We all have been monitoring second quarter bank earnings reports and the truth is undeniable: retail bankers face an uphill climb to recover lost revenues. Many U.S. consumers are largely tapped out with debt and public confidence levels remain unsteady. Small businesses remain under pressure and continue to be reluctant to expand, which impacts their demand for new loans. The game has also changed in regards to what banks can do with overdraft and credit card fees – with an impact on non-interest income that we’re all watching carefully. Add to that, our consumer research validates that consumer sentiment towards banks continues to decline.
So what can banks do to resume growth in their retail banking businesses and strengthen customer loyalty and retention? At BAI, we have spent a lot of time on this issue and identified four key areas where we believe retail bankers need to focus on to deliver specific improvements. These four areas also provide the four summits for our upcoming BAI Retail Delivery 2010. They are:
- Marketing. Bankers need to re-examine how they engage and communicate with both the general public and their own customers. Post-financial crisis, the message needs to be about cultural values that resonate in the new environment. Bankers also need to improve their ability to analyze and target specific customer segments to open up new revenue opportunities. A strong segmentation strategy is key.
- Product Management. Bankers know that punitive fee structures are out. The challenge for the future is to design and package products that customers value and are willing to pay for. Bankers must develop pricing strategies that make sense for the financial institution and then target the appropriate customer segments. The most important driving theme is value – value offered by the bank and value returned by a long-term customer relationship.
- Sales. While the evergreen issues of talent management and performance incentives remain, the challenge in today’s environment is to execute a high quality sales approach in a manner consistent with the recent shift in consumer values and the onslaught of new regulation. This calls for a sales strategy that provides value to the customer and boosts the institution’s bottom line over the long term.
- Multi-channel Strategy. It’s an old dilemma: new delivery channels keep coming but the only ones never seem to go away. As customers increasingly transact electronically, what do we do with the branch? Reconfigure it? Downsize it? And what about mobile which is changing everything? And who really understands how to utilize and monetize social media? Getting the distribution mix right is a critical priority in retail banking and requires an in-depth understanding of supply and demand factors.
By focusing on these four areas and designing strategies that leverage your institution’s particular strengths within these areas, banks can go a long way toward surviving and prospering in the “new normal.”
Ms. Bianucci is president and CEO of BAI and publisher of BAI Banking Strategies.
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