A war is being waged for the customer's wallet, and many banks are not prepared for it. Following up on the first two parts of this series (published on Oct. 12 and Sept. 28), we turn now to the competencies necessary to fight this increasingly complex battle for customer allegiance.

Throughout history, given any type of weaponry, the advantage in warfare has gone to the side with the best combination of strategy, technology, and committed skill. In our business, the advantage lies with those who select the wisest strategies and appropriate technologies, and invest the necessary competence to make them pay.

The new environment requires market managers who understand the strategy, have access to the technology, and are skilled in the three R's - retargeting, redeploying, and remixing - that are essential tools for market competence.

These competencies are not new, of course. Successful retailers practice them in order to profitably serve disparate markets. Super community banks, which retain the relationship qualities of community banks even while expanding into new markets, also embrace them.

But bankers generally have few opportunities to differentiate. Most have similar strategies, technology, and products, and face the same regulatory, cost, and competitive issues. Market competence - whoever is first and best gets the chance to build and sustain an advantage - makes the real difference.

Successful targeting involves availability and understanding of data that give market managers indispensable information about the definition of their markets, significant segments, current penetration of those segments, advantages and disadvantages versus the competition, etc.

Most organizations espouse the principle of targeting markets and customers that offer the best potential, but few have local teams that actually make it happen. Sometimes it's a matter of not having the right data, but more often it stems from not having the process, tools, practices, and skills to win in the new environment.

Without frontline market competence, the pitfalls are predictable. For example, the market gets defined by branch traffic rather than the potential population surrounding the branch that, for one reason or another, doesn't come into the branch.

Also, typically, market managers in all trade areas are expected to deliver the same percentage increases year after year, regardless of the potential of the respective markets. Growth markets, flat markets, and shrinking markets all get the same treatment, which can result in punishment for success and rewards for failure.

Retargeting enables market-competent managers to avoid these pitfalls and prepare to deploy resources accordingly.

On the issue of redeployment, Warren Buffett has said that the single most important thing a manager does is allocate capital. When we allocate 60% to 80% of our most precious resource - the time and expertise of our people - to markets that represent less than 20% of the profit potential, we have a sizable redeployment opportunity.

Customer contact people need to understand their target markets every bit as well as central marketing does. We can give them sales training and help them set ambitious new goals, but that doesn't help them redeploy their time.

Much of the redeployment that can be done centrally has already been accomplished through downsizing, restructuring, and reengineering. The next level of redeployment can be accomplished only in the market by line managers and staff.

Using their local target information, they need to redeploy with two questions in mind: Should we spend more time and effort on this particular customer segment? And if so, what efforts will bring value to the customers and profit to us?

There are pitfalls in asking our market teams to redeploy before we help them become market competent:

*The front line might assume that all affluent customers represent high potential, worthy of the ultimate in sales and service. But certain affluent customer groups are predisposed against banks, heavily sought by competitors, and resistant to switching.

*The front line might also suppose that spending more time with the affluent customers will generate greater loyalty and conversion rates. This assumption holds less and less for dual-income professionals, who value their own time, not the time they spend with us.

*A branch worker might dissuade a potential user of voice-response telephone services with, "Oh, you don't need to use the system. Just call me and I'll take care of you." A kind gesture, but in fact it goes against the strategy of selling the very technology that is supposed to reduce delivery costs while redirecting sales energies.

If the organization is not market competent, it runs the risk of suboptimizing customer potential among different lines of business - corporate, middle market, trust, cash management, investments. We tend to keep the profit dynamics of each segregated from the others, leaving both the customer and our profit opportunity ill-served. If unmanaged, these "disconnects" will only worsen as we get more involved in alternative delivery channels.

While carefully husbanding their financial capital, bankers have tended to be casual in giving away human capital to customers. No standards, no process, no skill training - just an "all you can eat" strategy relying on the best judgment at the moment of a frontline person serving whoever shows up in the lobby. But retargeting according to profit potential restores our ability to allocate human capital as well as we allocate financial capital.

Remixing is the ultimate objective of retargeting and redeploying. It changes the mix of customers so that a defined trade area or vertical market makes a better profit contribution. ActionSystems' analyses show that an adjustment in mix of as little as 5% to 10% can change profitability by 15% to 30% in less than 12 months.

Remixing can and should take any of a number of forms, such as retaining "A" customers, moving A's into an A-plus category, moving B's to A's, or C's to B's. The key is to know exactly who belongs in each target segment, what they value, and how to profitably sell to them and provide service.

Profitable customers can surface in any market segment - not just among the affluent. Conversely, a bank may have such a small share of a high- value customer's wallet as to give the appearance of low value. Or we may have a customer who appears to be of low value simply because we are serving the relationship through high-cost delivery systems, when a low- cost option would be highly profitable.

Such possibilities arise over and over again, and remixing means looking for them and taking advantage of their opportunities.

Next: Top executives' role in market competence

Mr. Hall is chief executive of ActionSystems Inc., a Dallas-based customer and market management company. Ms. Bird is chief operating officer of Roosevelt Financial Group, St. Louis.

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