Making the Most of Critical Opportunities for Sales in the Bank Branch

Every connection is a new opportunity™


MAKING THE MOST OF

BRANCH SALES

OPPORTUNITIES

Bill Simmons, Director-Client Services, Pitney Bowes Software

Don Quintana, Sales Performance Analyst, Hancock Bank

Framing the problem

Common Myths

Measuring Opportunity

Opportunity Based Goals and Allocation

The Hancock Bank Experience


Making the Most of Branch Sales Opportunities

A New Era In Retail Banking

Changes in Product Demand

Increased Competition from Non-Banks

Declining Branch Traffic

Declining Product Profitability

Increasing Regulation

3

The Challenge


What Drives Results?


Conventional wisdom says:

The Best Branches Sell Everything Well

Branch Sales Staff Can Influence Average Account Balances

Competition Limits Sales Potential Equally

Household Growth is the Most Important Factor

Common Branch Sales Myths


Myth 1: The Best Are Good At Selling Everything

• Does growing deposits

translate to all

products?

• Certain products are

negatively correlated

• Branches simply do not

grow interest and non-

interest checking at the

same time



• Branches also do not

appear to grow savings

and money market in

the same year

• Substitute products

present challenges for

branches

• Focus on product level

opportunity



TRUTH – opportunity varies by branch & product.

• The result of appropriate goal setting is to end up with

branches that have a variety of net growth targets across

the product suite.


Myth 2: Branch Staff Can Influence Avg. Balance

We often see branches goaled to units and dollars, sometimes inconsistently…

• Branch staff has little

influence over average

balances

• Branch average

balances tend to mirror

the market

• Goals should be logical

and attainable


Myth 2: Branch Staff Can Influence Avg. Balance

TRUTH – there is very little the branch staff can do to

influence average balances.

• Average balances are useful to capture for budgeting, but

the expected balances should be consistent with the unit

goals.


Myth 3: Competition Limits Sales For All Products

Competition limits sales universally across all products…

• Competition is one of the most important variables to capture in

understanding branch performance and sales opportunity

• Far more important when measuring opportunity for core deposit

products, than for term deposits or loan products

• Importance of measuring opportunity at a product level

• Network factors can influence all branches, and this is more prominent in

some products


Myth 3: Competition Limits Sales For All Products

TRUTH – competition should not be an excuse.

• Some banks form a competitive advantage in certain

products or customers.

• These brand values can have an important impact on the

effect of competition.


Myth 4: Household Growth = Greatest Importance

This myth shows up well beyond just sales goals…

• HH growth is accessible

and understandable

• But, it does not tell the

complete story of

opportunity

• Density is far more

important

• Churns generates sales

Ten branches

12,000 households

1,200 households / branch

5% annual household growth

600 new households

60 new households per branch

How much should this branch sell?

Safely assume 12% churn

1,440 available households

144 per branch

144 > 60


Myth 4: Household Growth = Greatest Importance

TRUTH – the great majority of new household acquisitions

(for a branch) are derived from churn in the market.

• This highlights the importance of pulling those households

away from other banks.

• Demographic household growth is minor in comparison.


Branch networks represent a significant investment Approximately $2MM in capital and annual operating costs of $500K

Despite the adoption of alternative channels, the majority of

sales still occur in the branch 95% of all transaction accounts are opened in the branch

70% of all relationships begin with the transaction account

How do you maximize the performance of this network? Ensure that you are capturing the appropriate share in your markets

Consistently measure performance and opportunity across the network

Effectively communicate market intelligence to your field staff

Diagnosing and Improving Performance

Understanding The Challenges


Measuring Branch Opportunity for Goal Setting


Goal Setting

Separates external factors from the performance of your people

Benchmarks branch sales performance against actual sales of other bank branches

Assessment of true attainable potential

Rational allocation of sales goals based on equal attainment risk

Align Marketing Resources with market opportunity

Better Sales Goals = Increased Sales


Methods of Goal Allocation

Uniform: “Everyone must grow by 5%.”

Easy to administer and communicate

Does not take into account branch challenges or opportunities

Historic: “Your goal is 5% more than actual sales last year.”

Easy to administer and communicate

Assumes last year’s performance was optimal and circumstances are unchanged

Total Wallet: “Your goal has been based on the demand in your market.”

Requires understanding of trade area and demand for financial products

Does not take into account competitive intensity

Market Opportunity: “You goal takes into account most of the challenges your branch faces but cannot control.”

Requires knowledge of demand and competitive intensity

Ensures each branch has equally difficult goal based on realistic performance


Based on actual customer data

Takes into account customer behavior & traffic patterns

May be irregularly shaped depending on customer data

For each branch, rank each block group according to the number of households assigned to that branch. After that select the block group with the largest household count. If multiple block groups have the same household count then select the block group with the highest deposit total. Repeat this process until 65% of the branch’s deposit total has been accumulated. If the site containing block group is not part of the trade area’s definition then it will be added in the final step.

Trade Areas Are a Key Building Block

for Branch Segmentation

Trade Area Methodology


Accessibility Type of Road

1-way vs. 2-way

Adequate Parking

• Incorporating Facility Characteristics Hours

Extended Drive-up Teller Window Hours

Daily Hours

Daily Opening Times

Daily Closing Times

Function # Less than 24hr ATMs in Lobby

# of Drive-up ATMs

# 24hr Drive-up ATMs

# of 24 Hour Access Walk-up ATMs

# of Less than 24 Hour Access Walkup ATM

Total # of Drive-up Lanes

# Open Area Management Desks

# Enclosed Management Offices

# Teller Desks

Local Environment Road Access to Branch

Branch on a Corner

Is Branch in an Office Building

Is Branch in a Mall

Is Branch in a Supermarket

Building BlocksFacility Characteristics

Visibility Branch Visibility from Road

Sign on Bank Building

Free-Standing Road Sign

Sign Visibility from Road

Other Age of Branch

Night Deposit



21

Trade Area:

Growth/Decline – Demographics

• Over 100 demographic variables by census block group

• One year demographic forecasts

Competition:

How Much – Who

• Branches in trade area: distance and strength

Facility:

Size - Hours - Services

• Over 30 facility variables collected for each branch

Branch Segmentation


Rose Creek 39.2% 1

Broadwater 39.1% 2

- - -

North Warren 19.5% 400

- - -

Key Street 12.0% 422

Bank Branch

Network

% of Business HH with

Savings Accts

Network Ranking

National Branch

Reference

% of Business HH with

Savings AcctsRe-Ranking

PBS Max 26.7% -

-

North Warren 19.5% 55th Pctile

PBS Avg 18.4%

- - -

- - -

PBS Min 10.2% -

Branch Segmentation

to to


Branch A

Branch CBranch B

Determined for each branch based on:

• Incidence Rate (HH cross-sell)

• HH Penetration (new HH acquisition)

• Average Balance

• Product Level Attrition

These benchmarks can be used to determine

untapped potential.

Performance Benchmarks

13.5%

32.1%

38.8%

17.6%

0.00%

10.00%

20.00%

30.00%

40.00%

MIN MEAN MAX BRANCH A

17.4%

24.7%

33.9%

22.0%

0.00%

10.00%

20.00%

30.00%

40.00%

MIN MEAN MAX BRANCH B

6.7%9.2%

12.5% 12.4%

0.00%

10.00%

20.00%

30.00%

40.00%

MIN MEAN MAX BRANCH C


Difficulty Depends on Starting Point

Lifetime Performance Scale

Equal Attainment Goals

Annual Goal Annual Goal

Min Max

Attainment Assessment

Branch CBranch A Branch B

Annual Goal


0

10

20

30

40

50

60

70

80

90

100

100/0 90/10 80/20 70/30 60/40 50/50 40/60 30/70 20/80 10/90 0/100

--80

--90

--10

--50

The optimal mix (lowest risk) is

40 units from A and 60 units from B

Path Of Least Resistance


--100

--20

--70

--60

--40

--30

Un

its

We

igh

ted

Ris

k

Branch A

Branch B

80units

50

units

20

units

100 Unit Odds of

Total Goal Success

0A + 100B 1 in 5

100A + 0B 1 in 8

50A + 50B 1 in 2 for A but 2 of 3 for B

40A + 60B 3 in 5 for A and B (best)

100units

70

units

40units

Branch A Branch B

1 in 5

1 in 2

4 in 5


Path Of Least Resistance

Two Approaches to Goal Setting:

Top-down approach

Allocate a given unit or balance goal from the top of the house

Efficient allocation – equal risk – across branches

Typically used when growth / goal numbers are predetermined

Bottom-up approach

By selecting a difficulty or risk level for all branches, guidance can be offered on achievable bank-level growth

60 - 70 Risk is a common stretch goal used by our clients

At this level you should expect 35 - 40% of your branches to meet or exceed their goal and 60 - 65% to fall short

Using Risk – Best Practices


Hancock Bank Holding Company

• Founded 1899

• Approximately 200 Retail Locations

• Over $19 Billion in Assets

The Value of Opportunity Based Goal Setting

Elevating PerformanceInforming Strategic

Decisions

• Coordinate Across Teams

• Flexibility

• Knowledge is Power

• Partnership in the Process

• Sanity Check Budgets

• Rationalize Locations

• Optimize Branch Gearing

• Prioritize Investments

Review

Myths Dispelled

Approaches to Goal Setting


Segment Branches

Creating Benchmarks

Risk Allocation

Hancock Bank’s Experience



Questions


Upcoming Events

Oct 28: The Five Best (& Uncommon) Practices for

Unlocking Value in Customer Data to Drive Growth and

Real Estate Strategy

Nov 4: Market Insights in the Hands of Business Users:

The Power of Market Intelligence Systems

http://www.pitneybowes.com/us/client-webinars.html

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