic packaging and pricing
13
Benefit Level 3
Many Products
High Balances
Many Transactions
Many Points
Benefit Level 2
Few Products
Medium Balances
Some Transactions
Some Points
Benefit Level 1
One Product
Low Balances
Few Transactions
Few Points
Benefits
Deposit fees
Deposit rates
Loan rates
Safe deposit box fees
Meet all criteria to qualify for …
Meet 2 of 4 criteria to qualify…
Meet one criteria plus 2 of 3 other criteria…
Accumulate 10 points to qualify…
Qualifiers
Products Owned
Account Balances
Use of Services
Transaction Activity
Demographics
15. 8,700
Relationships Using
Business Products
6,900
Business Products
Only
1,800
Business and
Personal Products
1,100
Without Business
Checking
5,800
With Business
Checking
200
Without Business
Checking
1,600
With Business
Checking
Of 10,000 Primary Customers, each of
which have business deposits or loans or
select business services
Case study – business customer base evaluation
15
15% of business customers have no
business checking account
Opportunity – Increase business checking
account wallet share. A primary account
or token account?
21% of business customers
also have a personal
relationship Opportunity –
Increase consumer relationship
wallet share.
17. Small business evaluation – What is your bank’s
opportunity?
• Small businesses want
simple/easy-to-understand
and conveniently integrated
financial solutions
• Questions to answer:
– What financial services do small
businesses use most often?
– Which of these offer the greatest
bottom line benefit to my bank
(volume potential and fee
opportunity) and require the least
product development time?
17
>80% >$250/yr < 6 mos
50-80% $50-250/yr 6-12 mos
<50% <$50/yr >12 mos
Deposit Products
Checking
Saving
Online Banking
Mobile Banking
Payment Products
Merchant Services*
Credit Card*
Payroll*
Other
Remote Deposit Capture
Personal Banking
Insurance*
* Referred to best practice strategic partner
Note: Except for credit card, lending excluded.
Customer
Use
Bank
Fee
Income
Prod.
Dev. Time
Bank
Opportunity
18. Is your bank’s pricing of small business financial
solutions on strategy?
• Understand your competitive
position
• What is your pricing strategy?
• What is your targeted position in
the competitive range?
• Answers will enable
quantification of bottom-line
benefit from new acquisition and
conversion of existing portfolio
18
Bank A is pricing
to market middle
as shown by a
mostly yellow
column.
Bank C is
generally pricing
at a market
premium as
shown by a
mostly red
column.
19. Product development – a process for repeatable
success
19
Concept
• What are the business and product objectives?
• How will success be measured? What are the KPIs?
• Prototype
Qualitative
Research
• Voice of the Team – Internal focus groups to “get in-the-ballpark” and engage internal stakeholders
• Voice of the Customer – What your customers say WILL surprise you. “If I have to pay a fee I will
leave. Oh, your fee for the service IS fair.”
Test
• Make sure what is built works as intended
• Look for vulnerabilities – Six Sigma “Failure Mode and Effects Analysis (FMEA) mindset
• Second set of eyes – builders should not test their own work
Pilot
• Are the results what you expect? What is the performance compared to KPIs
• What worked well? What can be improved?
• Ensure enough time exists between pilot and companywide rollout to make enhancements
Company-
wide
Roll-out
• Are you really ready? Do you have the appropriate reporting?
• What are the vulnerabilities?
• What are the contingency plans?
20. Case study – one bank’s approach
20
• Rabobank’s Business
Rewards Banking offers
customers the choice of three
packages:
– Silver Checking with 100 items
and other services/benefits
included for $12 per month
– Gold Checking with 250 items and
other services/benefits included
for $20 per month
– Platinum Checking with 450 items
and other services/benefits
included for $36 per month
• Fees can be avoided via
relationship-based activities
Rabobank, N.A.
Source: https://www.rabobankamerica.com/business/banking/business-checking
21. Case study – one bank’s approach (continued)
21
• Strong customer relationships
are acknowledged (and paid for)
via fee wavers based on certain
relationship activities including:
– Platinum Consumer Account
– Remote Deposit Capture
– Merchant Services
– Payroll Services
• Any one of these services
waives the monthly
maintenance fee for Silver, any
two for Gold, and any three for
Platinum
Rabobank, N.A.
Source: https://www.rabobankamerica.com/business/banking/business-checking
22. Business Product Packaging
How can we help?
22
• Customer Opportunity Analysis
Segment customers and quantify value of current and future opportunities:
– Build customer/product usage database
– Segment customers
– Develop customer value metrics (relationship value database)
• Product Design
Recommend product packages to achieve target product objectives:
– Provide insight into industry trends and make recommendations on product configuration/calibration
– Quantify customer value for multiple product package configurations
• Product Impact Analysis
Project product benefits and value based final product design:
– Forecast financial and customer impacts
– Transition customer and product analysis databases to bank staff
