The growth buzzword at many banks today is "relationship." Strategies call for a multiproduct relationship with all customers - from the consumer to a Fortune 500 corporation.

Not all customers, however, share this vision of one-stop stopping. The advantages to a bank of fostering such a relationship are apparent. They include reduced account turnover, increased product sales, lower sales costs per unit, and higher per-account profitability.

In reality, the number of attractive multiproduct relationships that banks should pursue is limited. Many of a bank's customers do not share the enthusiasm for developing a relationship - at least with only one financial institution.

These customers decide that it is in their best interest to avoid an all-encompassing, one-stop-shopping relationship, preferring instead to select specialist vendors as their financial services requirements evolve. This customer selects the "best-in-class" according to credit, investment, transaction processing, or insurance needs.

After brutally and honestly evaluating the likelihood of increasing relationships, many banks will find that relationship-based strategies either have a limited probability of success or must be highly focused on specific customer segments.

A bank may be well positioned to pursue a particular consumer segment, on the basis of geographic concentration or a particular product strength, for example. If so, bank management needs to target that segment, but only after assessing the economic value of those customer groups. Are they value creators? Do they generate marginal returns?

Furthermore, bank management must examine its infrastructure and culture to address issues that may have historically kept the institution from building multiproduct relationships. These factors can include organizational boundaries and the absence of meaningful incentive compensation.

Banks can also look outside their industry, to advertising, for an excellent example of an emerging customer trend in buying services.

Boston Market, formerly known as Boston Chicken, has recently announced that it is breaking up its advertising business into component parts.

Rather than going to a single agency for all its needs, the company will hire one agency for creative work, another for media planning, and various firms for regional media buying, making use of their local knowledge and strength.

In total, the company may eventually have a half-dozen advertising agencies, using the "a la carte" approach to build what they term the "right architecture for future growth."

Boston Market is in essence creating a "virtual advertising agency." While this strategy would create a substantial coordination and management issue for any company following this route, it also suggests that service providers, such as banks, need to reinvent their business processes.

The degree of coordination within a service company, such as an ad agency or a bank, may, in fact, be overestimated. In an article in The Wall Street Journal describing Boston Market's break with advertising tradition, the head of marketing expressed the view that there was little value to the company to work with one service provider: "Most media people and most creative people at agencies are on different floors and don't talk."

If they were honest, many bankers would make the same assessment of internal communication and marketing coordination within their industry.

Sharing this opinion, many companies and individuals are also independently building the "right architecture" for their financial services needs. It is an architecture that narrowly defines the role of commercial banks. More sophisticated, and potentially more lucrative, bank customers appear to be splitting up their purchasing decisions quite naturally unless a clear benefit exists for consolidation.

The current pursuit of the high-net-worth market provides several examples of this phenomenon. While virtually every bank is in pursuit of the high-end consumer, only the top nonbank players have been successful in capturing a high share of an individual's business. Superb personal service, product customization, and a truly consultative relationship appear to be keys to success in managing this customer segment.

Critical to success is the salesperson's ability to cut through the organization strata to get things done. Speed and flexibility in internal processes and a sense of ownership by the salesperson, that is personal self-interest, is required.

One case illustrates that many banks cannot succeed in relationship building the way they are currently structured. A highly successful entrepreneur I know works with a financial consultant at a major brokerage firm. My friend does not use this person to pick stocks. Instead, he describes him as "my private banker" and is quick to recount instances where the financial consultant has shown his worth.

In one case, the salesman arranged a 102% mortgage on a home; in another instance, he was on the phone with my friend at 11 p.m. advising him on how to handle a transaction. In return this financial consultant is well compensated because of the revenue he generates for his firm.

Up to this point few banks have shown an ability to provide anywhere near this same level of service, even to their high-priority target groups.

Here are two examples.

In one case, a client executive moves to a new town. His company has an affinity-like relationship with a major regional bank that provides private banking services to senior employees. Despite this introduction, in my client's words, the private banker "screwed up" a bridge loan, and in general, performs like an undermotivated "salaried employee" without the level of product knowledge required.

In another instance a small business maintaining balances in the low six figures receives a solicitation from its depository bank, suggesting a meeting to discuss 401(k) and other investment plans and promising a follow-up phone call. The proprietor's name, however, is grossly misspelled in the pitch letter, and no follow-up call is ever received.

Most banks still have fundamental issues to address before successfully duplicating the relationship-building capabilities of a USAA in insurance, a Merrill Lynch or Goldman Sachs in investment services, or a Chemical Bank in its middle-market area.

These companies and others succeed because of product quality, responsiveness to customer needs, salesperson commitment and continual training. These attributes are critical preconditions for successful relationship building.

John McCoy of Banc One told me that he believes the banking industry has lost a generation of investment customers because of their lack of competitiveness with investment specialists. Mr. McCoy says he doubts that banks will ever recapture much of that market.

Bank managers risk losing still another generation of attractive customers unless they immediately respond to what customers are saying when they take their business elsewhere - personnel needs to be upgraded; products must be at least competitive with others' offerings; customers cannot be taken for granted.

Senior management should also consider whether its pursuit of relationships is "fool's gold." Is the hope for customer relationships masking reality and denying fundamental strategic problems? Where that suspicion arises, banks should undertake an immediate evaluation of distribution methods and product offerings.

An assessment of relationships from the customer's rather than the bank's perspective is essential if management is to determine the approach that is most likely to lead to success.

As with any marriage, you need the enthusiasm of both parties to create a successful relationship. One of banking's major challenges over the next few years is establishing the infrastructure and culture required to make profitable relationships the norm rather than the exception.

Mr. Wendel is president of Financial Institutions Consulting, a New York firm specializing in business process reinvention and growth strategies.

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