Buildingthesmallbusinessbankingsegmentsep10 12869864430534-phpapp02 (1)

ABA Marketing Conference
September 12 - 14, 2010 • Minneapolis
Learning Lab

Building the Small Business Banking Segment
Learning Lab Overview
 This intensive, 2½ hour, interactive session will cover a
wide range of the elements you need to know to
create targeted Small Business Growth marketing
programs.
 You will learn how to craft a strategy and select targets
that are right for your bank, including deposit
programs and offering credit in a risky marketplace.
 The session will also cover operational issues that
can’t be ignored, like preparing the sales force for the
program and how to track and measure success.
1

Agenda
 Background
 Select your strategy
 Implement a range of deposit gathering
techniques
 Execute credit programs
 Acquire targets
 Operational concerns
2

OperationsTargetingCreditDepositStrategy
A Valuable Segment
 Small Business Banking is a highly valuable, highly
profitable segment compared to consumer
– Almost 3 times more profitable
– Twice as long-lasting
– Small business owners are older and more affluent
3
Source: salary.com
Background

The Community Bank Edge
 Community banks have some strong advantages
and opportunities serving this segment in the
current economic and banking environment
– Greater ability to lend profitably
– More flexible, responsive, and willing to deal with
small business relationships
– Able to serve profitably smaller relationships than
larger institutions
– Perceived as more ethical, friendly, open, and a
greater value than larger institutions
4
OperationsTargetingCreditDepositStrategyBackground

The Community Bank Edge
 How do you leverage those opportunities to
attract new small business accounts and
retain, deepen and broaden your existing
small business relationships?
5

What is “Small Business” Anyway?
 “Small Business” comprises many sub-segments
with different banking needs
– SOHO
– Sole practitioners
– Professionals
– Businesses
with relatively small sales and/or employees (sales
from $750K to $30MM and employees up to 1,500,
depending on industry)
 What is your focus, expertise, niche?
6
Source: SBA -
http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf

Strategic Targeting
 Select a strategy and a target that are right for
your bank
– Deposit programs: based on “locational
convenience”
– Special products and services: overcoming limited
locational convenience (see next slide)
– Offering credit that small businesses want
– Community Bank affinity strategy
7
OperationsTargetingCreditDepositBackgroundStrategy

Strategic Targeting: Services
 Add-on services or bundles can serve as
differentiators and start the conversation:
– Account access and monitoring tools
– Remote deposit capture
– Linked overdraft protection
– Data backup
– PFM tools
– Alerts
– Credit scores
8
BackgroundOperationsTargetingCreditDepositStrategy

Background
Deposits are Key
 Strong core deposit-gathering strategies key:
…so a strong core operating
checking product is key
Small business banking
relationships begin with deposits
and grow from there…
…so strong interest-bearing
offerings are essential
Small businesses holding a
higher % of assets in cash than at
any time in the last 40 years* …
Value-add services to help small
business with cash, such as cash
management, ACH, etc.
* Source: WSJ,11/3/2009
9
OperationsTargetingCreditStrategyDeposit

Referral
programs
• COIs
• Business
“member-get-
member”
offers
• Technical and
marketing
aspects
Personal-side
cross-sell
Deposit-Gathering Strategies
10
Promotional
incentive offers
BackgroundOperationsTargetingCreditStrategyDeposit

Referral Programs: COIs
 COIs (Centers of Influence) are excellent sources
of referrals for new banking customers
 Best COI referral partners:
– CPAs
– Attorneys
– Insurance agents/brokers
 Best lead sources:
– Sales team/relationship managers
– Lists: AICPA, ABA, IIABNY (NJ, CT, etc.)
– Customers
11

Referral Programs: COIs, cont’d
 COIs must be courted, educated, and nurtured
– Events
• Networking
• Educational (seminars, webinars)
– “Partner” program/status
– Referral incentives
 Sales team/relationship managers must be
motivated to build these important relationships
– COI leader to oversee and manage efforts
– Comp incentive
12

Business Referral Programs
 Customers are an excellent source of new
business and should be leveraged via a
formalized referral program
 Typical program details:
– Communicated to customers via branch
merchandising, statement inserts, online messaging,
ATM messaging, sales team/relationship managers
– Clear benefit (referral bonus, non-cash incentive,
points/miles, in-kind awards; include benefits for
both referring and referred)
– Continuous, ongoing: it takes time to build the base
and see results
13

Referral Programs: Marketing
Review/Sign-off Communication Training Support
– External
• Advertising
• Signage
• Collateral
• ATM/online
messaging
• Statement
inserts
– Internal (to
stakeholders)
• Formal training
program for
front-line sales
team with lead
time to prepare
• Proper forms,
systems to
capture referrers
and referred
• Clear
explanation of
WIIFC and
WIIFM (comp
benefits)
• Branch
• Phone unit
• Online
• Business (ROI)
• Legal/regulatory
(beware of CAN-
SPAM for e-mail
offers, and be
sure to note
referring party)
14

Referral Programs: Tracking
Capture
Referrers and
their Referees
 Branch
 Phone
 Internet
Customer
performance and
qualification
 Back-office
admin
Fulfillment
 Customer
Reporting
15

Personal-side Cross-sell
 Affluent business owners often have significant
personal-side relationships, with both deposits and
loans greater than their consumer-only counterparts
 Cross-sell offers must recognize the total value of the
relationship and promise additional customer value
for consolidating the entire relationship
 Cross-business cooperation essential: customer
balance sheet must be treated holistically and credit
given to both consumer and business units to
recognize and reward sales efforts
16

Promotional Incentive Offers
 Offers can be a cost-effective acquisition tool
if used correctly:
 Highly segmented with an understanding of ROI
against each targeted segment
 Contingent upon behavior over time to reduce
gaming – no “open-and-fund-only” offers
 Clear, concise, easy-to-understand, with well-
defined benefit and easy-to-follow required
behaviors
17

Promotional Incentive Offers (cont’d)
18
Rewards
Cash
Merchandise
Travel
Acct Type
New
Service Fund
For
(time)
By
(date) Wires
Check
Order Link
Best
Business
Checking
 $1,500 10/31
2/ mo.
x 3
mos.

MMA $10,000 3 mos 10/15
To
DDA
Basic
Business
Checking
 $1,000 12/31
To
Bank
Card
Some examples:
Vary by
segment

Incentive Programs: Marketing
Review/Sign-off Communication Training Support
– External
• Advertising
• Signage
• Collateral
• ATM/online
messaging
• Statement
inserts
– Internal (to
stakeholders)
• Formal training
program
alerting front-
line sales team
with enough
lead time to
prepare
• Clear
explanation of
WIIFC and
WIIFM (comp
benefits)
• Branch
• Phone unit
• Online
• Customer
interface
• Business (ROI)
• Legal/regulatory
• Tax reporting
19

Incentive Programs: Tactical
 Capture and store all required attributes and
behaviors
 Continuously monitor required attributes and
behaviors over time
 Fulfill offers (deposit cash bonuses to
accounts, send promotional gifts, deposit
miles into linked accounts and so on)
 Support tax-reporting
 Provide tracking and auditing
20

Execute Credit Programs: Basics
Target
Comm
Plan
Design
Launch
Analyze
Repeat
21
BackgroundOperationsTargetingStrategyDepositCredit

Credit: Targeting
 How to work with your institution’s credit policy
(RAC or Risk Acceptance Criteria)
– Use segmentation to improve acceptable risk
• Most portfolios have stellar sub-segments, find them
– Look at alternate credit-reporting agency models
– Focus on risk/reward ratio, not just risk
• Unaccounted for rewards to credit extension?
• Unaccounted for risks to not extending credit?
– Know data sources and how to use them
• Small business lists
• UCC information
• Principals’ net worth
22

Credit: Design
 Key marketing design choice:
– Pre-approved or Invitation-to-Apply?
• Pre-approved much more powerful but higher risk
– Use appended firmographics to target pre-
approvable prospects
23
Common Firmographics
 Line of Business
 Firm age
 Corporate structure
 # Employees
 Revenue (Sales Size)
From Credit Review History
 AR statistics
 Revenue concentration
 Balance sheet
 Principals’ net worth

Credit: Design, cont’d
 Operate within your available capacity
– Know your capacity: Apps per day/week/mo
– Divide by app processing type
• Auto review
• Partial review
• Full review
 Test vs. Control
– Importance of control group
– Know what you’re testing
– Design program measurement
24

Credit: Communications Plan
25
Direct Mail eMail
Mobile
& Text
Statement
Insert
ATMBranchCall Center
Internet
Banking

Credit: Launch
 Pre-Launch Checklist
– Are the branches ready? Do they know what’s
expected of them?
– What about the call center?
 Monitoring progress daily
– Not just success tracking
– Get branch anecdotals – how is it going? What are
customers saying?
– How is underwriting doing? What does app quality
look like?
26

Credit: Analyze
 Measuring Test vs Control
 Gross response vs Net response
 Response by test cells
– Channel
– Messaging
– Offer
– Back-end
– Others…
27

Credit: Repeat
 Set-up initial program to include multiple
iterations – plan for repetition
 Use learnings to refine for each iteration
 Don’t solve everything at once – plan and test
just 1 or 2 things per iteration
– Provides better control and confirms learnings
28

How to Source Prospect Lists
 Many sources; choose based on
 Segment
 Program
 Channel
 Available data elements
 Some common examples:
29
BackgroundOperationsStrategyDepositCreditTargeting
D&B Other “Traditionals” New Alternatives
Credit-based Donnelley/InfoUSA Jigsaw/Salesforce
Larger, well-established businesses Acxiom Cortera
Proprietary scoring Hoovers Social media
UCC filings Experian
Many data elements (“selects”) List brokers

How to Source Prospect Lists, cont’d
 B2B social networks can be mined by
relationship managers to provide highly
targeted lists:
3030

 Leverage resources like
– SBA
– Trade associations
– Local Chambers of Commerce
31
How to Source Prospect Lists, cont’d

Models
 Cash equivalents (correlated w/ sales size &
industry)
 Propensity (next product, etc.)
 What are the components of such models?
– 3rd party
– Transactional
– Product holdings
– Ad hoc proxies
32

Rolling Out to the Sales Force:
 Choosing channels
– Multi-channel
 Follow-up calling
 Designing tracking that you can learn from
– Who took up offer
– Who closed on line
– Who activated
– How to make use of existing tools (Raddon,
Harte-Hanks, etc.)
33
BackgroundStrategyDepositCreditTargetingOperations

BackgroundStrategyDepositCredit
Caveat: Uncertainties
 Dodd-Frank financial reform bill – over
2,300 pages
 Some examples of the estimated 243 new
federal rule-makings by federal agency:
– Financial Stability Oversight Council: 56
– Bureau of Consumer Financial Protection: 24
– FDIC: 31
– OCC: 17
 Smaller institutions may have the edge –
subject to less intense scrutiny than “too
big to fail” institutions bailed out by Uncle
Sam
Source: WSJ, 7/14/2010
Targeting
34
Operations

Tools
 Program checklist
 Channel Matrix
 RoMI calculator
35

Your Learning Lab Leaders
 Tony Coretto, Co-Founder and Managing Partner,
PNT Marketing Services, Long Island City, New York.
– tony@pntmarketingservices.com
– 888.PNT.2210 x204
 Phil Jarymiszyn, Co-CEO and founding Partner,
PNT Marketing Services, McLean, Virginia
– pjary@pntmarketingservices.com
– 703.761.0291
 PNT Marketing Services’ mission is to help clients know their customers better to
grow more profitable relationships. PNT’s database marketing solutions and
expertise power customer acquisition, loyalty and retention programs across the
financial services sector. PNT Marketing Services: customer intelligence;
marketing results.
 For more information contact:
– Adam Isler
– aisler@pntmarketingservices.com
– 212.932.7898
36

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