In any relationship, the first three months are crucial. Mess something up early and there is little chance of long-term success. That’s just as true for a newly dating couple as it is for another partnership: a bank and its new customer.
That is what makes the first 90 days of a small-business checking account so important for a financial institution. It’s in those first 90 days that it can draw its biggest gains, particularly if the bank employs so-called “onboarding” strategies. Getting onboarding right requires understanding how it differs from cross sell: the personal touch. The first 90 days is more than simple cross sell; it’s about making a connection with the client to gain trust in order to influence the consumer down the road. Increased revenue from cross sell is the ultimate goal, of course, but before that can happen the customer must get “onboard” with the bank.
The strategy has become popular in the last 12 to 18 months, explains William McCracken, chief executive of Atlanta-based consultant Synergistics Research. “Onboarding wasn’t used very much before, but what has brought up the popularity of it has been the reality of starting to look at some of the data that show a clear, clear correlation between buying more products close to the time that they open the account.”
What does the data show? More than half of small-business owners in a recent Synergistics survey said they had opened at least one additional account in their first three months with their new bank. Of those who opened an additional account, 60 percent did so in response to information provided by a bank representative. “It’s like there is this golden time frame that occurs very soon after the account is opened and they have to capitalize on it,” he says. “After a period of time, three to six months, it becomes a lot more difficult to cross-sell products.”
Contact, and customizing that contact with the owner, is key, says Frank Noyes, vp at San Antonio-based consultant Harte-Hanks, Inc. The company’s numbers indicate a 30 percent deposit attrition in the first year at banks, but with successful onboarding that number can be cut by between 12 percent and 21 percent. Some 73 percent of cross sell occurs in the first 60 days of a bank’s new relationship and new products can boost the average client’s portfolio of assets by between eight percent and 10 percent.
Onboarding has a direct correlation to cross sell. In a customer’s first 90 days at a bank, McCracken says bank officials should be actively making the client aware of personal checking accounts, savings or money-market accounts, business credit cards and/or lines of credit. Noyes notes that only 25 percent of new bank customers are asked about cross-sell opportunities in the first three months.
One of the best at onboarding, McCracken says, is Bank of America. The Charlotte, NC-based giant does an excellent job of maintaining customer contact, he says. Mark Hogan, president of the bank’s small-business banking unit, says representatives are always ready to assist, by phone, online or in person. “At every one of those touch points, we look to onboard them and deepen that relationship,” Hogan says. “It’s really about getting them to become a full-service customer, getting them onboarded very early in their life cycle with the bank. This is all part of onboarding and getting them into the right products so they can be successful.”
Onboarding doesn’t end once a second or third account is sold, however. “Post-sales contact should be considered essential to the sales process,” McCracken says. “Out of those [small-business owners] that had been contacted, almost nine in 10 say that this was important to their overall perception of the institution.”
While the first three months can destroy a relationship, it is also when the incoming partner is most flexible to change and adoption. However, proper onboarding can make the difference between a beautiful marriage — or a messy divorce.
