| Brick &
Mortar Renaissance
 By
Thomas P. Johnson Jr.
With renewed commitment to branches,
banks use a variety of approaches to boost sales productivity.
Not so long ago, branches were believed
to be Paleolithic — certainly, there were more modern
ways to gather deposits and make consumer loans. But because
of their unrivalled ability to strengthen customer relationships,
branches have shed their dinosaur skins and metamorphosised
into multi-product sales offices.
One indicator of the industry's new-found
faith is the branch opening data from First Manhattan
Consulting Group, which predicts that the industry will
add about 2,000 new offices a year (net) in the next two
years to the 87,777 bank and thrift branches the Federal
Deposit Insurance Corp. counted at mid-year 2003, which
itself represented an increase of 1,216 from 2002.
As the industry steps up its spending
on brick and mortar, branch productivity is emerging as
the critical issue in justifying the investment. After
all, ours is an industry widely acknowledged to be burdened
with excessive overhead. New offices are being opened
even as bank mergers consolidate branch networks as well
as back office systems.
The work required to rationalize branch
networks is largely quantitative, however. By contrast,
identifying the special mix of people, technology, incentives
and metrics that leads to overall system profitability
is more art than science. Bankers are convinced that one
essential element is cross-selling non-bank products to
bank customers. National City Corp. CEO David A. Daberko
puts the issue plainly: "If you don't generate more revenues
with more investment and insurance products, the costs
are going to eat you up."
As illustrated in this issue's interviews
with Daberko and Wachovia Corp. CEO Ken Thompson, there
is no single all-purpose approach to successful cross-selling.
While both National City and Wachovia are focused on the
same goal, they approach the task very differently. National
City, for example, tracks branch productivity through
the profitability statements of each individual office,
while Wachovia pursues the same objective via a sales
management tool called "book of business."
National City and Wachovia are two
examples of what can be seen industry-wide: An era in
which financial institutions use a variety of techniques
to boost cross-selling and new customer acquisition. This
is a theme to be elaborated on in the next several months,
when we present the findings of a new study by BAI Research
titled "The Front-Line Factor."
"The most common barrier to the implementation
of relationship strategies is frontline execution," says
Paul McAdam, managing director, BAI Research. "It's particularly
difficult for large banks that span states and regions
to ensure a consistent approach to the customer. The project
examines this issue from a perspective that includes top
management's role all the way down to training, incentives
and staffing in the branches."
We look forward to sharing what we've
learned with you in the next issue of Banking
Strategies.
Mr. Johnson
is publisher of Banking Strategies
and president and chief executive officer of BAI.
Copyright © 2004 by Banking
Strategies, published by BAI.
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