The people whose 1993-94 study made "delivery system" part of the retail banking vocabulary are trying to light another fire under their industry constituents.

First Manhattan Consulting Group has released an analysis of recent research showing that major banks are building entire strategies around alternative distribution and customer-knowledge systems, which would have been unheard of a few years ago.

But many of those strategies are not fully formed or executed, leaving the banks playing catch-up with the nonbank competitors that increasingly worry them.

Meanwhile, the Bank Administration Institute, which published the landmark First Manhattan document, is preparing two publications designed to take that knowledge to a new level of sophistication. The earlier report woke up many bankers to the reality that most consumer transactions were being conducted outside of branches, mainly via telephone or automated teller machine.

The skew, then 57%-43% at the major retail banks surveyed, is approaching 70%-30%, according to an update last year by MasterCard International using the same methodology.

BAI's 1996 volumes, "Selling Self-Service" and "Marketing Excellence: The Retail Banking Imperative," will draw on First Manhattan data to drive home the need for reliable and practical information on customers, their habits and preferences, and profitability as it relates to their banking behavior.

"The key to revenue growth is to develop superior marketing skills," said Rockwell F. Clancy 2d, executive vice president at Chicago-based BAI.

"We are moving from a time when you could throw new ideas up against a wall and see if they stick, to where you really have to know what your target audience wants and then put it together in a way that they will want to buy it," he said in previewing the findings at a recent Unisys Corp. user group conference.

He defined marketing as "the effective use and conveyance" of the wealth of information piling up in banks' data bases.

What BAI and First Manhattan call "marketing-driven growth" - new revenues from strategic acquisitions and other incremental sales - could account for 30% of a successful bank's stock price.

The two organizations want to help banks overcome the lag in data base effectiveness.

First Manhattan president James M. McCormick said few banks have all three keys to customer understanding: transaction behavior, profitability, and segmentation techniques including demographics.

"Certainly less than 10 of the top 50 banks have this capability in its entirety," Mr. McCormick said in a recent interview. It is essential to exploding the many myths First Manhattan and others are uncovering in their data mining.

"We are learning that information develops rapidly but competence comes slowly," said Robert Hall, president of Action Systems in Dallas, another consulting firm helping bankers come to grips with what their numbers show.

In one case, a First Manhattan client "found that of the new accounts it had cross-sold in 1994, 75% were unprofitable," said Mr. Clancy of BAI.

While the New York firm remains as insistent as ever on the need to recast the distribution of banking services in favor of less costly delivery systems, it also has concluded that 60% of a typical regional bank's retail profits come from 40% of deposit accounts - held by people who are still branch-dependent.

"You can't move so fast that you dislocate the traditionalists," Mr. McCormick said.

"Will these people be comfortable using branches in food stores?" he asked. "I don't know. It needs further exploration. You probably have to evolve that customer base (more toward self-service) but at a pace that makes sense for them."

Bankers who are too quick to judge or change can run afoul of a "law of unintended consequences," Mr. McCormick said. This explains why several California banks have begun, and others are considering, charging for "excessive" calls to telephone service centers.

Banks typically will offer these and other nonbranch services free, only to find that "the people who most readily take to them are among the most unprofitable in the bank," Mr. McCormick said. He calls them "optimizers" who are taking free advantage of a cash management mechanism.

"The most transaction-intensive 20% of the people can account for 60% to 70% of the channel usage, but they are low in balances," he said.

Meanwhile, typically about 10% of customers are entirely on self-service and are "reasonably profitable," Mr. McCormick added. "But among the many things we still don't know is how fast this group is growing.

"Are they attracted to a better deal? Are they moving to avoid penalties or take advantage of incentives?"

First Chicago NBD Corp., whose overhaul of retail pricing last year, including a charge for certain "excessive" teller visits, was influenced by First Manhattan, "has data to suggest the rate of change is significant" in the self-service cadre, Mr. McCormick said.

Aside from a doubling of ATM deposits and a 20% decline in live-teller deposits within three months of its new pricing regime, First Chicago has built a "direct bank" - customers mainly using phones and ATMs - with more than $400 million of deposits.

"That would rank as our eighth-largest branch," said James M. Grant, senior vice president of First National Bank of Chicago.

He acknowledged "some abuse" by the so-called optimizers, but the bank is not yet charging for phone services. Mr. Grant said automated voice response units can solve much of that problem.

"With new phone technology that is coming along, the system will know who you are as soon as you call in, and if you are a preferred customer, it might route you immediately to a live representative," he said.

Among senior executives from 38 commercial banks First Manhattan surveyed, all but five had, or were at least considering implementing, a direct bank. Two-thirds of them would do it as "complementary to branches"; the rest, as a stand-alone service.

Also, 84% considered telephone centers "obviously critical" - meaning they would be required by more than 40% of profitable customers. The remaining 16% of bankers said call centers were "important"; none had a "wait and see" or less urgent posture.

That contrasted with banking via personal computer software (13% critical, 71% important), smart cards (11%, 37%), and Internet access (3%, 45%). Another 26% deemed Internet access "over-hyped," compared to smart cards at only 5% and PC banking at 3%.

Among other survey responses, predominantly from senior retail executives at banks exceeding $5 billion of assets:

*Heads of retail banking rated distribution their No. 1 issue; heads of corporate planning or marketing ranked it in the top five.

*A majority - 54% - said they would reduce branches by 10% to 25%, net of merger consolidations, between now and 1998. Only 9% predicted a 25% or greater branch reduction by 1998, but 47% said they would close that many by 2000.

*Two banking companies - Wells Fargo and Huntington Bancshares - ranked with three nonbanks as "most progressive" in financial services distribution. The nonbanks are Charles Schwab & Co., Fidelity Investments, and United Services Automobile Association.

*Three-fourths viewed MasterCard, Visa, and the Smart Card Forum as "useful alliances." But only 15% to 25% said the same about Microsoft Corp., Intuit Inc., AT&T Corp., television and cable companies, and on-line services. Microsoft was rated an "obvious" competitor by 50% and a potential competitor by 35%.

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