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Science of Shopping Opportunity for Banks


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Hard Times Spell Opportunities For Banks Responding To The Customer Need For Trust

Published in: Economy & Finance, Business
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Science of Shopping Opportunity for Banks

  1. 1. THE SCIENCE OF SHOPPING HARD TIMES SPELL OPPORTUNITIES FOR BANKS RESPONDING TO THE CUSTOMER NEED FOR TRUST Q1 2009 There is no question, the American consumer-banking customer is 1 Industry Consolidation traumatized given the sub-prime fallout, plunging stock values, 2 Evolving the Role of the decimated 401(k)s and the frightening media coverage regarding the Branch state of financial institutions. Where do consumers turn for reassurance and guidance they can trust? 2 Science of Shopping and Branch Banking More than print or media advertising, the branch is where we find 3 Conculsion the cheapest, easiest and most effective way for an institution to reach its customer base. The branch is a three-dimensional brand statement. Beyond headline and media, it is also a living, breathing embodiment of the institution itself. From platform to teller station, from ATM installation to paper and electronic messaging, to the staff that provides face-to-face service – all contribute to the public’s perception and comfort level with the institution. Cushman & Wakefield, Inc. 51 West 52nd Street New York, NY 10019-6178 In this volatile environment, how can institutions best manage the Tel (212) 841-7500 brand that sits in the midst of our communities? INDUSTRY CONSOLIDATION De novo branch development, strong in 2006-2007, slowed in 2008, forcing banks to reduce budgets and improve efficiency. The slowing market coupled with industry consolidations put added pressure on competing banks (Table 1). TABLE 1: 2008 BANKING COMPANY MERGERS ACQUIRER ACQUISITION NO. OF BRANCHES TRANSACTION NAME OF MERGED ACQUIRED1 VALUE ENTITY $50.0 billion0 Bank of America Merrill Lynch -- Bank of America $15.1 billion2 Wells Fargo Wachovia 3,125 Wells Fargo $8.5 billion0 TD Bank Financial Commerce Bank 476 TD Bank $5.1 billion3 PNC Financial Services National City Corp 1,451 PNC Financial Services $1.9 billion4 JPMorgan Chase Washington Mutual 2,180 JPMorgan Chase $1.1 billion0 JPMorgan Chase Bear Stearns -- JPMorgan Chase 5/3 Bank First Charter Bank -- -- 5/3 Bank BUSINESS BRIEFING Q1 2009 1
  2. 2. THE SCIENCE OF SHOPPING GLOBAL CONSULTING: TRANSFORMING BUSINESSES WORLDWIDE In the past, such acquisitions may have caused disruption, presenting opportunities for the competition to steal customers, but today, firms like Wells Fargo, Chase and PNC have become experts at smoothly integrating acquired banks and courting the most profitable customers from the acquired firms5. So how do institutions ensure that they remain relevant to their customers and competitive during turbulent times? EVOLVING THE ROLE OF THE BRANCH Branches remain an important delivery channel to the consumer market. Three in four households conduct their banking within three miles from home6. Despite the growth of electronic banking in the last ten years, consumers are using electronic channels in addition to, rather than in lieu of, traditional channels6. So how is the role of the branch evolving? Many branches are refocusing efforts by handling more service-intensive, complex transactions. Research has shown that customers choose to perform certain transactions face-to-face. To capitalize on in-store presence and corresponding sales opportunities, de novo, infill or retrofit branches must marry shopping behavior to the shopper environment. As a result, new methods are being applied to analyze the efficiency and effectiveness of a branch’s ability to reach the right customers, while making each in-store visit as profitable as possible. THE SCIENCE OF SHOPPING AND THE BRANCH Shopper behavior is intrinsic to humans and, most often, has no geographical boundaries. Banks, drugstores, movie theaters, supermarkets, and airports – all of these environments draw specific types of people and specific types of behaviors. By taking action during the downturn to identify opportunities and obstacles in the shopping environment, banks will be better positioned to nurture customer relationships and see their business soar into the upturn. Brand: Utilizing the brand to support the shopping environment creates the reality of what customers experience and what they come to expect from the branch. The brand is the intimate relationship a bank has with its customer. The brand is not a collection of marketing tactics or components used in communication. The brand is the way banks do business. Key questions that banks should be asking themselves include: Can we put the face of safety on our brand? What does our brand mean to newly acquired customers? Customer Needs: Who is looking out for the branch? Who is looking out for the branch visitor? Branches focus on getting their existing, acquired and new customers into the store, but managers need to determine if the space accommodates and meets their customers’ needs. Is there a setting for a group discussion? Are there quiet corners for distraught customers? During these challenging times, banks must deliver superior customer service and innovative ideas to bridge the gap between consumer uncertainty and their role as a trusted advisor. 2 BUSINESS BRIEFING Q1 2009
  3. 3. THE SCIENCE OF SHOPPING GLOBAL CONSULTING: TRANSFORMING BUSINESSES WORLDWIDE This requires each branch to generate unique ideas and solutions based on customer needs. For example: City Center Branches: Small business owner customers need cash to make payroll. Does the branch offer private, face-to-face guidance and counseling? Suburban Stand-Alone Banks: Retirees and individuals on fixed incomes are worried about their heating bills. Does the bank offer “town hall” informational meetings? Suburban Supermarket Branches: New families are fearful of losing their homes and single mothers worry about their monthly grocery bill. Does the branch offer Saturday morning coffee discussions about where to go for help and when to ask for help? Urban Street Front Branches: Urban nine-to-fivers worry about what they should be worrying about. Can the branch offer happy hour sessions that cover the basics? Office Space Branches: Mid-level service workers are still on track for a first-time home. Can the branch help them understand what it takes in this climate to buy that home? The physical space must address the intended uses of the branch. There will always be customers who want to get in and out, but banks have an opportunity to capture and accommodate those who should and want to spend more time in-store. CONCLUSION The Science of Shopping during a downturn is about saving stores, saving customers and improving profits. By looking at demand profiles and shopper behavior, the financial crisis has created a unique opportunity for banks to serve as a primary resource in helping consumers with their financial concerns. As a trusted advisor, banks will be better positioned to nurture customer relationships and will emerge even stronger into the upturn. 1. FDIC (As of October 2008 – Numbers based on quarterly self reporting by banks). 2. David Ellis (October 3, 2008). quot;Wachovia: Wells in, Citi outquot;, CNN Money. 3. Dan Fitzpatrick, David Enrigh and Damian Paletta (October 25, 2008). quot;PNC Buys National City in Bank Shakeoutquot;, The Wall Street Journal. 4. Eric Dash and Andrew Ross Sorkin (September 26, 2008). quot;Government Seizes WaMu and Sells Some Assetsquot;, New York Times. 5. Bank Administration Institute (BIA) Retail Banking Community. 6. Raddon Financial Group (June 2007) “Branch Banking: Survival of the Fittest”. 3 BUSINESS BRIEFING Q1 2009
  4. 4. THE SCIENCE OF SHOPPING GLOBAL CONSULTING: TRANSFORMING BUSINESSES WORLDWIDE ABOUT THE GLOBAL CONSULTING GROUP To discuss your immediate needs please contact: Cushman & Wakefield’s Global Consulting Group delivers Matt Winn actionable strategies addressing our client’s vital business and real Managing Director, Retail Consulting estate challenges. We partner with clients looking to establish Cushman & Wakefield higher expectations in business productivity, efficency and 55 Allen Plaza performance. 7th Floor Atlanta, GA 30308 Retail Consulting Tel: 404.853.5309 For merchants and marketers looking to integrate their location strategy with analysis of point of sale issues, layout, merchandising, Paco Underhill human traffic flow and operations, Cushman & Wakefield’s Retail Founder, CEO and President Consulting Group in conjunction with Envirosell offer leading Envirosell research and consulting expertise having advised more than half of 907 Broadway, 2nd Floor the world’s 50 largest retailers. New York, NY 10010 • Brand Positioning Tel: 212.673.9100 x322 • Sales Analysis & Store Volume Forecasting • Demographic & Psychographic Analysis Christine Schultz • Portfolio Evaluation Marketing Director, Global Consulting • Customer Behavior Research Cushman & Wakefield 1420 5th Avenue • Supply Chain Strategy & Implementation Suite 2900 • Labor / Operations Strategy & Implementation Seattle, WA 98101 • Financing Strategy & Implementation Tel: 206.521.0262 ABOUT ENVIROSELL For more information about the Combining traditional market research techniques, anthropological Global Consulting Group, contact: observation methodologies and videotaping, Envirosell has established its reputation as an innovator in commercial research Andrew Ratner Executive Managing Director and as an advocate for consumer friendly packaging and shopping Global Consulting Group environments. Paco Underhill, Founder, CEO and President, is a Tel: 213.629.6562 leading expert and pioneer of shopping behavior and research. His book Why We Buy: The Science of Shopping has been published in 26 languages, and has sold more copies than any other retail book in history. A second edition is expected for release in 2009 by Simon & Schuster. For more information visit Cushman & Wakefield is known the Cushman & Wakefield is the world’s largest For more market intelligence world-over as an industry knowledge privately owned commercial real estate services and research reports visit the leader, through the delivery of timely, firm with more than 15,000 professionals in 227 Knowledge Center at accurate, high-quality research reports on offices in 59 countries. In Europe, Middle East the leading trends, markets around the and Africa the firm’s operations extend to more world and business issues of the day, we than 1,500 professionals in 33 countries. the firm © 2009 Cushman & Wakefield aim to assist our clients in making delivers integrated solutions by actively advising, All rights reserved. property decisions that meet their implementing and managing on behalf of Printed in USA. objectives and enhance their competitive landlords, tenants, and investors through every Cushman & Wakefield, Inc. position. stage of the real estate process. Cushman & 51 West 52nd Street New York, NY 10019-6178 In addition to producing regular Wakefield also provides valuation advice, reports such as global rankings and local strategic planning and research, portfolio analysis, quarterly updates available on a regular and site selection and space location assistance, basis, Cushman & Wakefield also among many other advisory services. to find out provides customised studies to meet more about Cushman & Wakefield’s service offerings, visit: specific information needs of owners, occupiers and investors. This report has been prepared solely for information purposes. It does not purport to be a complete description of the markets or developments contained in this material. The information on which this report is based has been obtained from sources we believe to be reliable, but we have not independently verified such information and we do not guarantee that the information is accurate or complete. 4 BUSINESS BRIEFING Q1 2009