Sharpen Your Small Business Focus


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Practical Tools to Differentiate Your Bank from ABA Marketing Conference.

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Sharpen Your Small Business Focus

  1. 1. ABA Marketing ConferenceSHARPEN YOUR SMALL BUSINESS FOCUSPRACTICAL TOOLS TODIFFERENTIATE YOUR BANKSusan Brown-Monforte, Senior Vice PresidentMarketing Group Manager, California Bank & Trust ($10B),San Diego, CABuck Bierly, PresidentMZ BIERLY CONSULTING, INC. Malvern, PA
  2. 2. A Definition or Two• Defining Small Business* • Small Business: Businesses with less than $10,000,000 in Sales • Business Banking: $10,000,000 to $25,000,000 in Sales• Defining Sustainability • Sustainable Top Line Revenue Growth in Segment • Sustainable Profitability in Segment • Sustainable Asset Quality in Segment• Wallet Share • Capture 65% of the Relationship (“Relationship” includes both the Business and Consumer Opportunities)• Relationship Manager (RM) • Branch Manager • Business Banker (< $10,000,000 segment) • Small Business Representative* Not Effective for the < $750,000 Business 2
  3. 3. Building SUSTAINABLE GROWTH in a Crowded Market1. If the economy remains in a slow recovery, loan demand will remain “tepid” as Business Owners use “retained earnings” for capital expenditures and look for “efficiencies” in their operational processes2. The industry’s continued “reduced dependence” on investor real estate lending will create increased competition for well run operating businesses3. “Re-pricing” loans will become a constant as Banks use pricing to build market share or to survive4. Liquidity continues to be important; low cost deposits remain key5. Revenue replacement is still a critical issue, replacing lost fee business6. The acquisition [and then expansion] of new clients remains a focus7. Successful “Business Development” Processes will focus on “differentiation” in the market. (Bank and RM differentiation!) 3
  4. 4. A Changing Environment. . . with Opportunities 1. Banks require increased discipline on resources and segmentation to drive profit growth: • 85-90% of profits driven by 10% of clients • “High Value” companies (high profit accounts) require high touch, distinctive service • “Low Value” companies require good cost effective service that instills loyalty but does not over-serve 2. Advice remains a critical need, a notable opportunity remains for banks to successfully differentiate and win/retain business acting as a partner. • Only half of banks provided “advice” and that the advice currently provided is typically a thinly veiled product sell.Data from Greenwich Associates, June 2012 4
  5. 5. A Changing Environment. . . with Opportunities 3. Strategic options are on the minds of business owners. • More than 30% of small firms are considering a merger, acquisition, or sale of the business in the next 24 to 36 months. • RMs must initiate dialogues with business owners early to identify M&A financing, and wealth management opportunities. 4. About 16% of firms are actively seeking a new Treasury provider. • Flawless execution on delivery and demonstrating value are criticalData from Greenwich Associates, June 2012 5
  6. 6. Building Relationships, Growing Recurring RevenueProfessional Practice: 10-years, $800,000 in sales 65% of the “Relationship” Business Owner DDA DDA MMA MMA Internet Banking Short-Term/Long-Term Investments Line of Credit Retirement Planning/Retirement Plan Equipment Loan/Lease Mortgage SEP HELOC Liability Insurance Term Life Insurance Employee Relationships Total: 8 Total: 7 6
  7. 7. Building Relationships, Growing Recurring RevenueBusiness Services: 15-years, $3,500,000 in sales 60% of the “Relationship” Business Owner DDA DDA MMA MMA Web-Based Banking/Cash Management Web-Based Banking Line of Credit Investments Equipment Loan/Lease Retirement Planning/Retirement Plan Commercial Mortgage Jumbo Mortgage 401(k) HELOC Liability Insurance Life Insurance Key Man Insurance, Buy/Sell Agreement Total: 9 Total: 8 7
  8. 8. Building Relationships, Growing Recurring RevenueProfessional Practice: 18-years, $8,500,000 in sales 60% of the “Relationship” Business Partners(s)DDA/Cash Management DDAMMA MMALine of Credit, Acquisition Financing Web-Based BankingEquipment Loan/Lease Private BankingCommercial Mortgage Investment ManagementMerchant Account Retirement Planning/Retirement Plan401(k) Jumbo MortgageLiability Insurance HELOCKey Man Insurance, Buy/Sell Agreement Life Insurance Total: 9 Total: 9 8
  9. 9. What is the Brand you are Building?The Focus prior to the Recession “Excellent customer service. . .” “Highly responsive to opportunities and requests” “Faster turnaround than our competitors” “Give you what you ask for. . .”Today, these are some aspect of a “brand” that your competitors arealready focused on. These are now the price of entry, not a“differentiator” 9
  10. 10. Adding Value is not a ConceptIn a highly competitive (or re-pricing) environment...• What value is your RM adding?• As a “Line of Business”, does the Sales Team have a “Plan” for Adding Value?Every thing has changed, in Today’s Environment. . .Sales Team Leaders and RMs need clear direction andon-going guidance 10
  11. 11. Business Owners and “Value Added” Skills This study correlates skills with “Customer Satisfaction” and with the likelihood a Business Owner would refer you to other Business Owners.Data from the Corporate Executive Board 11
  12. 12. Business Owners and “Value Added” Skills Business AcumenData from the Corporate Executive Board 12
  13. 13. Business Owners and “Business Acumen” The Questions that drive results and satisfaction.Data from the Corporate Executive Board 13
  14. 14. Business Owners and “Business Acumen”BusinessAcumen The Key Questions that drive satisfaction. Data from the Corporate Executive Board 14
  15. 15. Business Owners and “Business Acumen” Relationship Development Strategies that drive satisfaction.BusinessAcumen Data from the Corporate Executive Board 15
  16. 16. Business Owners, Business Acumen andUncovering Financial Opportunities Business Acumen Leads to Financial Opportunities More EffectivelyData from the Corporate Executive Board 16
  17. 17. Business Owners, Business Acumen andUncovering Financial Opportunities Business Acumen Leads to Financial Opportunities More Effectively Data from the Corporate Executive Board 17
  18. 18. Adding Value: Business Acumen vs. Product Acumen• Business Acumen* is bringing Business Issue Insights and Unsolicited Financial Ideas to the table. It is a significant “differentiator” in a competitive marketplace and is highly effective in proactive situations• Product Acumen is important in reactive situations. It is less of a differentiator in proactive situations* Business Acumen is Conversational Competence in Business Issues; it is not thesame as a “Business or Industry Expert”. Business Acumen, as we are discussing it,is Conversational Competence around “Industry and Business Issues”. 18
  19. 19. Levels of Relationship and Relationship Development1. Not all Decision Makers want the same level of relationship with an RM.2. Not all RM can build all levels of relationship with a Decision Maker. Business Acumen Product Acumen 19
  20. 20. Levels of Relationship and Relationship DevelopmentLevel 3: Providing a High Level of SupportWhat gets you to Level 3 is the Client’s understandingthat you are providing more “financial ideas” thanyour competitors are providing.Identifying opportunities to support the short-term,mid-term and long-term business objectives of adecision maker is a well established method forbuilding Level 3 relationships.Putting together a team of Business Partners,presenting an overview of a Client or Prospect’s currentand future plans and looking for ways to help them getto where they want to go. . . before they request yourideas gets you closer to this level.Many banks are capable of doing this but few do itconsistently. 20
  21. 21. Levels of Relationship and Relationship DevelopmentLevel 4: Focusing on Business IssuesThe Level 4 Relationship is focused on businessIssues. Clients know that you provide better serviceand support than competitors; what they see now isthat you understand their industry, trends within theirindustry, and “business issues” those trends arecreating for their businesses.At Level 4, you generate ideas for addressing morethan explicit financial needs; you focus on topics likeefficiency, productivity and market strategies. At Level4 you provide [1] industry and business insights thathelp Business Owners see mid-term/long-term issuesmore clearly, [2] on-going education, [3]“benchmarking” of business/financial operations. 21
  22. 22. Changing the Conversation toward Business Acumen Consider these Questions. . . 1. Where are you banking? 2. What products are you using? 3. How are they priced and structured? 4. What 2 things do you wish your bank was2 doing but they’re not? 5. Can I have a copy of your statements to put together an offer of how we would handle your banking relationship? Where are the Business Issues here? These questions focus on products; comparing your products with a competitor’s. These questions demonstrate product acumen!! 22
  23. 23. Changing the Conversation toward Business Acumen Use this Question Set to Demonstrate Business Acumen and Building Relationship Momentum.2 These questions align with a Business Owner‟s Business Strategy, Business Plan, Business Objectives, Business Operations. These questions demonstrate business acumen!! 23
  24. 24. Changing the Conversation toward Business Acumen 2. Industry trends affecting the1. Keys to success business today. 3. Industry trends, businessaffect current and future changes in next 3 years.decisions. 4. Current and future5. Current and future changes force changes inchanges in business current and future businessoperations force changes current and futurefinancial operations. 6. Changing financial operations create changes in the financial needs and then an evaluation of the solutions currently in place. 24
  25. 25. Relationship Development Process Overview 25
  26. 26. Relationship Development Process Overview Market Management ProcessThree Sources ofBusiness. . . Relationship Development ProcessThree Steps:Identify, Plan, Execute Face-to-Face Meeting Process 26
  27. 27. Sustainable Performance is Driven by LeadershipHigh Performing Sales Leaders . . .1. Provide “Targets” to Team Members and2. Keep a focus on the quality of the calls made on those Targeted Businesses 27
  28. 28. The Market Management ProcessThe Market Management Process “proactively” focuses on 3 sources ofleads. . . Customers, Prospects and COIs .Sustainable growth in top-line revenue (and asset quality) is driven bydeveloping leads with “targeted” relationships within these leadsources. Typically. . .1. Retention Relationships (Key Customers)2. Expansion Relationships (High Potential Customers)3. Acquisition Relationships (Key Prospects)4. Current and Prospective COIs 28
  29. 29. Identify the Right TargetsDefine the industries you want more business from. Target Industries Limited Appeal Industries Distributors Transportation Businesses Law Practices Trade Contractors Architect, Engineering, and Business Service Firms Real Estate or Construction Businesses Financial Service Providers Retail Insurance Brokers or Firms C-Stores and Gas Stations Wholesalers Used Car Dealerships Medical, Dental, and Health Practices Restaurants Accounting Firms Farming Manufacturers Mini-warehouses Retail Trade
  30. 30. Identify the Right TargetsDefine the businesses you want more business from. Business Characteristics In business over 3 years Sales revenue between $750,000 and $10,000,000 Employing more than 5 people Plant located within 10 miles of a branch location Privately held Experienced management team Borrowing needs greater than $100,000 Satisfactory commercial borrowing-track record Profitable (Net Profit After Tax) for at least two consecutive years Tangible Net Worth greater than $250,000 Leverage (Debt-to-Worth) less than 4 to 1 Deposit balances average more than $50,000 Using or needing 5 or more business banking products
  31. 31. Defining the Conversation with the Business Owner Use this Question Set to Demonstrate Business Acumen and Building Relationship Momentum.2 These questions align with a Business Owner‟s Business Strategy, Business Plan, Business Objectives, Business Operations. These questions demonstrate business acumen!! 31
  32. 32. A Model for a Marketing and Sales PartnershipSo, this what sales teams need. . . This is where the Marketing Partnership is both Key and Necessary for Sustainability 32
  33. 33. A Model for a Marketing and Sales PartnershipPRACTICAL TOOLS TODIFFERENTIATE YOUR BANKSusan Brown-Monforte, Senior Vice PresidentMarketing Group Manager, California Bank & Trust ($10B),San Diego, CA 33
  34. 34. SegmentationSegmentation 101What is it?Segmentation is the process of defining and subdividing a large homogenous market into clearlyidentifiable segments based on similar needs, behaviors, or characteristics.How do you build it?It depends on the business objective a company is trying to answer. The initial discovery processdetermines the approach used and it centers on answering two main questions:  How will you take action?  How will you measure success?How does it add value?Segmentation is a tool companies use to solve specific business problems. For example:  “If I develop a new product…What will the demand for the product be? Who is most likely to buy it? Where do I find them? And how do I speak to them?”  “Where should I place my TV and Online ads in order to best reach my intended audience?” 34
  35. 35. CB&T Business Segmentation ExerciseWhy It Was Important Gain better understanding of customer base Identify and align opportunities for growth within organization – expansion and acquisition Calculate opportunity for any geography, trade area or market Transition from a product focus to a segment focus Support relationship emphasis versus transaction emphasis Optimize sales and marketing efforts Help inform other decisions 35
  36. 36. CB&T Business Segmentation ExerciseThe Process1. C-Suite Sponsorship2. Selecting the Right Partner3. Understand the Goals & Objectives4. Receive Data & Audit it5. Match the CB&T data to our Universe of Businesses6. Append everything we know about each Business7. Create „Buckets‟ & segments (with known, measureable, & implementable metrics)8. Add the Descriptors (operational metrics)9. Apply the segmentation to CB&T‟s „universe‟10. Deliver results and continue with implementation plan 36
  37. 37. CB&T Business Segmentation ExerciseSegments were defined with known, measureable, & implementable metrics  Type of business (SIC code)  Size of the business (small, medium, large, etc) DriversSegments were described by CB&T operational metrics  SVA (Shareholder Value Added)  Market Penetration  GAP (Market Opportunity)  Products  Checking  Business Loan  Internet / VRU  Money Market Descriptors  Debit / ATM  Installment Loan  Savings / CD  Cash Management  International  Merchant Services 37
  38. 38. CB&T Business Segmentation ExerciseThe CB&T Buckets Analysis Universe # of # of Business % Business Bucket Business % Business % Employees Segments Pen Index Comp Comp B1 1-3 46 38.26 49.86 0.95 77 B2 4-9 46 31.05 28.88 1.33 107 B3 10-24 45 17.28 13.26 1.61 130 B4 25-49 51 6.59 4.11 1.98 160 B5 50+ 48 6.82 3.90 2.16 175 Total 236 100.00 100.00 1.24 100 Buckets were determined by logical, meaningful and manageable breakpoints in the data. Employee Size is the key metric for defining buckets because it is a reliable and well populated metric on both customer and prospect files. 38
  39. 39. Making the Results ActionableMarket Opportunity Prioritization 39
  40. 40. Making the Results Actionable Modeled Demand (SVA) By CountyMarket Opportunity Prioritization Potential PotentialCounty County SVA SVAAlameda County 158,244,214 Orange County 350,167,230Alpine County 243,695 Placer County 38,011,572Amador County 4,589,333 Plumas County 3,567,607Butte County 21,598,301 Riverside County 144,391,367Calaveras County 4,536,616 Sacramento County 126,307,083Colusa County 1,919,942 San Benito County 4,088,750Contra Costa County 87,974,697 San Bernardino County 145,392,031Del Norte County 2,175,153 San Diego County 298,726,235El Dorado County 17,065,325 San Francisco County 128,127,691Fresno County 70,897,746 San Joaquin County 48,407,044Glenn County 2,418,451 San Luis Obispo County 32,873,040Humboldt County 13,680,059 San Mateo County 80,766,723Imperial County 11,722,321 Santa Barbara County 43,056,806Inyo County 2,666,534 Santa Clara County 201,955,950Kern County 57,076,771 Santa Cruz County 29,203,212Kings County 8,309,586 Shasta County 19,047,705Lake County 6,386,023 Sierra County 524,652Lassen County 2,609,325 Siskiyou County 5,190,087Los Angeles County 952,943,679 Solano County 33,526,296Madera County 9,702,545 Sonoma County 53,662,740Marin County 38,324,989 Stanislaus County 40,953,271Mariposa County 1,932,907 Sutter County 7,620,693Mendocino County 10,966,162 Tehama County 5,254,867Merced County 14,287,026 Trinity County 1,347,755Modoc County 1,547,349 Tulare County 30,205,178Mono County 3,063,320 Tuolumne County 6,061,773Monterey County 39,281,426 Ventura County 78,350,288Napa County 18,433,391 Yolo County 16,467,043Nevada County 13,300,345 Yuba County 4,678,635 40
  41. 41. Making the Results ActionableSegment Opportunity PrioritizationMethodology to prioritize segments Combine size buckets to create three 0 – 9, 10 – 49, 50+ Balance three critical elements: A. Number Businesses in CA for a segment (The Market Size) B. Penetration in CA (How well CB&T traditionally does with a segment) C. SVA per business (The anticipated benefit to CB&T when acquired) Priority Score (Weighted Value) = 50% of A, 15% of B & 35% of C Identify high risk segments with Business Partners Result – 28 unique segments identified as priorities 41
  42. 42. Making the Results ActionableDevelopment of “Segment-In-A-Box” Everything a banker needs to know about a segment/industry in one complete package Designed to help bankers be more effective in the sales process and demonstrate industry expertise Aligned with relationship sales process and brand positioning Applicable to both customers and prospects 42
  43. 43. Making the Results Actionable Segment-In-A-Box includes Segment Information:  Segment Profile  Industry Profile (by First Research)  List of Associations (by geography)  List of Primary Trade Publications  Business Journal Editorial Calendars for major market business journals 43
  44. 44. Making the Results Actionable Segment-In-A-Box includes Marketing Materials:  Customizable Sales Letter Template  Segment Specific Pitch Book Slides  Segment Specific Flyers  Segment Specific Brochures  List of Additional Sales Collateral to use on sales calls 44
  45. 45. Making the Results ActionableSegment-In-A-Box also includesSales Tools Market Plan / Call Planner Call Prep Questions (by First Research) Telemarketing Scripts Prospect list for each segment (loaded in Customer lists Packaged product offerings 45
  46. 46. Measuring Success Metrics are always important, but the story they tell is what is critical! 46
  47. 47. Measuring SuccessMeasurement #1Success Stories Survey used to gather success stories from the field Gift card drawing used to encourage participation Success Stories published bank-wide and posted on Intranet 47
  48. 48. Measuring SuccessMeasurement #2Tracking Segment Penetration Over Time CB&T Segment-in-a-Box, 2008 - 2011 Compared to 2008 250 2011 Index (and relative to 2010 Index changes within the 200 2008 Index state of CA), CB&T’s concentration in 2011 150 has increased in key 100 segments 50 Compared to 2008 (and relative to - changes within the Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Wholesale Wholesale Wholesale Wholesale Wholesale Professional Professional Professional Professional Professional state of CA), CB&T’s concentration in other key segments has not experience as much of a decline 48
  49. 49. Measuring SuccessMeasurement #3 –CRM Reporting Track use of segment specific prospect leads Monitor usage of segment specific materials Track segment specific campaigns Monitor pipeline for segment specific deal activity 49
  50. 50. Key Learnings C-Suite Sponsorship and Region Management buy-in Sales management and sales process must be aligned with marketing and segmentation strategies Clean customer data provides the foundation for insights derived and it instills confidence in the results Data inputs used in the analysis are dependent on the business objectives you are trying to achieve It’s crucial to understand the data in the results to determine which factors impact performance metrics over time Requires a long-term perspective and investment 50