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It was just coincidence that Nevada's and California's credit unions were meeting across town at the same time as the Bank Administration Institute's Retail Delivery Show here, yet many of the strategies being extolled sounded mighty credit union-like.

Seeking new profit opportunities, banks are being urged by vendors and speakers alike to drastically improve customer service levels as a way of retaining and building profitability. David Daberko, CEO of National City Corp., said his bank is fresh off spending $500 million during the past four years to improve levels of customer service, with the bulk of those funds going to technology and an expanded branch presence.

National City had long been built upon commercial services, but it now says it sees ripe opportunity in the retail market.

"The overall trend is to fewer banks and more branches as the industry consolidates and invests to stay in business, said Daberko. "We all recognize what needs to be done. To truly be an effective competitor requires an enormous investment that doesn't always have immediate results. It can mean a sacrifice of earnings."

NCB is spreading its $500-million investment across several initiatives, including $265 million into technologies, $200 million into new branches (with half of that in Chicago), $35 million into incremental marketing and a brand campaign, and $40 million in incentive programs, especially for branch managers.

Those types of expenditures exceed the asset sizes of many credit unions, which may instead want to consider spreading their own budgets over the five investment areas identified by Daberko: service quality, technology, products, promotions, and people.

"Without great service, bank products are mostly commodities and the only real growth lever is price," he said.

The one comment made by Daberko that might sound most familiar to credit unions was his observation that "doing what's right for our customers" has become part of the "DNA of our organization."

In a tour of his own bank's branches in 2000 Daberko said he found revenue was bad and there were an "unacceptable level of errors." "Our products were not competitive and we did not have enough people to service customers," he said.

A third-party survey had found in 2000 that 44% of customers rated the bank a nine or 10 on a scale of 10 for service. By 2003, that figure had risen to 57%, and Daberko expects it to be higher this year. What those percentages translate into, he said, is an additional 400,000 people who are now pleased with the service.

In 2000 the bank also set out to reduce its error rate by 50%. With that accomplished, it has set a goal of reducing errors by another 50% in the more than 300 quality standards the bank measures.

"It is our view that you must consistently improve service quality or you will be left behind," said Daberko. "For us service is becoming a key differentiator."

National City Bank's latest effort is being called Customer Connections, a three-year initiative to speed transactions at its 1,200 branches and three call centers. Heavily dependent upon automation, NCB said it is now saving $8 million a year as a result of Customer Connections through reduced attrition and new sales.

NCB has also made aggressive moves in an area many credit unions have wrestled with: removing unproductive people and replacing them with people comfortable with sales. It has placed a special emphasis on branch managers, and has replaced more than 300 (Daberko said it did so with dignity, recognizing that many managers were hired for one set of skills, but the bank now wants another).

"We have transformed the branch manager position. It had been a minor position, but it is now a different position in our system," he said. "Our incentive plan is not capped, and some branch managers earn up to six figures. They are now screened to ensure they have the right aptitude."

Specifically, that aptitude has to do with generating profits at the branch. Branch managers are "stack-racked" against each other according to profits, and the bottom 10% "are counseled to consider other career choices," said Daberko. He added that turnover among branch managers is now under 10%.

Despite all the talk about service to the customer, credit unions won't be overly surprised to hear Daberko add that "ultimately, it's all about the revenue growth."

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