In the past 20 years, enormous change has occurred in the distribution of financial products and services.

Twenty years ago, the automated teller machine was just starting to appear; banks had to think long and hard before placing a unit that might cost $50,000.

Today, more than one ATM exists for every 750 households in the United States. Although cash access is still the predominant function, newer machines are doubling as miniservice centers dispensing account statements and stamps.

Retail banking was largely a brick-and-mortar traditional branch office system 20 years ago. Today, some banks and financial service providers have moved transactions to the customer's home or workplace in the form of telephone and PC banking. Many more have moved the branch office into high- traffic locations like supermarkets.

Twenty years ago, it might have taken two to four weeks to apply for and get approval on a mortgage loan. Today, the process can be completed in a day-and sometimes almost immediately, via an electronic link to a real estate broker's office.

Some banks pursued these changes to capture cost savings-off-load transactions from branches and costs would decline. In fact, that has not been the case. Consumers, when given the opportunity to use channels like ATMs and telephone banking, have taken advantage of the convenience they offer.

Many of those same consumers, however, have continued to use branches. The result: increased distribution costs and, unless branch personnel have been trained to sell, no offsetting revenue increases. In any business, this is a problem.

Although there are several good examples of how banks and financial service providers are addressing this dilemma, it might be instructive to look outside the banking industry for ideas on distribution.

Several sophisticated consumer product companies face distribution issues every day. Companies like Coke, Frito-Lay, and McDonald's have constructed selling and distribution systems that, by any measure, are very powerful elements of their business design and significant drivers of their success.

These companies have pursued an all-channel, high-availability distribution model, and have built enormous infrastructures to pull it off. Coke and McDonald's have even gone public with statements on their availability goals.

McDonald's goal is to be within a 10-minute drive of every person in the United States.

Without necessarily making such statements, many banks have pursued the same strategy-gain share by placing branches in sufficient density and making them more convenient than competitive alternatives.

But branch location alone is not enough. The experience of visiting one branch versus another can be very different, and can overshadow any kind of convenience or location advantage.

McDonald's is a good benchmark for banks when it comes to the broad- availability and strong-experience distribution model. In fact, the McDonald's experience is a major part of the company's strategy, and although it encompasses convenience of location, it also goes far beyond it.

The experience of going into a McDonald's is very different from that offered at a Burger King or Wendy's. For children, an important target segment, the McDonald's experience is substantially different by design. Investments in assets like playgrounds and characters like Ronald McDonald support this experience.

As a result, customers visit McDonald's every 10 days, versus every 30 for Burger King or Wendy's.

Although most banks are keenly aware of the customer experience in their branches, not many design and manage it actively as part of an integrated distribution strategy. Because of this, they miss a big opportunity to drive increased sales from current customers.

Broad availability is not the only distribution strategy being pursued by successful consumer product companies, however. Some intentionally focus distribution of their product on a much narrower universe.

Gatorade, for example, has built a very successful business-80% market share, despite competition from Coke and Pepsi sport drink products-by focusing on quenching active people's thirst.

In this strategic context, being everywhere and trying to serve all consumption occasions is not the right strategy. For Gatorade, the trick is to be in places where people are very active.

By following this strategy-building a distribution system around prime locations-Gatorade not only serves the immediate needs of its customers, but increases volume.

Unfortunately, many financial service providers have not learned from the Gatorades of the world, and continue to pursue a broad-availability strategy even when a narrower focus would yield better results.

One of the most significant lessons financial service providers can take from companies like McDonald's and Gatorade is the way they have created very different distribution systems, each providing the right type of availability for their customers.

Availability, as we define the term, includes three important elements.

Right location. Given the strategy, what are the prime locations for the brand?

Right way. How should we go to market in each of these locations to achieve the right penetration and presence? What should the customer experience look and feel like?

Right product. What product, package, and mix should be represented at each of these locations?

Many banks and financial service providers have defined availability more narrowly than this, and have relied too heavily on location and penetration as the keys to success. These banks often view the retail side in terms of adding or removing branches, rather than addressing the broader and more important question of availability.

Determining the right availability requires an approach that starts with the marketplace-your target customers and the opportunity they represent- and works its way back into the retail distribution system. Bank managements must ask:

What is our customer focus? Who are our targets? Where are they located?

What is the value proposition these customers find attractive? What are their preferences when it comes to financial service products, delivery options, and brands? What trade-offs do they make between providers?

Given the target customer groups and the preferences they demonstrate in product, delivery options, and brand, banks must ask:

What locations will deliver the highest potential volume?

What should these locations offer in the way of experience?

What product range should be offered, and how should it be merchandised?

These questions, as basic as they are, represent the foundation of any distribution system, whether it be for a beverage or a bank. Moving beyond the traditional retail focus of branches to the broader question of availability holds significant opportunity for financial service providers.

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