Despite the affordability and availability of online banking, not to mention all the publicity it gets, less than 20% of small-business customers actively use it. These companies tend to use the Web mainly for research, and though more of them are going online to purchase office supplies and equipment, only 8% say Internet sales represent more than 5% of their revenues.

Clearly this sector has not fully incorporated the Internet. How can banks take advantage of this?

A couple of more numbers can help us answer that. About two-thirds of small-business owners, chief executive officers, etc., say they feel comfortable using the Web to obtain account balances, but less than 20% say they would be comfortable applying for credit or buying/selling investments online.

This passiveness suggests that most small-business principals see no compelling reason to change their current branch- or phone-based method of conducting banking. To help them see why such a change would help, banks need to create targeted approaches and value propositions for key customer segments. Depending on the segment-specific product and channel preferences, each approach would incorporate a mix of online and offline channel use.

Ultimately, banks need to manage delivery-channel integration in a way that helps the small business add to its bottom line incrementally. This requires that the business' leaders set discrete and highly measurable goals so the bank can get a handle on near- and long-term success.

Banks should segment small-business customers into three types: early adopters, mass market, and branch junkies, and tailor their products and offers accordingly.

Early adopters (estimated to be 5% to 10% of most small-business bank portfolios) are those relatively few companies that operate at the leading edge of technology. Whether this involves wireless communications or smart cards, they are ready targets for the very latest inventions and enhancements. Banks wishing to get more business from them should focus on protecting and retaining established relationships, maximizing revenue growth in new areas, and cost reduction for current and future product sales.

The mass market (70% to 75% of most small-business bank portfolios) consists of those executives who are content with the way they manage their banking needs.

Branch junkies (20% to 25% of most small-business bank portfolios) include local retailers and are particularly branch-dependent.

A mass market-type may be intrigued by the Internet but wary of security threats. A good channel-integration tack for a bank working with such a business would be to focus on addressing these concerns and to help it expand its Web use a step at a time.

In working with the branch junkie, it's best to emphasize the benefit of lower delivery costs. Give them bottom-line incentives to help them kick the habit.

With the mass market, banks need to emphasize how Internet banking makes life easier. And the client's management needs to provide reinforcement in the form of training for its employees.

With early adopters, banks should focus on new product sales and account retention and should emphasize the ways the Internet can help a company manage itself better. Also, this segment should be recognized for its loyalty, value, and long-term importance.

Branch junkies may embrace the Internet if their actions result in both money and time-related savings.

However, it may not be easy to persuade branch-dependent retailers that they can use the Web to handle some of the things they have grown so accustomed to doing at walk-in branches. Successful small-business bankers will offer rewards for migration while, to the extent possible, "penalizing" excessive branch channel use.

In light of these value propositions, product and channel choices can be reevaluated and new segment priorities set. For example, while early adopters are valuable, the mass market surpasses them in size and potential impact on the bottom line.

To encourage delivery channel changes, branch personnel in particular need incentives to give priority to Internet banking services. These can include cash for each sale made, referral credits for signing up a customer to an Internet product, and payouts based on a customer's profitability. Management should highlight the benefits of the Internet and encourage active selling and training.

Most customers will continue to require more than one channel for product delivery and service. In fact, many Internet-only providers are modifying their service strategy to include branch access. While small businesses may prefer to perform some basic transactions online, most require traditional channels, and that gives banks an edge over Internet-only competitors.

Measuring incremental increases in customer value is crucial. Before they can do this, organizations must first assess current channel and segment performance and then establish benchmarks based on industry best practices and internal indices.

Metrics should be segment-specific and can include account retention, product sales, branch usage, and transaction cost reduction.

Editor's note: This is the final of four columns by Mr. Wendel on this topic.

Mr. Wendel is president and Ms. Williams is senior engagement manager at Financial Institutions Consulting in New York.

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