Banks Need To Reassess Cross-Selling Efforts

For decades, cross-selling has been a strategic priority of banks and credit unions since earning more business from current customers is the most efficient way to achieve growth. Despite this focus, a new study indicates that many financial institutions may be far from realizing the full potential of cross-selling.

In fact, according to the study, only 19 percent of retail bank customers owned three or more products in addition to a checking account with their primary bank compared to 49 percent who have three or more products with other financial institutions.

A just released Deloitte report entitled, 'Kicking It Up a Notch: Taking Retail Bank Cross-Selling to the Next Level' supports the view that success in cross-selling targeting may need to move beyond traditional product ownership, satisfaction and tenure parameters to include a behavior segmentation approach that takes into account perceptions based on total account holdings. 

While the Deloitte survey shows that banks have generally achieved long tenure and a high degree of satisfaction with customers, this success has not translated into multiple product relationships. In fact, the study found that there is a positive correlation between the number of products a customer uses and their desire to use multiple institutions.

Source: Deloitte Center for Financial Services

According to the study, customers only turned to their primary financial institution for a savings account on a consistent basis. In fact, while 75 percent of respondents owned credit cards, only 33 percent had one that was issued by their primary bank. Obviously, this could be the result of an inferior offer, poor marketing and/or the absence of a primary bank offered credit card, but it still illustrates a major opportunity gap.

Some of the other 'opportunity gaps' may be caused by poor cross-selling at the time of account initiation, poor customer education on the benefits of relationship consolidation or even beliefs that a primary bank is not the best place to build a specific relationship (wealth management or insurance products).

Source: Deloitte Center for Financial Services

The research suggests that banks and credit unions may want to revisit traditional cross-selling strategies that focus on current product ownership, tenure of relationship and demographics to predict cross-selling success. Deloitte believes a deeper analysis of customer perceptions and motivations driving product purchasing may be needed, including a potential share of wallet segmentation scheme.

Share of Wallet Segmentation

"To remain competitive in a largely saturated market where revenue opportunities from new customers tend to be limited, deepening relationships with existing customers will likely remain critical to increasing banks’ top-line growth," Deloitte says. "One important way this might be achieved is through more refined strategies and targeted execution of cross-selling programs."

As a first step, respondents were grouped into four segments - 'Basic Users', 'Value Shoppers', 'Diversifiers' and 'Consolidators' - based on share of wallet.

The segments were then analyzed based on a number of dimensions such as demographics, perceptions, price sensitivity and channel use.

Finally, the segments were analyzed for product ownership patterns to identify opportunities for cross-sell success as well as 'dead ends', where investment could be wasted (no expanded ownership potential). Product ownership details available in the full report.

Segment Challenges and Opportunities

Basic Users

As the name implies, 'Basic Users', despite the large size of this segment (42 percent of respondents), have limited financial means, less access to credit, and an average bank product ownership rate of 1.7. And while there is uniformity of income and product ownership rates, Deloitte suggests there are two groups of basic users; 1) young people whose product needs may evolve/grow as they get older, and 2) middle-aged and older customers whose needs and behavior are unlikely to alter over time.

"One way to attract young basic users could be through education. Providing information and advice on financial challenges, such as debt management, benefits of improving one’s credit score, and the importance of saving early for retirement may help banks become the go-to institution for this group," Deloitte says.

To target young basic users Deloitte suggests use of social media and mobile banking and gamification that emphasizes improved money management.

"As young basic users progress in their professional and personal lives, their needs are likely to evolve. Banks could leverage their primary relationship to engage early with this group to provide products that meet their needs at various life events - education, marriage, purchasing a home, starting a family, investing, or retirement. This can allow their product needs to be met sequentially and appropriately, rather than pushing products prematurely with limited success or failing to cross-sell at all. A consultative approach as opposed to hard-selling may be particularly effective with this group."

In addition, Deloitte suggests retail bankers could learn from product bundling strategies common in other industries, offering younger consumers in the Basic User segment the flexibility to purchase products in bundles as well as individually. For example, all add-on elements of checking account such as debit card usage, in-network ATM usage, paper checks, overdraft protection, and wire transfers can be priced individually. "Such a pricing approach will likely increase the affordability of the product, allowing Basic Users to pick and choose services that fit their wallet size," says Deloitte.

Deloitte also advocates low-cost products such as prepaid cards with low usage fees, no minimum balance requirement or overdraft fee. While the younger part of this segment is relatively small and could be considered a long-term investment, banks and credit unions who connect early could enjoy relationship growth over time.

Value Shoppers

Value Shoppers, the second largest Deloitte segment (39 percent), are described as being the least loyal customers with only 1.1 products with their primary bank. A lack of trust among this category of customers means that they usually don't believe their bank is 'fair', and are prepared to take their business elsewhere even over a 'slight' fee increase (6 in 10 will leave if fees increase $5 a month).

Nonetheless, Deloitte suggests targeting value shoppers can be an attractive proposition for banks.

"They have all the attributes that banks typically look for in high-value customers: financial strength, broad product needs, and higher channel engagement levels (67% pay their bills online and 58% use bank tellers) - the second highest among all the segments. Winning over this segment will likely involve changing their negative perceptions and incentivising product consolidation at the primary bank,"' Deloitte says.

The report notes that companies seen as having transparent pricing are best placed to win customers' trust. This may require simplified fee structure, consistent communication or a better demonstration of value.

"Given value shoppers’ low affinity with their primary banks and their tendency to shop for the best offers, loyalty incentives could be effective in influencing them to consolidate some, if not all, of their financial relationships with primary banks," says Deloitte. "Although banks have effectively implemented rewards programs at the individual product level, they will have to build a more holistic structure that incentivises customers to achieve the 'preferred' status in multiple product categories."

Wells Fargo’s Portfolio Management Account (PMA) is provided as a good example of incentivising customers for consolidating accounts with the bank. The PMA package begins with a checking account, which is then linked to other eligible Wells Fargo accounts, including savings, deposit, credit, mortgage, and brokerage. (details available in the Deloitte research available here)

Diversifiers

This group, according to Deloitte, is comprised of a significant proportion of mass affluent households (47 percent) and takes the highest average amount of bank products at 6.3, with about half from their primary bank. What they don't have through their primary financial, institution is the likes of investments, life insurance, and annuity products.

"Banks seeking to grow relationships with 'Diversifiers' may need to target specific products where the segment relies on other financial players (investment brokerage, life insurance and annuities)," says Deloitte. "Retaining this segment will also likely require banks to shift from traditional pricing to value-added benefits."

Advice given here includes personalised service at the branch level, access to dedicated financial advisors, and immediate resolution of any complaints.

Deloitte also suggests that banks could impress diversifiers by developing a better perception among the mass affluent base as a viable alternative for investment and brokerage services. The report highlights an example of Bank of America utilising its Merrill Lynch unit.

Consolidators

'Consolidators' are the banks' most loyal consumers, holding an average of 4.1 products with 3.6 of the products at their primary bank. They clearly hold a positive view of their primary bank, often in terms of service and even fees.

"What strategy should banks use with consolidators?" Deloitte asks. " Banks should retain them and leverage their loyalty by converting them to advocates."

"Personalised attention to consolidators’ needs and prompt response to their concerns will strengthen their relationship with the primary bank, increasing the possibility of turning them into advocates," says Deloitte. "Peer influence-based, community-oriented marketing holds the potential to create authentic customer relationships."

The report goes on to suggest banks could create dedicated virtual space, both on websites and social media pages, for consolidators to share their experiences and influence the perceptions and buying decisions of other customers. "Banks may also consider devising reward programs to incentivise consolidators to help generate referrals."

Additional Ways to Achieve Cross-Sell Success

While I have written many blog posts around the importance of cross-selling and the opportunities for success, Deloitte also emphasizes the importance of of changing current banks processes and functions to achieve success. Three aspects recommended by Deloitte are:

• Improve onboarding: It is critical to make the onboarding process efficient and effective since 75 percent of cross-selling occurs in the first three months
• Set cross-divisional goals: Set goals that ensure that lines of business stay coordinated and capitalize on cross-functional relationships
• Equip sales force: Combine incentives with training to improve sales force effectiveness

As shown in this recap of the well done Deloitte research report, banks need to move beyond product ownership and demographics to better understand the behavioral and attitudinal traits of customer segments. With this understanding, banks can redesign their channel and communication strategy and fine-tune product offerings to suit the needs of the different segments.

While the process may be challenging, it is clear the current strategies are not effective and need to be adjusted to remain competitive in a highly saturated market where revenue opportunities from new customers are limited and the importance of deepening relationships is paramount.

Additional Detail of the Deloitte Research

The survey was conducted online by Harris Interactive during August 16-30, 2012. In total, 4,271 checking account customers aged 18 years or older participated in the survey. Responses were weighted across geographic regions, income levels, age, and gender groups to reflect the national population.

Definitions of “primary bank” as used in the Deloitte report refers to the bank where respondents have their primary checking account. “Other financial institutions” refers to other organizations at which customers have a financial relationship.

The analysis includes 12 different products sold by financial institutions beyond the checking account:

• Savings account
• Money market account
• Home equity line of credit
• Investment/brokerage account
• Credit card
• Auto loan
• Prepaid card
• Life insurance
• CD
• Mortgage
• Secured card
• Annuity

Additional Resources

Kicking It Up a Notch: Taking Cross-Selling to the Next Level - Deloitte (July 2013)

Kicking It Up a Notch: Taking Cross-Selling to the Next Level (Infographic) - Deloitte (July 2013)

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Banking Leaders Discuss 2014 Strategic Planning Priorities

As we enter the planning season with a marginally better economy than last year, banks and credit unions are faced with margin compression, high operating expenses, new competitors and channel disruption that challenge even the most efficiently run organizations. Therefore, it has never been more important for institutions to formulate a successful strategic plan.

To assist with this process, I asked some of the foremost global leaders in the banking and credit union industry to provide thoughts on what they believe are the 2014 strategic planning priorities. This blog post is a companion to the post done at the beginning of the year regarding trends expected in 2013.

Understanding that each financial institution and market is different, it was interesting the uniformity of priorities offered to bank and credit union management by the more than 30 industry leaders I interviewed for this post. And while the ability to execute against these strategic priorities may be impacted by size of organization and other dynamics, there was a consensus among those who I spoke with that 2014 may be one of the most important planning cycles ever.

Enhance the Customer Experience

Improving the customer experience was the foundation of almost all of the responses I received around 2014 strategic priorities. Whether we are talking about branch reconfiguration, mobile banking applications, back office operations, etc. banking industry leaders believe an improved customer experience is the key to growth. 

As was said by Mary Beth Sullivan and the team from Capital Performance Group in their May/June Newsletter, "Many banks have a long way to go to get the basics right, so banks and credit unions should focus first on the basics. Once the basics are humming, ask yourselves: What can we do to be sure that our customers are better off banking with us than with our competition? What will make our customers lives better? How can we help them solve specific problems they are dealing with? Answers to these questions will define the experience you seek to create."

Beyond 'the basics', other specific strategic initiatives were recommended by Steven J. Ramirez, CEO of Beyond the Arc. "Developing a proactive complain management process that goes beyond regulatory requirements can drive new customer experience projects", says Ramirez. He also believes financial institutions need to determine how they can be a finger swipe away from providing guidance and support through mobile devices.

Financial industry futurist and blogger Scott Bales believes bankers need to get out of the office and talk to real customers, developing empathy for their problems, behaviors and desires if they want to develop offerings that align with the needs of the market. According to Bales, "The goal is to build experiences, not products".

Sankar Krishnan from Sutherland Global sees customer experience as the 'X factor' across all channels and interactions the customer has with their financial institution. Comparing what banks need to strive for with customer experience leaders Apple, Amazon and Quicken Loans, Krishman believes banks need to excel at aligning people, process and technology. 

Sam Maule from Carlisle & Gallagher Consulting Group believes that recent start-upssuch as Moven and Simple (and perennial cx leader USAA) are the best at visual engagement and customer experience. He quoted one of his banking clients as saying, "I would pay $500K for ONE great user experience designer. FSI's are horrible at this. We have massive data systems, huge BI tools, and more, but none of that means jack for consumers if there isn't an amazing user experience."

Finally, best selling author and acclaimed management advisor Joe Pine believes banks and credit unions must go beyond providing just checking accounts and loans.

Define Mobile Positioning

In response to the growth in smartphone adoption and customer demand, most financial institutions offer basic mobile services. But those are just table stakes. Going forward, banks and credit unions now need to determine how to position this channel for the future. 

Senior Aite analyst and Snarketing 2.0 blogger Ron Shevlin states, "The most important strategic question banks and credit unions need to address is how will the mobile channel help FIs add more value to the customer relationship, help differentiate the institution, and create a strategic advantage". He adds, "If the 2014 strategic planning process can answer these questions, it will drive decisions regarding pricing, product offerings and customer segmentation."

Noted technologist Bradley Leimer from Mechanics Bank agrees that banks need to move beyond 'mobile banking 1.0' and adopt a mobile-first mindset in regard to application development, marketing, service and transactional functionality. According to Leimer, "Banks need to build simplified journeys similar to those offered by Moven, Simple, Bluebird, GoBank and USAA." (Leimer expands on his strategic planning thoughts on his Discerning Technologist blog here). 

Senior marketing professional, Lori Philo-Cook from InnovoMarketing believes that financial institutions also need to improve the marketing of the mobile channel to customers, including enhanced training of employees and one-on-one demonstrations to customers. "The key is to better understand the needs of customers and provide personal demonstrations on how mobile banking can meet these needs", says Philo-Cook.

Multimedia and special projects editor of Finextra, Elizabeth Lumley believes it is time for banks to go beyond just mobile banking improvements and to place their bets on mobile payment partnerships. While the winners in payments have not been determined, she believes waiting is not an option.

Integrate Delivery Channels

As noted by Capital Performance Group in their May/June newsletter strategic planning article, everyone is talking about the future of branches because there is so much fixed cost tied up in this channel where fewer and fewer transactions are taking place. The challenge is not the opening or closing of a branch, however. It is the ability to integrate capabilities and information across channels, delivering an consistent experience.

Dominic Venturo, chief innovation officer at U.S. Bank believes banks and credit unions need to quickly adjust to the disruption in financial delivery channels. "Now that the majority of consumers in the US are carrying a smart-phone of some type and the technology has been used to eliminate the need to visit a branch for many activities (opening account, depositing a check, paying a bill, sending a gift card, etc) how will the delivery model of your institution change to remain relevant?", says Venturo. He adds, "The mobile wave started just a few short years ago and has already changed how we do business. Planning for the future of delivery should have already started, but if it hasn't, now is a good time."

Another retail banking executive at a top 5 financial institution believes FIs need to move to omnichannel banking which maximizes cross-channel consistency and provides a seamless user experience where and when the customers desires. This includes scenarios where the customer may begin their transaction using one channel and finish it with another.

To this end, Nicole Sturgill, research director for retail banking at CEB TowerGroup recommends, "Adjust channel strategy from ‘all transactions in all channels’ to ‘seamless integration across channels’. Our research shows that consumers prefer reduced effort over choice. They’d rather know which channels will be fastest and work best than try a channel that doesn’t work for what they’re trying to achieve. Instead banks and credit unions should focus efforts on ensuring that customers can move easily from one channel to another without degrading the experience."

Industry recognized innovator Matthew Wilcox also believes 2014 should be the year of breaking down internal channel silos and to determine how banks and credit unions can leverage channels to not just allow the client to self-serve, but to provide a positive full-service experience regardless of the channel.

Unfortunately, the back office of many financial institutions makes it difficult to break down silos that have been in place for years says Fred Hagerman, chief marketing officer of Firstmark Credit Union. He still believes that a disconnected experience has risks.

Both Virginia-based chief marketing officer of Geezeo, Bryan Clagett, and Market Insights' senior strategist Jim Perry from Chicago agree that financials should get out of their branch-based comfort zone.

London-based mobile/digital consultant for Keatan and publisher of The Bold War blog, Michael Nuciforo may state it best when he says that banks must move from a perspective of self-service (getting customers to do hated tasks themselves) to selfless service (where we focus on how the customer wants to interact). "New technology and changing customer behaviors mean that there are widening gaps between the processes of the past and the expectations of the new", says Nuciforo.

Reduce Enterprise Costs

It is no surprise to financial institutions of all sizes and in all countries that costs must be reduced as revenues have decreased and margins remain low. Many banks and credit unions have made cost reduction a perennial foundation of their strategic planning process, but more needs to be done in 2014.

"Banks must manage the cost base of the physical infrastructure and staff costs in branches to ensure that overhead of traditional operations are minimized while effectiveness of such operations are maximized", offers the Chairman of the London-based Financial Services Club, Chris Skinner. 

Bob Palmer, global financial services marketing lead at IBM agrees that there needs to be a continuation of the enterprise cost reduction strategies that are already in place. He believes these initiatives need to include a more aggressive reduction in workforce with a correlated reconfiguration/reduction of branch networks.

Melanie Friedrichs, analyst at Andera feels automation of core banking services also needs to occur. "For most institutions, I think that cost cutting through the better application of existing technology is the easiest path to a better margin", stated Friedrichs. Specific examples she provided include: increasing the percentage of deposit accounts and loans originated online, creating incentives to use online or mobile banking over branches and call centers, and investing in technology, perhaps even branch automation technology, to improve staff efficiency.

Author, 2012 American Banker Innovator of the Year, 'Breaking Banks' radio host and founder of Moven Brett King believes that banks need to dig even deeper for cost reductions. In his normal disruptive style, he challenges traditional financial organizations to make a significant paradigm shift.

Fellow disruptive thinker Deva Annamalai from Zions Bank agrees that banks need to identify processes that are outdated and archaic and get rid of them. "There is nothing more dangerous than sticking to things that we have done in the past because we are too lazy to change them," says Annamalai. "Your customers' tolerance for unneeded traditions like signature cards and other long and costly processes is wearing thin. Competitors who provide simplified, frictionless banking are ready to serve these customers."

Optirate CEO, Serge Milman adds that the future of banking may require additional scale. "Scale is needed to diversify 'concentration risk' (customer, geographic and product), attain lower funding costs, reduce unit costs, absorb regulatory burden and gain access to a broader base of potential customers," says Milman. "Options include organic growth and acquisitions."

Leverage Data

The discussion of 'big data' permeates our industry trade publication, industry meetings and blogs like mine (see here, here and here). This is because most financials sit on some of the richest sources of data of any industry, yet we rarely leverage it as effectively as possible. 

Recognized top innovator Matthew Wilcox states that while investments in innovation data management are up, banks still lag behind other disruptive companies in recognizing payoffs. "Banks have a strong hold on massive amounts of customer data and understand that their data is truly a gold mine", says Wilcox. He adds, "Initially, banks should avoid major new data initiatives until they get good at using the data they already have". 

Scott Bales suggests that banks may want to look outside their organization for help. "Bankers may want to look to data scientists, who can create stories from data to derive patterns, trends, insights and add context to interactions with consumers. The bank who best leverages their data best will ultimately win." 

Fred Hagerman from Firstmark Credit Union agrees. 

Understanding and processing data from various internal systems is imperative according to Zions' Deva Annamalai. "Break down data silos within the organization and facilitate information flow which will lead to a better customer experience," states Annamalai.

A strategic priority for banks should include the delivery of a mature enterprise data management structure that provides true parity based reporting between operational, performance and financial information", offers Jeff Fisher, director at Perficient. "From here, banks should build capabilities to further extend a bank’s ability to segment customer data and create a solid foundation to execute on a strategy to monetize customer data".

Sam Maule from Carlisle & Gallagher Consulting Group agrees and adds, "We all must be better at drilling into the contextual data that matters for customer engagement and not on creating executive dashboards for PowerPoint decks. Data analytics must lead to actual application and engagement with consumers, from customer acquisition to origination, marketing, education, collections, fraud, etc."

Nicole Sturgill from CEB TowerGroup believes that channel preference would be a great starting place for many financial institutions. "Know a customer’s preferred channels, both individually and in the aggregate. At the individual level, understanding how a customer wants to bank can drive how they are served, what products are offered, and how they are offered. At the macro level, understanding the channel preferences of the customer base can drive strategic decisions on channel investments as well as management structure."

Improve Marketing and Sales Effectiveness

As I discussed last month in my blog, the consumer purchasing funnel has changed forever, with the majority of consumers beginning their purchase process using online channels and less and less frequently preferring to visit a branch to open a new account. This new paradigm requires a shift in marketing emphasis from 'push' marketing, where mass media would bombard a consumer with messages, to 'pull' marketing, where time, place, offer and channel become much more important. 

This significant change in the purchase process requires a rethinking of strategic priorities for bank marketers in 2014 and beyond. 

James Robert Lay, president of PTP New Media and advisor to the credit union industry is a strong advocate of building a digital strategy that will lead to increased leads and sales. According to Lay, "Moving to digital channels requires banks and credit unions to stop thinking about digital as a tool that works independently of other channels and processes, but instead works together as part of a system or process." Lay continues, "Once banks and credit unions accept that the business model will need to change when dealing in a digital world, banks and credit unions need to explore how digital can align with people and products around a unified purpose."

London-based retail channel director at Misys, Alex Bray emphasizes that the future reduction in branches across the globe will require digital marketing acumen. "Banks and credit unions need to build relationships, differentiate brands and identify customer needs through digital channels instead of face to face as branches disappear," states Bray. "I think gamification and social media marketing will also play a big role here as will the importance of 'one-touch' mobile marketing."

Financial Services Club's Chris Skinner also believes that a strategic priority for 2014 will be to find ways to leverage social media and mobile for growing share of wallet through deepening customer relationships.

Finally, Elizabeth Dias, financial services and retail marketing manager at Perficient speaks for many of the banking leaders interviewed around the new strategic direction of marketing. "Successful financial services innovators will start to leverage a more integrated portfolio of technologies to be where their customers are today and identify new ways to create utility with their digital marketing strategies for tomorrow," says Dias. "There is a great opportunity for marketers to use tools like Vine, Instagram, Twitter, Facebook and Google or to develop a mobile app to solve a problem, make life easier, and of course engage with the customer as they map the digital customer journey."

Define a Differentiation Strategy

According to the list of strategic planning priorities developed by Capital Performance Group, there has never been a better (or more important) time to identify your institution's niche. How do you become the 'go to' financial provider for a specific retail or business segment? And how can you increase revenues (and potentially reduce costs) through this differentiation at a time when the consumer thinks all financial providers look pretty much the same?

According to Keatan's Michael Nuciforo, it may be as 'simple' (or difficult) as being the firm that executes the best against their plan. "The banks that are winning are the banks that are delivering," says Nuciforo. "They have refocused not on analysis paralysis, but on quality and speed of delivery." 

Serge Milman from Optirate and Melanie Friedrichs from Andera voice a similar warning around building differentiation in a crowded marketplace. While they agree that banks and credit unions need to develop strategies to set themselves apart in the marketplace, they both emphasize that there needs to be a highly focused commitment to the strategy.

Amber Farley, director of interactive services and media at Financial Marketing Solutions in Nashville, reminds us that, "Companies that usually do the best are ones that have a brand that permeates throughout the entire organization. The best companies value customer service and they make consumers want to be a part of their story". She suggests that more time and investment should be spent on internal branding initiatives by improving internal communication and energizing the organization. 

"Once each member of the entire team (from executives to the front line staff) is a brand ambassador for the bank, I think it is equally important to communicate the brand message in a consistent and aesthetically pleasing manner so that community members desire to be a part of the story. That's how life-long customers are made". 

Finally, fintech technologist Bradley Leimer emphasizes that differentiation (and innovation) do not need to be created internally or in a vacuum. Instead, he emphasizes the power of partnership with outside providers. If your firm is not able to address all of the external requirements of your customers and the marketplace, are unable to test, iterate or develop agile or lean processes that can help differentiate your organization, or simplify the customer journey and build a unique customer experience, partnering with an outside disrupter that can lead the way may be a better option. (read more about Bradley's perspective here).

Revenue, Security and Regulation

As was very profoundly offered by SourceMedia's Editor in Chief Penny Crosman, the financial services industry can't ignore the 'elephants in the room' . . . the ongoing need for revenue, the increasing importance of improved security and the reality of a heightened compliance environment. The negative impact of neglecting any of any of these strategic priorities could easily offset any benefits from the strategies discussed above.

Finding new ways to generate fees from new innovations or established products, testing new security options which will allow for greater acceptance of mobile banking and mobile payments and finding ways to improve compliance with fewer dedicated resources will be 'must haves' in 2014.

Keys to a Successful Planning Process

Whatever strategic initiatives are agreed to by a bank's or credit union's management, it should be shared and communicated with bank employees so they understand the organizations’s mission, vision, goals, and objectives and the employees’ role in achieving the objectives.

In its simplest form, a bank’s strategic planning process should answer the following four questions:

1. Where are we now?
2. Where do we want to be?
3. How do we get there?
4. How do we measure our progress?

In today's marketplace the strategic planning process must be dynamic and focused. Unfortunately, at many institutions I visit, the process becomes nothing more than an adjustment to the prior year's plan without adjustments that reflect the rapidly changing industry dynamics. In others, there is a lack of unified focus that can lead to disruption and competing priorities.

Simply going through the motions is a recipe for disaster as articulated by credit union advocate Tim McAlpine, president of Canadian-based Currency Marketing and Jeff Marsico, EVP of bank strategy at The Kafafian Group and fellow blogger.

Fintech advisor and CEO of Clientific, J.P. Nicols cautions, "Too many banks try to be all things to all people, and the universal bank model really needs significant scale to work. Bank executives should spend a a good share of their strategic planning time evaluating all of the businesses they are in (or not in) and make an honest assessment of potential growth rates and the investments and scale needed for success".  He adds, "Business lines not making the grade should be divested or closed and the investments diverted to lines where they can legitimately compete and win". 

I hope some of these suggested strategic priorities help in your 2014 planning process. Thanks to the dozens of financial service leaders that were so kind to share their thoughts.

If you have other priorities that you believe will help your fellow FI associates, I would love to have you post these in the comments section.

Additional Resources

Strategic Priorities for 2014 Planning - Capital Performance Group (June 2013)

Banking Leaders Predict Major 2013 Trends - Bank Marketing Strategy (January 2013)

Strategic Plans That Make A Difference - Mary Beth Sullivan for BAI Banking Strategies (August 2012)

Semiannual Risk Assessment: Spring 2013 - Comptroller of the Currency (June 2013)

Ten Keys to a Solid Strategic Plan For Banks - Sageworks Blog (July 2012)

Meaningful Strategic Planning Can Happen - ABA Banking Journal (May 2012)

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Digital Shopping Has Transformed The Bank Purchase Funnel

Historically, customers came into a branch to research financial products prior to purchase. Today, the majority of customers have done significant online research before entering the lobby, transforming the bank and credit union purchase funnel. 

Unfortunately, these digital shoppers get confused as they try to navigate tedious web pages or become unimpressed when they encounter unprepared branch personnel, requiring financial institutions to develop an improved multichannel sales strategy.

When respondents to the Novantas 2012 Multi-Channel Sales Survey were asked to identify their preferred channels for product research, online was cited as the top avenue by 63 percent of respondents with only 13 percent of the respondents stating that the branch was their primary research source. A majority of these same respondents, however, preferred to open an account at a branch, with only 36 percent preferring to open an account online.

The Novantas research found that preferences differed based on the account the customer was researching, with customer using the online channel more when shopping for a new checking account (69%) than for a mortgage (57%) or investment product (55%). Again, the branch channel was not the first choice for initial research.

Multichannel Purchase Funnel

But the online channel was not the only channel used by consumers shopping for bank or credit union products. In fact, Novarica research in conjunction with FindABetterBank found that consumers who were about to open a new checking account in the next 90 days expected to use several channels before deciding on a new financial institution.

The customer trend towards 'having it both ways' (digital shopping and branch-based opening) has a variety of implications, especially when the impact of mobile marketing through smartphones and tablets is taken into account. According to a recent Novantas Review feature entitled, "Winning With Online Shoppers", banks and credit unions must realize that their websites need to drive sales traffic to the branch and help complete sales online.

Gaining Visibility Online

Now more than ever, banks need to gain visibility online, since more and more consumers use search engines like Google to start their research process for a new product or new financial services provider. It is important for a bank or credit union to be visible as close to the top of searches as possible to have a chance in today's marketing warfare. As Novarica managing director, Robert Rubin put so succinctly in an online interview, "Improving online visibility in search and on third party sites is imperative. These are the online resources consumers use to shop. If they can’t find you, how will they know you exist?"

Despite all of the hype around paid digital placement, the Novantas research found that most consumers (roughly 80%) only clicked on organic search results that depend on keywords and search relevance. To consistently rank in the top five organic results, a bank or credit union must optimize their website so that: 1) the site has greater relevance to keywords used in local searches; and 2) the site reflects indexing activity of search engines. Novantas also recommends a program that establishes inbound links from related websites to stimulate traffic.

Although only 20% of online shoppers click on paid links through search engine marketing (SEM), the links still provide visual cues and reinforce brand presence. The value of SEM can only be determined through testing and ROI evaluation. As mentioned, the power of engaging third parties for referrals and mentions is one of the most powerful tools to reach online shoppers.

Improving the Internet Banking Sales Experience

Expanding the relationship of current customers who are comfortable shopping online is probably more important than many of the prospecting strategies discussed above since the cost of expanding a relationship is lower than finding a new customer. 

According to a recent study from Mapa Research entitled, "Digital Sales: Enhancing Existing Customer Relationships," personalization of the buying experience is core to successful conversion of customers. In reviewing the sales strategies from over 30 providers in 10 different countries, Mapa found that relevance is imperative in both the targeting of customers and the tailoring of offerings. 

The sales messages can occur at any point while the customer is engaged in their online banking activities. Obviously the account activity screen is often used for customized messaging. The key is to provide pertinent offers without being obtrusive or interrupting normal digital activities. While some of the personalized messaging is in a static position on the account summary page (NAB Bank 'My Offers'), other institutions were found to use pop-up windows to draw additional attention (NatWest). 

With Bank of America, Mapa found that when a customer wanted to open a new checking account they were shown additional 'go with' services within the account opening process. If the customer does not want to open an account online, they can schedule an appointment with the phone number provided.

Providing support options at key moments of the sales journey is also important according to Mapa. For instance, Natwest provides a link to an advisor if a customer looking for a new service wants to abort a sales process, while Citibank also provides assistance prompts throughout the sales journey. Many examples of integrated sales support are offered by the larger banks as part of their internet banking sales experience.

The 85 page Mapa Research report (available for free review and purchase here) also provides many visual examples of institutions that cross-sell products to existing customers upon the log out of internet banking. While some organizations provide several product promotions on the log out screen, the best limit the products promoted to those relevant to the customer.

Selling Through Mobile

The frequency of engagement via mobile is higher than with either internet banking or tablet engagement, yet the length of engagement is significantly shorter on average. This makes the sales journey using a smartphone much different than through other channels.

For several institutions reviewed as part of the Mapa study, the sales message preceded login or was integrated within the login process, with product information, news and links to the bank's website provided at the onset of the mobile experience. Where this was done, it was important to provide a 'one click' option for the customer to receive more information or begin the sales process.

As with internet banking, there are many ways banks are beginning to provide customer service and agent access through the mobile device, While less prevalent in the U.S., many organizations overseas that have integrated customer service within their sales process.

Similar to the internet banking examples, Mapa provides many visual examples of banks that include selling as part of the logout of the mobile engagement. This is to avoid any interruption in the primary reason the customer is using their mobile device (balance check, transfer funds, etc.) 

The good news is that any message on the mobile device will usually be seen multiple times during any period due to the number of times many customers use their mobile device and since many customers access their accounts using multiple devices (desktop, smartphone, tablet).

Additional coverage of mobile sales and servicing innovations can be seen on my previous post entitled, "Banks Accelerate Mobile Banking Innovation".

Tablet Banking Sales Experience

Since many tablet applications continue to be non-customized versions of a bank's internet banking experience, the integration of selling using the tablet has lagged other channels. 

Despite the slow start, there are some examples of how banks have leveraged the tactile experience and social interaction capability to provide a better sales dialogue. Tablets also provide a much better graphically oriented tools that can build engagement. Since the time spent on during a tablet engagement is significantly longer than a customer spends on a smartphone, the potential for sales success is greater with this channel. 

The tablet also is a much better media to integrate live chat and other forms of customer support that can improve sales results. While the tablet should not be considered the channel to place all product information, it does provide a very valuable stepping off point to a bank's website. Through links and redirection, the tablet can be a great asset to any bank wanting to improve their digital sales results.

Closing The Multichannel Sale

The advantage of cross-channel integration is the possibility to sell with each interaction through each channel in a consistent and relevant manner. In other words, each interaction becomes a sales opportunity. The objective is for banks to allow prospects and customers to switch between channels, at will, without breaking the sales cycle.

In conjunction with online visibility and internet and mobile/tablet marketing, it is clear that most financial institutions need to significantly simplify the customer journey from online or mobile inquiry to completed sale. According to both Mapa Research and Novantas, the majority of banks are lagging other industries in their multichannel shopping experience, potentially losing potential customers who get frustrated. There is definitely a revenue consequence to not investing in process and site simplification (e.g. fewer clicks and clearer communication).

Complexity and lack of personalization in products and/or process creates an immediate wall for consumers that are increasingly mobile, less tolerant of difficulty in completing a process seamlessly online, and more sensitive to non-customized offerings. In addition to improving the channel experience, forms must be simplified as well as links between channels.

In addition, once a shopper is engaged, the best strategy is to provide a number of channel options for fulfillment since research shows that shopping and buying can be disjointed. Integration of channels is necessary. Do we enable online account opening? How about through mobile channels? Can customers connect directly with a live agent? Can the ATM channel assist in the process? Has social media been considered as part of the digital sales strategy?

Robert Rubin provides this advice, "Look for opportunities to present add-on offers within a sales process. Also, PFM solutions from vendors like Intuit and MoneyDesktop provide opportunities to cross-sell within the online banking interface. For example, letting the customer know that your credit card has a better rate then the card they’re currently using."

Finally, banks and credit unions should consider segmentation around channel use since customers differ so much with regard to how they interact with their financial institution. According to Novarica's Rubin, "Consumer behavior is changing and branches are a very large fixed cost for financial institutions. Successful cross-selling requires channel use segmentation to allow the ability to provide customers the combination of 'right time, right offer, right channel'. Understanding how customers use channels is essential."

Need For Management Buy-In

A relevent sales experience needs to meet the content and functionality needs of the customer. Both Mapa Research and Novantas believe a shift in management mindset is required to eliminate current channel silos and to support the investment in the overall sales process regardless of where a sale begins or ends. This will require improved measurement of sales results across channels and a rethinking of products suites based on the needs of the online and mobile customer.

Note: The Mapa Research report provides some excellent examples of global banks that are succeeding in integrating channels for improved multichannel selling. In addition to ABN AMRO and ASB and others, the report provides a case study of Commonwealth Bank's personalized sales process.

Additional Resources

Winning With Online Shoppers - Novantas Review (June 2013)

Digital Sales: Enhancing Existing Customer Relationships - Mapa Research (April 2013)

Winning With The Multichannel Consumer - Novantas (March 2013)

Winning in a Multichannel World - Novarica (April 2013)

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