In a gleaming suburban office, KeyCorp employee Katie Hanna sits ready to answer customers questions with a telephone headset over her ears and her hand on a computer mouse.

When small-business owners call to ask if a check cleared or to transfer money between accounts, she checks if they have overdraft protection. If they don't, Ms. Hanna offers it to them.

"Almost any call we get in, you can turn into a sales opportunity," said Ms. Hanna, who works in a specialized call answering center dedicated to the bank's small-business customers.

That's KeyCorp.'s small-business strategy-to use its branches, telephone centers and computers to sell more products to the bank's already profitable small-business customers.

So far, it's working. As of June 1996, KeyCorp was the second-largest bank lender to small business with $3.9 million outstanding in loans less than $1 million.

And in the first six months of this year, the bank's newly opened telephone answering center made more than $2.4 billion in loans and handled more than 117,000 calls.

It sounds simple but it's hard to do. KeyCorp.'s small-business division, directed by Sandra Maltby, has designed a sophisticated telephone answering center and computerized sales program and rolled out a lengthy array of small-business products.

But the hurdle for Ms. Maltby, KeyCorp's executive vice president for small-business services, is to explain the bank's sales strategy and promote all the products to the sales people who interact directly with the customers.

"In a large company that can develop the products ahead of the competition, the challenge is not figuring out what small-business owners want," Ms. Maltby said.

"The challenge is getting John Barth downstairs to absorb everything we dump on him," she said. "We need him to understand and digest everything and sell it to the customer."

Mr. Barth is the small-business relationship manager who works in the branch on the ground floor of Key's headquarters building in downtown Cleveland.

Equipped with a laptop computer, a car phone, and an exhaustive list of banking products, Mr. Barth is responsible for selling Key's services to business owners with sales between $750,000 and $1 million downtown and on the near east side.

Despite Key's training sessions, tests, and updates on new products, Mr. Barth said absorbing all the information and selling the new products is a high hurdle.

"I can recommend products that meet their needs," Mr. Barth said. "But there is no way with everything we have that I could know all the details to every question they are going to ask."

The products Mr. Barth sells include debit cards, payroll processing, sweep accounts, equipment leasing, and international letters of credit.

Instead of trying to do everything himself, Mr. Barth relies on a team of bankers from the trust, private banking, and small-business departments who meet regularly to discuss their customers' needs. Then, the bankers pass the customers on to their colleagues or make joint sales calls.

Mr. Barth also use his laptop computer, which tracks the customer's interaction with the bank, to call up a sales presentation that prompts him to ask specific questions about managing debt, short-term business goals, employee benefits, and retirement plans.

"I can use that as lead-in for a discussion to probe what they need," he said.

Although Mr. Barth spends his time speaking with customers face to face, he also must determine which customers are the most profitable ones and encourage the others to use cheaper methods to do their banking, such as the ATM machine, computer banking programs, or the telephone centers.

"We can't tell the customers, 'You have to use the ATM' or 'we don't make enough money on your account, go somewhere else,' " Ms. Maltby said.

"They will look at the fees and the services and they will make decisions in they own mind about what they want and how much they want to pay," she said.

But Lamont Mackley, president of Shore Bank & Trust Co., said Keycorp employees frequently refer customers to his community bank which focuses on real estate and small-business lending.

"We have a competitive but complementary relationship," Mr. Mackley said. "Sometimes a transaction is very reasonable, but it might not fit within the guidelines or product lines they have."

To steer customers toward cheaper banking methods, KeyCorp. charges fees for some transactions in the branches but no fees if those transactions are done over the telephone.

KeyCorp. also offers Intuit's Quickbooks computerized banking program for $8.95 for the basic version and $19.95 for the bill payment option.

The bank has conducted eight direct mail campaigns to promote its loan products and its equipment leasing and to inform profitable customers about new services. The mailings for pre-approved credit lines go only to the bank's existing customers because they are the most profitable customers.

The telephone answering center, where Ms. Hanna works, was designed both to reduce the amount of time entrepreneurs spend in the branches for routine tasks and sell more banking products.

To open the loan application form on her computer, Ms. Hanna, who earns commission based on her sales and service, clicks her mouse on a little yellow happy face.

"We're very happy when that happens," said James M. Vinson, vice president and manager of the Key Business Resource Center.

Each representative in the small-business resource center is expected to take one loan application each day. If they have an unproductive day, the supervisor gives them a mock medicine bottle that reads, "Take one loan application daily to ensure proper growth in your wallet."

Ms. Hanna's supervisor rewards her by ringing a cow bell when she takes a loan application and gives her miniature candy bars when she takes several applications in a day.

Although Ms. Maltby won't give statistics, she said branch visits have declined as use of the telephone center, called Key Business Resource Center, has increased.

In the end, the bank's challenge is providing good service and selling its products at a low cost, whether it's done through the branches, telephone, or computer.

"We know we've succeeded when our customers say we helped make their business better," Ms. Maltby said.

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