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Tactics for Success in Small Business Banking


Banks across the nation continue to robustly target the small business customer as a prime source of revenue and differentiation although the going has been tough lately. This sector of the market has been vastly fragmented over the past three to five years as banks found themselves restricting lending and credit due to the economic crisis and focusing more on other streams of revenue to survive. With limited access to credit and lack of personal attention and service, many business owners lost confidence in financial institutions.

Now, with a growing receptiveness to switch to more “customer-centric” financial institutions, small business clients are emerging as a major opportunity for many banks to increase sales and improve retention rates. Here are some key tactics banks need to focus on in order to effectively capture and satisfy today’s small business client:

Create – and stand by – your value proposition. ath Power Consulting studies show that, in general, banks and credit unions continue to struggle with the small business banking customer experience, particularly in the branch, which remains a key channel for this market. The first step toward progress is to develop a well communicated value proposition that defines your small business banking market position and brand expectations.

Our most recent research shows that “customer service” is far and away the most common response by bankers to the question, “What makes your bank better than where I am now?” The study also reveals little relationship between the frequency that customer service was cited by a bank and that bank’s respective overall score, as ranked by small business customers.

To more sharply differentiate your institution, create a “value proposition script” to help bankers answer the question, “Why should I bank here?” Your message should be inherently clear on how your institution performs with regard to the sector’s key drivers of banker knowledge, ease-of-use and accessibility and overall experience. Ultimately, your frontline needs to intrinsically understand your prominent differentiation in the market and must have the ability to communicate it consistently.

Align your branch managers with your business banking specialists. Bank executives have made it clear that small business banking is a strategic priority by continuing to dedicate dollars to their business banking model. Institutions such as Bank of America, JPMorgan Chase, Citigroup, Citizens Bank, Fifth Third Bank and Wells Fargo have all announced their intention to hire thousands of new small business banking specialists in the coming months. These banks clearly recognize the current market opportunity. They also recognize that while online banking is strong in this sector and small business mobile banking adoption outpaces its retail counterpart, the branch network remains integral to small business banking profits. That means the alignment of business banking specialists to local markets as well as defining unambiguous roles in the branch is imperative.

With that said, your business banking specialists must work together in partnership with your branch management. The typical small business owner still chooses a bank based on location and will visit his or her nearby branch a number of times each month, providing your staff with many in-person interaction opportunities with these individuals. Branch management and business banking staff need to work in conjunction on both sales and service efforts to ensure a streamlined channel for effectively prospecting, cross-selling and providing an exceptional customer experience at all times.

Train your existing frontline to handle small business prospects or clients. While it is evident that having a dedicated business banker or business banking specialist in place presents an optimal scenario for a financial institution to meet and exceed customer expectations regarding account capture and ongoing relationship management, our research shows that a variety of well-trained frontline roles can have a very positive impact on the growth of small business accounts. For example, we found that only one-third of potential clients were helped by an actual “business banking specialist” when inquiring about a new account relationship. Others were assisted by a variety of bank personnel, with one in 10 being assisted by a teller.

It is extremely beneficial to staff your branches with multi-functional players who provide value-add and cross-sell capabilities specifically in the business banking arena. Organizations that are able to put business banking resources in place will clearly be well positioned to address the needs of their customers. However, those organizations that are unable to expand that workforce under current conditions or under future scenarios can achieve comparable success through the proper training, coaching and message development with their existing employees.

Understand that initial and early-stage needs assessment profoundly impacts the decision to become a customer – or to walk away. In one of our most recent annual studies, 700 business owners visited 33 of the nation’s leading banks posing as potential new clients. The study uncovered several gaps in the service experience that would deter a potential client from bringing their business to a bank. For example, results showed that less than two-thirds of the bankers evaluated tried to establish the size of a potential client’s business and almost a third failed to determine what products and/or services the potential client had with their current bank before talking about their own products and services. Even more surprisingly, more than one in five bankers did not ask for follow-up information such as name, business card or other contact specifics!

It is evident that most, if not all, financial services organizations serving small business customers have significant opportunities for improvement with regard to initial and early-stage needs assessment and learning about the prospect’s business. By taking the time to determine needs and subsequently, connect those needs with the right products for the potential client’s business, you are providing customers with the personal attention and product knowledge that they desire – and steering away from the generic product push sales pitch behavior that alienates most prospects.

According to our study, regardless of who they met with, small business owners who received an informed needs assessment and were asked about business objectives were much more likely to be interested in becoming a customer of the bank than those who did not. Consequently, it is vital that any staff member who may interact with potential small business clients develop and receive selling skills training so behaviors, such as asking questions before offering solutions and probing on business size and objectives, come naturally and appear genuine to the prospect.

Make exceptional customer experience a top priority. When bankers were asked in one of our latest surveys why they care about the customer experience as a leading strategic priority, competitive advantage/differentiation and customer retention emerged as the top two reasons. That stated, our research also shows that a quarter of small business owners indicate some likelihood of switching primary business banks within the next two years, with four in 10 citing poor customer service. Though business owners also cite “fees” as one of the top reasons (behind poor service) for switching to a new bank, reasonable fees are acceptable and typically rank well below the less tangible dimensions of trust, reputation and employee knowledge with regard to what business owners seek in a banking relationship. Small business owners will pay reasonable fees – they just need to see value for what they are paying.

On the flip side, for small business customers who aren’t thinking of switching banks, these were the major reasons cited:

  • “Happy with the level of customer service I receive at my current bank” (68%)
  • “Rates and fees offered by other banks will likely not be better than what I have now” (47%)
  • “Too much hassle to switch” (42%)
  • “No other bank has branches as conveniently located for me as my current bank” (38%)
  • “I trust my bank more than other financial institutions” (31%)

The customer experience in the small business banking market drives retention and, even more critically, acquisition. One would therefore expect banks to make a directed effort to train, manage and motivate (through value-based goals) platform staff to offer exceptional treatment to their small business clients and prospective account openers.

Based on the span of insights captured in our research, some banks have made progress in improving their customer experience over the last year. However, a significant number of organizations remain concentrated more on product and less on customer relationships as a way to recoup lost fees. Adding new products or increasing rates or fees for existing ones may seem like an instant solution to increase profitability, but these initiatives do not help improve customer loyalty, and oftentimes, can generate a negative impact on customer retention.

By focusing on adding value through the provision of a superior customer experience, banking institutions will be better positioned to attract new small business banking clients – turning prospects into satisfied clients – while improving retention with their existing customer base.

Mr. Aloi is president and CEO of ath Power Consulting, which is based in Boston and Washington, D.C. and is a full service marketing research firm providing demand-side research to banking and financial institutions. Mr. Aloi can be reached at [email protected].