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In our recent survey of bank CEOs, 72% expressed optimism and agreed with the statement:
However, the vast majority of consumer and small business checking accounts are still opened in branches, and even self-service oriented retail customers express a preference for choosing a bank with nearby branches. The level of challenge is borne out by:
I. Our multi-year analysis of close/ consolidations. The survivor branches in two-thirds of banks have lost share of retail deposits
II. Our analysis of marketing campaign results that shows the capture ratio of stimulated prospects drops off rather dramatically with distance from the closest branch.
To beat the odds and deliver on the goal of maintaining share with fewer physical facilities, retail bank managers need to:
1. Optimize marketing spend around surviving branches: Reduced geographic coverage requires that each remaining branch in the network achieve greater share. It is critical to have analytics to target the highest profit potential consumer and small business prospects
2. Expand the customer acquisition/retention radius of surviving branches: Key here is capitalizing on the expanding population of consumer and business prospects that could retain or open accounts at a less geographically-convenient branch. This requires (i) superior ability to target consumers and small businesses that are more willing to trade off close proximity for other benefits, (ii) understanding which products can be more successfully marketed to prospects that are further from a branch, and (iii) a competitive value proposition, including, for example, online features, bundled account/balance-based pricing, and service quality aspects
3. Excel at retaining and cross-selling: This is critical for the highest revenue existing customers that have lost access to what may have been a convenient branch. Analytics that provide insights on which consumers and small businesses are most at risk are required
4. Track customer portfolio dynamics, including prospect acquisition, return on marketing investment, cross-sale effectiveness, and customer attrition: This is essential for the 80/20 most profitable customers and prospects that are further from surviving branches. Frequent performance scorecards will enable the bank to optimize pruning decisions and direct marketing spend.
Beating the odds on maintaining or even expanding market share is the goal while expenses are being reduced. Alternatively, if pruning results in losing market share...
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