When a Branch Closes, Treat Customers with Kid Gloves

With bank consolidation now in full swing, the delicate task of retaining customers after closing their local branches has become a major challenge for bankers.

There is no particular magic to keeping customers in the fold, according to bankers and consultants. Success lies in careful attention to detail, supplemented by copious communication.

It is beyond argument that branches will be closed. Unlike the 1980s, when commercial bank branches grew 25% to 51,225, the trend today is toward shrinkage. Analysts predict that BankAmerica Corp. will shutter 400 branches in its merger with Security Pacific Corp. Hundreds of branches have already been closed as healthy financial institutions sop up the remains of defunct thrifts.

"We used to fear and tremble at the thought of closing a branch," said Jack Whittle, chairman of the Chicago consulting firm Whittle & Hanks. "Nowadays it is becoming fairly routine."

So, too, are the techniques for breaking the news.

Accentuate the Positive

Once the decision is made to close a branch, a full-court press must be made to inform employees and the local community about details of the consolidation. Be honest, experts advise, but emphasize the positive.

"For heaven's sake, don't use the word |close,'" said George R. Frerichs, a Chicago consultant. "Say |relocate' or |consolidate.'"

Consultants stress that employees should be a bank's first concern, since disgruntled workers can do more to chase customers away than any other factor.

"If employees are not on the team, they will kill you," said Mr. Whittle.

As soon as plans are clear, a branch manager should hold a comprehensive briefing for employees. Workers also should be given question and answer sheets that anticipates their own questions as well as those from customers. Many banks have found that telephone hot lines for employees work well, consultants said.

To cover these costs as well as for those related to customer marketing, it is important to have a budget to cover the details of closing, advised Kathleen C. Holmes of Furash & Co., a Washington-based bank consulting firm.

Make Information Easily Available

When dealing with customers, spare little expense in providing details about the branch closing and alternatives. Post information throughout the branch that is closing, including stickers on the automated teller machines and night drop boxes.

Send customers several letters in addition to statement stuffers. Make telephone calls to the branch's most important customers. Hot lines, too, have proved effective, consultants said. And Maps that list other branches also are recommended.

"A major, major focus during the transition period is a high level of customer service," said Deborah K. Adams, vice president at Shawmut National Corp. in Boston. "Don't give the customer a reason to go elsewhere."

Another focus should be small-business owners. "They should get special attention, because they feel the most insecure in many ways," said Ms. Holmes. Again, a party is in order, with senior executives and regional managers attending to cement the relationship. Business owners might appreciate a gift, but "they are more interested in making sure their business is well cared for," said Ms. Holmes.

An emphasis should also be put on the new branch. Customers, for example, should be invited to an open house. It might sound hokey to serve coffee and cookies, consultants said, but it works. "Try to get them into the new branch and make them feel at home," said Mr. Frerichs.

Some consultants suggest small gifts to entice customers into the new branch. First Alabama closed some branches after an acquisition around Christmas and gave out tree ornaments in its new branch. Hiring a photographer to take free family pictures at the new branch has also proved popular.

Other consultants felt such gifts were not effective, and instead recommended product promotions. Eric Morse, the corporate marketing director of Fleet/Norstar Financial Group Inc., suggested incentives such as the waiving of a service fee or an "introductory" pricing offer on a new product.

Minimize Pricing Changes

With all the hoopla, however, immediate changes should be minimized. If new branch customers find that pricing and balance requirements on their accounts differ from the usual, they will be put "in a sampling mode" and try other banks, said Mr. Frerichs, the Chicago consultant.

The local press should be courted, too, since many customers will learn that their branch is closing in the newspapers.

If a branch closing is not properly handled, consultants warm, customers will be lost. They are not only wary of change, they are also being courted by competitors.

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