Lending is the heart and soul of middle-market commercial banking, but deposits and fee-based services have become a huge priority in the post-bubble economy. Can commercial bankers change gears?
It's a pressing question at a time when bankers are trying to rebuild core deposit funds and rebalance customer relationships. Gone is the growth formula where loan origination is followed by the cross-sale of transactional banking services.
Treasury management, which includes commercial deposit and cash management services, was the most-cited sales priority in a recent survey by our company on middle-market customer acquisition. Among 16 executives from 10 leading commercial banks, all of them cited "noncredit products" as one of their top priorities in customer acquisition, versus 80% for commercial credit.
The mandate is clear, yet commercial bankers face a variety of challenges in expanding customer outreach beyond lending. Performance issues include:
- Boosting relationship manager expertise in treasury management.
- Supplementing the individual initiative of relationship managers with specialty sales and marketing support.
- Easing administrative burdens on calling officers to free up more time for consultative selling of more complex products.
- Boosting the consultative outreach by leveraging "inbound channels," such as internal bank and client referrals.
One question is whether credit-centric relationship managers are prepared to promote the fuller suite of commercial banking products and services. Training and incentives often are centered on credit origination, and there's a steepening learning curve for increasingly complex treasury management offerings.One solution is to enhance the role and capacity of treasury management officers. However, at most banks (70% in our survey), specialty sales officers have to wait in the wings while relationship managers establish the initial customer relationship.
Other options for supplementing the sales efforts of relationship managers are underutilized, as well. Only 20% of the banks we surveyed employ business development officers. Similarly, three-fourths of respondents said they are not using sales leads generated by third-party service or data providers.
Such hesitancy reflects the challenge of balancing top-down change with the need to preserve individual banker initiative. In our survey, 44% of respondents reported no standardization of the customer acquisition process among relationship managers. Sixty percent reported no geographic standardization, and 84% reported no standardization across product groups.
These figures by no means constitute a call for sweeping standardization of a process which, in essence, relies heavily on personal rapport and individual initiative for its very success. Yet centralized processes would help in several areas, including targeting and lead generation, segment-tailored offers and systematic pricing.
We also see opportunities to ease the administrative burden on relationship managers. Certain types of cold-call prospecting and lead prioritization, for example, can be handled by dedicated teams, some even made up of junior staff members operating within call centers. In particular, treasury management officers can play a more active role in initiating prospect contacts and structuring more complete solutions that enhance customer acquisition.
Nurturing a relationship-driven sales culture will be critical as bankers seek to promote a broader product set. The survey highlighted the untapped potential of internal sales channels, such as referrals from other lines of business, along with client referrals and inquiries. Internal bank referrals accounted for only 14% of new commercial clients among survey respondents. And 40% said their bank did not have incentivized customer referral programs, such as those that reward private bankers in the wealth management division for channeling opportunities to the commercial bank.
Clearly, the decline of the commercial loan creates a worrisome outlook for sales generation among banking officers in the field. How can the industry respond? We see two major opportunities.
The first is to refocus the strategy by using a more integrated approach across relationship management, treasury management sales and dedicated new business development officers. Their combined efforts should be supported by marketing analytics that identify, qualify and prioritize prospects in a consistent manner across the bank's area of operations.
The second opportunity is to improve sales productivity. Steps include cutting unneeded tasks and paperwork, delegating simpler and more repetitive activities and automating steps where practical. These actions free up more time for banking officers to master the treasury management product set, cultivate internal sales channels and expand their role as trusted advisers.
It will take a new kind of commercial banker to succeed in today's environment, but relationship managers cannot transform the client outreach on their own. Fortunately, there are specific supportive actions banks can take to speed the transition.