Keycorp is getting to know its branches a lot better these days.
Through an extensive research effort, the $67.5 billion-asset bank holding company is pinpointing branch-by-branch distinctions in three areas: customers, types of transactions, and technological usage.
The results will eventually divide Keycorp's network of 1,400 branches into four segments, each designed to meet the needs and demands of a different customer group.
"We're trying to transform the company from a product focus to a segment and relationship focus," said Bob Jones, executive vice president of community banking at the Cleveland-based financial services company.
"If you look at the way banks have delivered products and services," he said, "it's been very much of a shotgun approach. We're trying to narrow the focus and understand customer needs better."
The four main customer groups Keycorp has devised are mature market, mass market, small-business, and emerging affluent, which covers the baby boom generation.
These segments are further divided into 16 additional groupings linked to business areas such as investment management, trust services, and Keycorp's securities brokerage.
Calculating the proportion of each customer segment within a single branch will determine the type of merchandising, collateral, and automation available to branch employees and account holders. In branches with a mix from each segment, a hybrid approach would apply.
"An 'emerging affluent' branch may be highly automated with a heavy emphasis on automated teller machines, interactive kiosks, and fewer tellers," Mr. Jones said. In a 'mature market' branch, "there will be more tellers, and automation will be more value-added than transactional in nature."
The transformation of Keycorp's branch network, the sixth-largest in the United States, began this month and will be expanded gradually. The plan, however, does not include significant branch closings or employee layoffs.
"We believe there is a future for branches," Mr. Jones said. "By trying to structure them around a segment's needs, we create destinations where people can come and get value out of their relationship with the bank."
Robert Rossettie, a partner at Ernst & Young in New York, noted that market segmentation is an important shift in delivery of banking services.
"The biggest challenge is being able to take the next step beyond information management to what is now called knowledge management," Mr. Rossettie said.
"This means moving from the mundane demographic information to an intellectual customer information file that shows spending patterns, account histories, errors, problems, product delivery preferences," he said. The ability of each bank to make this shift will determine its profitability.
An important tool for Keycorp in realizing its competitive goals is a strongly sales-oriented platform automation system from Olivetti called Mosaic OA.
The system will also drive the bank's automated call center, which customers will eventually be able to use for account-to-account transfers and bill paying. A teller module is also under consideration.
Fraser Thomas, senior vice president and division manager of community banking systems at Key Services, Keycorp's service and technology arm, said the Olivetti system fits perfectly with the bank's segmentation strategy.
"We can target information by branch, district, or by state," he said, adding that this is a major improvement on current systems.
"We currently have a number of sales systems throughout the retail network that cannot do it all," he said. "One may only open an account for a deposit product, while another sells only credit products."
Mosaic integrates the selling process by tying together all Keycorp products, thus supporting a much more seamless sales effort.
A pilot of the program starts in September at single branches in Columbus, Ohio, and Syracuse, N.Y. It will be rolled out to another 200 branches by yearend 1996.
The system's colorful screens and ease of use also make it attractive for the interactive, self-service customer kiosks Keycorp plans to install in some branches, company officials said.
"Customers can ask the system questions such as, 'What if I took out a car loan for three years versus five years?'," Mr. Jones said. "They can also do rudimentary financial planning on their own, though the system will direct them to the platform for a more comprehensive sales approach."
In Mr. Jones' estimation, self-service kiosks enhance sales employees rather than replacing them.
"We believe this will allow us to sell more products to the consumer that meet their needs rather than our needs," he said.
Getting customers to use the kiosks is not expected to be much of a problem. Mr. Jones noted that, in light of the popularity of off-the-shelf consumer software such as Intuit's Quicken, consumers are already accustomed to taking charge of their budgeting and financial planning through computers.
"We see a trend where more consumers are taking a self approach to their financial needs," he added. "People are more knowledgeable about what those needs are, and they like to do the exploratory work on their own."
In addition to technological improvements, Keycorp's retail banking strategy includes big changes in the way branches look. A design firm has been hired to plot physical accommodations for the bank's targeted service and technological delivery.
A branch that serves mostly customers from the mature market may have a section in which books and videocassettes are available on financial planning topics.
For an office that caters largely to small-business customers, the design may include access to conference facilities and ATMs that accept merchant deposits and issue receipts 24 hours a day.
An 'emerging affluent' branch will focus more on flashy automation - like interactive kiosks - and reserved areas for comprehensive financial planning consultations.
Keycorp is also gearing up for a major training program in what Mr. Jones calls "the most critical issue we face in this reconfiguration."
The training will include a comprehensive certification program held in and outside of the bank to qualify employees as specialists in one of the four major customer segments.
Training will take about 18 months, and certified employees must commit themselves to recurrent instruction as the need arises. Certified employees will also get greater compensation.
By emphasizing an advisory role for branch employees that goes beyond promoting bank products, Keycorp is addressing its customers' hunger for information. A Keycorp specialist trained to serve the mature market, for example, will have a broad knowledge of retirement issues.
"Specialists in the mature market will expand their knowledge so they understand issues such as Social Security, Medicare, and Medicaid," Mr. Jones said. "In the small-business area, this means helping customers with more than just loans."
Small-business owners are a key growth area for Keycorp, which already counts 422,000 entrepreneurs in its customer base.
Keycorp's segmentation strategy is also being adopted bankwide for its three other major market groups: private banking, national consumer finance, and corporate banking. The overhaul is part of the company's First Choice 2000 plan, which aims to increase Keycorp's prominence among the country's top 10 financial institutions.
Keycorp rose to its current position of No. 10 after the merger between Albany, N.Y.-based Keycorp and Cleveland-based Society Corp.
Details of the First Choice plan have been in development since a task force was formed last year comprised of 80 Keycorp managers from various business groups. To pay for the plan, Keycorp is working to reduce annual expenses by 5% - a total of $100 million - by the end of 1996.
Ms. Monahan is a freelance writer based in New York.
