Facing continuing pressure from investors to reduce expenses in a slow-growth environment, the temptation for many bank executives is to cut costs indiscriminately, for example, 10% across all departments. The problem is that such traditional cost reduction programs will leave them unable to sustain those early gains, resulting in a competitive disadvantage. Also no business can grow and survive on cost cutting alone; serious thought needs to also be given to sales and growing top line revenue.
The most successful banks are not those making the deepest cost cuts; instead, they are cutting the right costs, increasing operational efficiency and re-investing in revenue growth. They focus on short-term cost cutting efforts alongside longer-term strategic cost savings and revenue growth.
We have identified the following four core-banking areas with cost cutting and revenue/sales opportunities:
Branch footprint. Perform a strategic analysis on your branch network, while also analyzing your customer behaviors and your competition. Where are you and your competitor’s branches located? Which are more profitable and why? What customer trends do you see?
Research continues to prove that branches must be fewer in number and more strategically placed to remain viable, as the cost of branch transactions are increasing and the number of such transactions is decreasing. Performing an in-depth evaluation of your branch footprint will help guide your strategic branch placement and design moving forward.
Likewise, evaluate your staffing model. Does your staffing model match transaction levels? Are your branches staffed based upon customer needs? Having the right, strategic staffing model in place will help maximize your staff and reduce operating costs.
Also, reinvent the customer experience. Banking is now something you do, not somewhere you go. Using the data gathered from your analysis, develop a model to evaluate, streamline and reconstruct existing branch locations. The new branch design may have more self-service options, tellers with tablets and other electronic means, cash recyclers, coffee stations, business centers and conference rooms. They’ll also be much smaller. On average, branches will be at most 3,000 square feet and some as small as a kiosk!
Develop and implement a branch consolidation plan that accompanies a strong e-banking strategy. This plan will also need to include outbound communications to your market as well as internal communications to all employees about what changes will be made. Consolidating bank branches means migrating customers to electronic banking channels so that they can bank anywhere, anytime and still have the convenience of in-person services where they are really needed.
Embrace technology. Arm in-branch employees with tablets for improved, convenient customer service. For example, tablets may be used to streamline the process of opening a new customer account. Traditionally, selling a new account includes showing brochures or graphs to explain fees and terms; however, with the same information assembled on a tablet, the banker can work side by side with the customer to compare features, rates and other options. This leads to better customer/employee interaction while also providing the option to customize each presentation to the customer’s specific needs.
Drive your target audience to mobile channels for reduced transaction costs. Educate your customers on the various ways they can interact with your bank, keeping online and mobile channels at the forefront. An in-branch transaction can cost your bank up to 44 times more than an online transaction and 21 times more than a mobile transaction.
And don’t forget innovation. We define true innovation as the act of knowing your market and creating unique products and services to meet their specific needs. How does your customer base want to interact with you? How are they changing? By designing your bank around customer needs now and trending into the future, you are staying on top of “true innovation” in banking.
Product portfolio. Are you delivering the right products and services? Are your products profitable? Are you developing new products and services based on customer feedback? Can the number of product families be reduced? Are your customers profitable? Can low-value customers be reassigned to less expensive services or channels? Can the efficiency of the product development pipeline be improved?
Train your staff frequently on product and service changes and updates. If your staff is well prepared, they will be better able to answer questions and better direct customers to the best products and services to meet their needs. Also, automate processes for improved efficiencies. Having automated processes in both the front- and back-end of your bank will save you time and money.
Streamline sales processes. Evaluate your current sales structure. Is the proper plan for selling and tracking in place? How effective is cross-selling? Are there clear objectives in place?
Define rules and expectations for all employees. Once the critical issues are identified through the evaluation, your bank must design a tactical plan for the sales initiative. This includes goal setting, sales management, tracking and more. And don’t forget to put your plan into writing. It might seem cumbersome, but having a plan in writing allows you to identify clear objectives and share your expectations with your staff.
Cultivate a regular training schedule. If you expect employees to sell and cross-sell bank services, you must provide training to equip them with the necessary tools and knowledge to meet your expectations. The more knowledge your employees have, the better they can sell.
Create appropriate support materials and mobile applications. Do you know what information your customers want and need during each step of the sales cycle? Are specific marketing promotions driving sales? Whatever service you are selling or promoting, make sure you have and/or send the appropriate materials.
By reducing your branch footprint, embracing technology, managing your product portfolio and energizing your sales processes, your bank will be well on its way to improved profitability.
Mr. Roth is CEO of Mooresville, N.C.-basedVitex, Inc., a community bank consulting firm, focused on helping banks ignite performance, improve efficiencies and increase profitability. He can be reached at [email protected].
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