We continue to hear of the demise of the traditional branch, a relic of the past, a dinosaur.
In fact, the term "traditional branch" is now applied to large supermarket branches (400 square feet) as opposed to kiosks and smaller branches within the supermarket environment. The stand-alone brick and mortar branch is allegedly obsolete. Is it time to fold up the tent? It only depends whether you are well equipped to win the war for the customer relationship (not on how big you are) and whether you as a bank manager have the intestinal fortitude and the interest in waging that war.
The battle won't be easy. Customers increasingly are becoming multichannel users. They are the key to increasing bank profitability and they require traditional branches as anchors to their behavior. In addition, their wallets are being preyed upon by a wide range of vendors, mostly monoline companies that are interested in one specific product. The only way for community banks to compete effectively against the emergence of the "virtual bank" is to give customers value-added products and service while becoming more efficient.
Many customers are still willing to pay for services, but only if they perceive them to be of value. The challenge and for community banks nationwide is to generate tangible value in the customer's eyes through their unique delivery style and through product packaging, while accepting the opportunities associated with multiple delivery channels, available from a large number of possible vendors.
What are the key steps to developing a viable value proposition for the future?
Find out what your customers value. The easiest and least expensive way to find out is to ask your customers - they know best what is important to them. Remember that price is only one component of value, not the total equation.
Think creatively about building win-win-win situations for the customer, employee, and shareholder. Your job is not to take value from the shareholders and give it to the customer through lower-priced products. Customers and shareholders both should mutually benefit from your value proposition. For example, the automobile maker Lexus integrated the parts business into its activities because customers valued on-time service, which is highly dependent on parts availability. Customers benefited. So did Lexus, by profitably managing this part of its business.
Recognize that not all customers are alike. Different segments are motivated by different components. For example, a self-reliant person would positively respond to a self-directed IRA solicitation. However, people who'd like nothing better than for the bank to take care of their financial needs would be turned off by the product, and direct mailing to such people is a waste of resources.
Once you have identified the value determinants for your customers, execute. Many of us know the answers but somehow can't make them happen. If a five-minute decision is what it takes to make a consumer loan in your target market, then you should gear up to executing that requirement effectively. It is non-negotiable in the customer's mind.
Community banking is not obsolete; single-channel delivery is. Community banks still have the edge as the owners of the primary customer relationship. That edge will erode and dissipate if they do not take specific and deliberate steps to build value propositions for their customers and expand access and convenience.
P.S.: Value does not equal low price. Value is in eyes of the beholder and while price is a variable, it is not necessarily the key decision factor. Had it been so, everyone in America would own a Hyundai.
