In part 1 of this article, published last week, we discussed how to improve platform sales performance through better information and more focused incentives. In this concluding part, we examine how the platform can draw strength from other parts of the bank in its drive to become more relevant to the customer.
Despite careful value-proposition design, virtually no one is wise enough - or brave enough - to claim that a test-tube idea will be a "killer app" in the marketplace. One can hypothesize the details of a product and service offering. But to field a winning campaign, the seller must submit its proposition to a sample customer subsegment, using what it learns from this interaction to refine the elements of its offering before rolling it out to larger customer populations with characteristics similar to those of the test subsegment.
The ability to go through this testing process (engage in pilots) repeatedly and rapidly is the hallmark of a company which understands that (1) prosperity depends on customer focus and (2) focusing on the customer is impossible without continuous two-way communication.
Experience shows that being committed to an ongoing testing process is more important than conducting successful initial tests. The process, once ingrained in the organization, offers the best method of continually refining the combination of target, offer, and sales medium that will maximize future profitable sales and customer net present values.
A bank committed to testing its value propositions appropriately will discover that while the branch platform is necessary to successful selling, it is by no means sufficient. Otherwise put, selling is far too important a job to be left to sales personnel. What is required (and has been implemented at a few institutions) are multidisciplinary task forces that are composed of analytically driven people from both staff and line functions such as marketing, finance, and systems, as well as regional and local sales management.
The job of these task forces is to: (1) develop value propositions for discrete customer groupings, (2) permit discussion by concerned bank functions of the ways these propositions can be implemented, and (3) monitor that implementation.
This team approach for the first time puts marketing research insights under the scrutiny of most of the affected bank, which, by becoming involved in their refinement, can better understand and use them. The approach suggests that, by addressing problems cross-functionally rather than sequentially passing proposed solutions from one function to another, one can achieve two advantages: quality and speed. And indeed, where tried, the task force method has greatly spurred sales, both by helping generate sounder campaigns and by reducing the gestation period between the conception and launching of these campaigns.
The experience of many banks also argues for supplementing the efforts of branch sales personnel with those of representatives of other channels. That's because the speed with which value-proposition tests must be conducted requires almost instantaneous communication with the customer, i.e., by telephone. Some banks that run parallel sales promotions from the branch and by telephone find that the latter enable them to discover whether a given promotion is working within hours of its being launched. They use this information to revise and make more productive a branch campaign that otherwise could not have been revised for some protracted period.
Based on data cited in part 1 of this article, many banks might consider cutting back on the platform (as banks that are replacing traditional branches with mini-installations - food-store outlets - already have). In fact, some might opt for firing as many as two-thirds of the current platform staff.
But after arming this staff with the appropriate information, the right incentives, and the results of an ongoing testing program that makes their selling efforts more productive, a few lead banks will probably see results that could not only justify retention of existing staff levels but might even argue for their expansion. The laggard banks will face even more pressure to implement Draconian platform-force reductions.
To be sure, the nature of the platform job and the type of personnel needed must change, as the relative importance of simple service and fulfillment decreases while that of selling increases. On balance, however, it is not impossible that the sales success of a revivified platform could justify an enlargement in its numbers.
Consider the possible economics of staff enlargement for one of these lead banks. If the average bank branch added three new full-time-equivalent platform people, the cost would conservatively exceed $100,000 a year. Given that the current performance typically results in the sale of only 10 liability and credit products per platform person per week, only three of which are profitable, such an enlargement would not seem justified.
But suppose that, thanks to better information leading to improved customer and product targeting, the proportion of profitable sales rose to half. And suppose further that the average loss on each unprofitable sale came to $150 per year, while the average gain on each profitable sale amounted to $600. Then, instead of generating profits roughly equal to his/her annual salary, each platform person would generate profits equal to more than three times that salary. In these circumstances, staff expansion would seem mandatory.
(However, if technologies such as two-way video communications take off, it may be possible to achieve the required sales increases by concentrating sales personnel in a central location rather than adding them to the platform staff in each branch.)
It is important to note that although, assuming feasible changes, staff expansion seems justified for some banks, it is not justified for all. Unlike the rising tide that lifts all ships, the market for most financial products is not obtrusively buoyant. The growth of some products - for example, plastic ones - will remain strong, but on average, the rate of expansion of all credit and liability products will not greatly exceed the rate of inflation.
Therefore, the name of the game, at least in most retail businesses, is taking share away from other market participants. The advantage in this game is with the nimble, those quick to understand the preconditions for changing the platform from an underemployed servicing force into the proverbially lean, mean selling machine. The future of the platform and the branch hinges on this commitment.
Mr. McMahon is managing vice president with First Manhattan Consulting Group in New York.
