CLEVELAND - In the months after a megamerger created Keycorp, bankers here set out to win more of the small business banking market armed with a simple idea: ask customers what they want.
The nation's 10th-largest banking company is packaging products and services with guidance from a unique seven-member Small Business Advisory Board created in April after the merger with Society Corp. So far, the effort is winning support as Keycorp tries to distinguish itself from competitors.
"I don't think this is one of those cycles other banks have gone through," said Robert Wigton, an advisory board member and owner of Lou's Car Care Center in Mentor, Ohio. "I think Keycorp has discovered the potential small businesses present to them."
The bank has been trying to turn that potential into profits. With an estimated 1.2 million small businesses in its 11-state market stretching from Maine to Alaska, the bank embarked on a national small business campaign in April. The campaign netted nearly $387 million in new loans, pushing the bank above $1 billion in business loans of $100,000 or less. (The bank has another $700 million on its books from loans between $100,000 and $1,000.)
Perhaps as important, Keycorp also attracted $44.7 million in new- deposit relationships. With rich spreads on the 1,700 new small business accounts, the company is working to keep the new customers.
Whether that happens could depend on the feedback Keycorp bankers get from its advisory board. Sometimes, the input is not what the bank expects to hear.
"Sometimes we're absolutely sure we're right on track with a new product or service," said Sandy Maltby, the Keycorp senior vice president who heads up the bank's small business-services division. "They just give us a strong dose of reality."
For example, the bank intended to roll out a small business club, complete with discounts on everything from office products to air travel. By making owners of these companies members, the bank hoped to make them feel the $60 billion-asset bank cared about their needs.
The reaction from the advisory board was decidedly cool. "I wasn't too hip on that idea," said Mr. Wigton. "We wanted to see more value-added things."
The bank listened. Keycorp has killed plans to form strategic alliances with companies to offer discounts on products that may compete with other small businesses. In its place, the bank plans to roll out a new club in the first quarter of 1995 which will focus on networking and education seminars that members of the advisory panel said they preferred over discounts.
The board has paid dividends on new products as well. Its input helped the bank design a credit card that not only included a revolving line of credit, but included other features that helped make bookkeeping easier for the company.
Ms. Maltby said board members suggested the revolving feature. While many of these companies would likely use the card for travel and entertainment purposes, others wanted this feature for flexibility in those months where they could not pay the full amount.
The card will also allow cardholders to access their credit line by writing a check. A statement for each card will help the company follow who spent what, when, and where.
Beyond products, Keycorp is beginning to focus on how to make its branches more small business friendly. Ms. Maltby said the bank was trying to determine what delivery methods customers liked. Some may like going to the branch, while others may prefer doing their business over the phone or the personal computer.
From this information, the bank is looking to expand its product base to serve each customer segment. For one, the bank is considering creating an area in each branch designated specifically for small businesses. These financial service centers would be staffed by employees certified as small business experts.
"We're trying to determine where our customers would prefer to do their business, not where we prefer they do their business," said Ms. Maltby.
By helping the bank understand the small business need for convenience and simplicity, Ms. Maltby said the board has helped the bank meet those needs.
"Their needs are pretty basic - loans, deposits, consultation on retirement," she said. "But if you can deliver products and services that fill these needs efficiently, then they're satisfied."
Small businesses were important to both banks before the merger, but the customers were not always satisfied. For instance, the former Society National Bank estimated it had nearly 20% of the segment in its markets before the merger. However, research showed that small business owners were less satisfied than the bank's other customers.
Bob Jones, a senior vice president and head of retail at Keycorp, said the problem was an internal focus after a series of mergers by Society in the 1980s.
"One of the best ways to negate the perception of many people of us being an out-of-touch big bank was through small business," Mr. Jones said.
One outsider says the bank's efforts are getting results. Mike Greer, president of Greer Growth Systems, a consultancy based in Cleveland, worked with small businesses with Society Corp. prior to the merger.
"Within the last year-and-a-half, Keycorp has really started to marshal their resources behind this effort like few banks have done," he said. "Whether they're able to make the effort successful across the entire franchise remains a question."
Indeed, the advisory panel has been used only in the Great Lakes states. Keycorp is considering a plan to replicate the boards in its other regions.
But making the effort fit in each of the 11 states in Keycorp's market would be a test. Small businesses in Utah and Wyoming often have little in common with small companies in Ohio, Michigan, and New York. However, Mr. Greer said the bank is trying to blend the best from its community-banking markets with the conveniences available in its urban markets.
Ms. Maltby said the objective was mass customization. This involves the difficult task of taking products designed for the mass market and delivering them on a one-on-one basis.
While this may seem a formidable task, Ms. Maltby said her biggest challenge was changing the bank's focus away from lending and to the profitability of the total relationship. She said the alternative could be to risk losing the small business customer to a brokerage company or other nonbank.
"We've learned our lessons on the consumer side," Ms. Maltby said. "I don't think we need to relearn them on the small business side."