Could a bank's sales organization ever compete with relationship marketers such as Nordstrom and Procter & Gamble?
Thanks to product innovation, deregulation, information technology improvements, and turf wars between industry sectors, the financial services environment has become as competitive as retailing and consumer goods.
For banks to thrive in this new world, they must adopt marketing strategies-customer management, needs/behavior segmentation, product management, channel and category management, iterative test marketing, and segment economics-that have been proven in world-class sales organizations.
Banks have been slow to implement such strategies. In 1996, not a single bank made Sales and Marketing Management's list of the top 20 sales organizations. A year later, only Citicorp made the cut.
However, institutions are now recognizing that their profitability and market leadership will be driven by the effectiveness of their sales and marketing organizations. To that end, they are making it a priority to identify and anticipate customer needs, meet them in a timely, effective, high-quality manner, and monitor the results to refine their business models and value propositions going forward.
What does it take to create great sales organizations in the banking industry? Our experience has shown that the leading sales organizations are driven, first and foremost, by a sound strategy coupled with solid resource management skills, infrastructure design, corporate culture, and performance measurement systems.
Historically, banks have had a one-size-fits-all sales strategy based on their organizational strengths and objectives. This flies in the face of what successful marketers have done-they have developed multiple, differentiated value propositions based on real customer needs. For example, discount broker Charles Schwab succeeds with the proposition of "low cost with maximum choice." Merrill Lynch competes as a high-end broker by stressing the quality of its equity research and customer service.
Strong marketing organizations focus on their customer, channel, and product value propositions. They know who their customers are and develop service delivery options that reflect their preferences and feedback concerning what is value-added. The payoff can be enormous.
One bank that adopted a customer-driven strategy was able to increase deposits in a particular region by 55% in just two years. It focused on high-potential consumer segments and redesigned its sales channels, products, and marketing support to serve those segments. To reach the "convenience-oriented" segment, for example, it opened satellite offices in grocery stores and doubled its investment in ATMs. Many banks today need to sharpen their value propositions to achieve such meaningful sales growth.
However, even the best, most customer-focused strategy cannot be successfully implemented if the institution lacks the resource management skills, infrastructure design, corporate culture, and performance measurement systems necessary to sustain the strategy. Execution can be the most critical element of strategic implementation.
Banks should use as models the techniques world-class organizations have used to effectively manage their selling resources. These include adopting a consultative approach to sales and making a significant investment in recruiting and training people.
For example, Northwestern Mutual, a life insurer which has become an employer of choice in its field, sponsors contests to generate innovative recruiting ideas. Managers at Cisco Systems, a leading technology networking company with more than $8.5 billion in annual sales, scrapped and replaced the entire financial system within six months because they decided it was a strategic priority.
Without a solid sales-support infrastructure, a bank's sales organization is likely to spend too much time on activities better done elsewhere, such as administration and lead generation, and too little time on value-added activities, such as making sales calls. At world-class organizations, integrated marketing support-everything from image advertising and collateral, to sophisticated marketing data bases-helps make the sales staff more effective.
At Hewlett-Packard, an intranet gives reps access to sales reports, market analysis, testimonials, and pricing information. ADP has a sophisticated telemarketing organization that generates pre-qualified leads so sales professionals can concentrate on the top prospects.
Organizations like these leverage their sales forces with advanced technology and by delegating tasks to lower-cost personnel who do not directly generate revenue, freeing sales professionals to do what they do best: sell. Wachovia Corp. has instituted PRO-Profitable Relationship Optimization-which heavily leverages technology to support a comprehensive, continuous relationship-management process.
The best sales professionals view selling as a religion. To emulate this, banks need to develop strong sales cultures by creating and communicating a clear vision to which everyone in the organization is committed. The vision must be supported by a service culture that makes customer satisfaction part of everyone's job. Additionally, banks need to bring a sense of excitement and urgency to selling, and encourage and reward innovation.
A final element of successful strategic implementation is performance measurement and management. World-class organizations tie their management decisions closely to customer satisfaction and profitability numbers. They develop compensation programs that drive change and reinforce corporate objectives, nurture the desire to win, and ruthlessly manage results.
Such programs may not prepare banks to go head-to-head tomorrow with retail giants such as Nordstrom. But they will dramatically increase sales, the depth of customer relationships, and customer loyalty. That spells additional profits, important in today's competitive retail banking market.