Study: Building Branches The Easy Part; Strategy Is Challenge
Most community banks see branch building as the next big step in their strategic development, but many admit to being unsure about how to reach customers once they open new doors, according to a survey conducted by Newground.
Newground said the poll of 125 community presidents, directors, and CEOs shows a clear majority (63%) looking to expand to new branch locations. However, when asked about the most effective way to communicate to their customers, 30% of bankers said they were not sure.
"The current frenzy of branch-building is running ahead of some banks' strategies for customer acquisition and retention," said Charlene Stern, chief experience officer of NewGround, a design/build and branding firm for financial institutions. "You cannot just believe if you 'build it, they will come.' The smart bankers are redefining their retail delivery strategy before a shovel even hits the ground."
'Mega Banks' Not the Problem
Though much has been made of the intimidating expansion plans of national banks, 55% of community bankers see other local banks as their biggest competitors, according to Newground.
"Mega banks" ranked second (18%), followed by credit unions (16%), and non-banks (9%).
"Retail banking is a block-to-block street fight right now," said Stern. "I find it fascinating that most community bankers (77%) feel their brand image is reflective of their community, yet this image appears to yield no competitive advantage since the community bank across the street is doing the same communication. So community banks are tempted to 'out-community' the competition. Instead of engaging in this kind of 'me too' branding battle, some independent banks are building a retail message that connects to customers of today instead of the bank across the street."
Indeed, in written responses to the NewGround survey, one banker noted his worry about planning retail strategies in reaction to the competition. When asked his biggest concern regarding future marketing trends, he said, "That the big banks will once again change their focus and we will be forced to follow, i.e. branching is now in vogue."
Branch as Brand
Fully 74% of respondents said the main point of contact between the bank and its customers is the teller, and another 18% cited the in-branch greeter. Phone/online services (6%) barely registered, and ATMs finished a decisive last place (0%).
However, when asked to describe their branches, only 11% of bankers believed they were innovative and engaging, and another 10% acknowledged the need to redefine their branches.
The largest group of bankers (45%) said their branches had a "traditional layout/feel" that "works well." More than one in five (22%) said their branches were remodeled and updated with today's finishes. Another 12% of bankers described their branch designs as "all over the map."
"Bankers feel strongly that the branch is their key to customer acquisition and retention, but many are surprisingly traditional about their retail strategy," said Stern. "Branch expansion is often difficult to align with brand expansion, and new spaces require brand and cultural consistency that reaches from the color of the walls to the first words out of the teller's mouth. Your interior is designed to energize employees as well as customers. Bankers are ahead of the game if they can align their branch-building initiatives with their brand and culture."