Investment in the branch networks of the world is running at very high levels. Any reluctance to invest caused by the storm of hyperbole about the death of the branch has disappeared and the results of this renewed interest in bricks-and-mortar banking have been remarkable.
In Europe, despite the impact made by first generation internet banking, there have been few closures of major networks other than through consolidation. BBVA recently announced plans to open 550 new branches in Spain over the next three years. Bank Austria Creditanstalt is planning 200 new branches by 2007 to bolster its existing representation in central and eastern Europe, where it already has 850 outlets. In the US, the continuing development of branch networks has confounded the pundits and unforeseen growth has been sustained into the 21st century. The banks of the Asia-Pacific region, meanwhile, have been among the industry leaders in the re-engineering of branch formats and processes.
Critical factors
Three key factors will play a critical role in determining the overall customer experience in the new generation of branches that is now emerging. These are sales and service, retail format and self-service strategy. These factors will also play a large part in determining whether the next generation of investment produces the required return.
For many years, the banking community has been obsessed with the practice of referring to bank branches as ‘shops’. This was part of a significant shift towards a harder sales environment, which put a strong emphasis on the targeting of selected products. The trend to emulate retailers has frequently been fuelled by the hype of external observers.
A new trend develops
However, in a slowly developing trend since the early 1990s, an increasing number of banks have begun to explore the idea that they should only sell to meet real client needs. Comerica Bank of the US was among the pioneers of this strategy in the 1990s, which exceeded its expectations in sales and customer appreciation.
This movement – based on true relationship building – is now well established in the US, with a developing following in Australia. In the UK, Barclays made a low-profile announcement in autumn 2004, heralding the introduction of a similar approach to selling in its branches. Wherever it is applied with professionalism and commitment, the outcome of moving to a needs-based sales strategy is almost universally beneficial, and often delivers a paradigm shift in results and customer appreciation.
There is now a spectrum of sales strategy options. At one end is a harder sales policy of moving products off the ‘shelves’ of bankers ‘shops’. This may extend as far as encouraging after-sales service to be conducted through non-branch channels. In this scenario, the customer is typically given a list of telephone numbers that they must ring for any further dialogue. Unless they return to the branch, they may have no further contact with it. At the other end of the strategy spectrum is an emerging approach of developing a dialogue with customers – from which sales ultimately flow – rather than just pedalling products.
Each of these sales strategies also has implications for the respective roles of the bank’s delivery channels and how they work together. The common factor in both scenarios is for the highest level of shared customer information providing:
- a view of all aspects of a customer’s relationship, including their creditworthiness;
- a record of the ongoing dialogue with the customer, whichever channel they have used; and
- either reactive or proactive identification of the next sales opportunity.
This is customer relationship management (CRM) in action. A face-to-face dialogue with the customer has the potential to be the best-quality bank-customer contact in terms of CRM. For this, the competences of branch staff are critical. However, the basic elements of courtesy, empathy and a commitment to resolve issues on behalf of a customer are often still lacking. Much remains to be done to improve interpersonal competences, besides selling skills, in order to harvest sales from a dialogue. The leadership and coaching capabilities of branch managers are also critical to success. Failure to reach these new standards, and establish a positive difference in the mind of the customers, will do much to further corrode relationships and sustain the vulnerability of the banks to their competitors.
The retail format
Many of the new branch development programmes have been guided by creative design, with varying levels of input from qualitative consumer research. What would appear to be beyond dispute is that any new concept branch project must comply with the following fundamental principles:
- The design must meet the expectations of the market segment at which it is targeted, and avoid costly over-engineering;
- It must be fit for purpose through its facilities and functionality;
- It must be both flexible and affordable if it is to be financially and operationally viable and capable of being rolled out across the network.
Failure to comply with these principles will almost certainly result in a sub-optimal performance of the bank’s investment. Often associated with branch design is the exhortation for bankers to be more like retailers. Let the buyer beware! In many areas, there are fundamental and critical differences between the businesses of bankers and retailers. For example, the gestation period of a bank product purchasing decision – and the motivation behind it – is typically longer and different from that of the weekly food shop.
Retail store staff’s interpersonal and professional skills fall far short of the depth of those that are required at a bank branch. And even the successful operators of in-store branches (whether retailers or bankers) now recognise that complex financial services are not the type of product that consumers will buy ‘in the aisles’.
Retail lessons
However, the thoughtful and innovative banker will always recognise value in looking across sector boundaries and learning from others. Although retailing will not offer a panacea, it will offer some valuable lessons. The following points may be worthy of consideration:
- Retailers value footfall. They see customer visits as sales opportunities and not operational costs, and they work to increase the time that customers spend in store.
- The best retailers work hard to ensure the consistency of the appearance and operation of their stores.
- Retailers maintain a willingness to explore new ideas for increasing the effectiveness of their outlets, in particular in the promotional area.
- Branch sales effectiveness is subject to executive involvement at the highest level. Many retail chief executives take time out of their working week to visit stores and see them at first hand.
Although many observers and suppliers continue to pressurise banks to be more like retailers, few case studies in sustained success exist. There are valuable lessons to be learned but being more like a retailer is not mission critical.
Self-service strategy
The ability to move a large proportion of transactions onto self service offers the opportunity to improve radically the layout, ambience and flexibility of bank branches. It also offers a more profitable role for branch staff. The German Sparkassen – now mature retail banks in their own right – are leading Europe with a broad range of self-service functionality and sophisticated lobbies. The role of the cashier has now been minimised. And the nature of the branch and the customer experience has changed significantly – for the better.
There is now a strong imperative for all banks to move self service to the centre of their channel strategy. No bank should be without an active strategic self-service project, based on a comprehensive knowledge of all the latest hardware and software options – and a vision of how they can be applied for advantage. Examples of developments that should now be revisited include:
- automating the teller processes;
- the development of the kiosk;
- self-service marketing;
- the impact of prepaid cards.
Fundamental requirements, such as network quality and capacity, should also be factored in. Other issues to include are the better management of the relationship between customers, staff and machines, and the creation of an environment that allows access for all service users.
This strategic view, with its range of viable sub-projects – for example, counter automation and elimination – should be updated regularly to ensure it takes account of new concepts.
It should also be borne in mind that the distinction between the ATM, the kiosk or PC, and hand-held devices is becoming increasingly blurred. Today, any self-service strategy should embrace the broader family of customer-activated terminals.
David Cavell is a consultant specialising in branch and self-service strategies.
THE IDEAL BRANCH
As the customer approaches the ideal branch, they become progressively more aware of the bank’s brand values from the messages and images that are being projected. It is clear what product, services and facilities the branch is offering.
On display
The window is fitted with well-positioned, outward-facing electronic merchandising and signage that still allows a clear view into an inviting interior. Some merchandising is window-based; other equipment is located inside the branch but is also visible from outside.
The interior will meet the customer’s expectations by balancing their wish to feel that it means business with an overall ambience that is comfortable, secure and friendly.
Internal issues
If the customer wishes to have a private conversation, then a booth is readily available. The overall appearance of the unit is smart: free of the usual array of wires that trail across desks and floors; clean and tidy; and there are no desk-top published notices taped to the walls (or fixed to machines that are out of order).
There is an area where the customer can sit comfortably and use a web pad to review the state of their accounts. They could also stand or sit at one of the kiosks in the lobby. A video booth allows the customer the opportunity to call in on their way home from work – even if the main branch is closed – and contact a mortgage advisor for a ‘face-to-face’ conversation, without an appointment.
It is possible to conduct most types of customer transaction in the self-service area, through online automated tellers and service terminals.
Staff skills
The staff that operate from the meeter-greeter desk are friendly and helpful, without being pushy. And they are encouraging and supportive in helping the customer get accustomed to the array of equipment in the lobby. They want customers to use the equipment and they want to maintain a friendly, ongoing dialogue with them on each occasion they visit the branch.
The staff are good at listening as well as at asking questions. They are always interested in the customer and what they are doing next. If a withdrawal or credit cannot be dealt with by the self-service equipment, a member of staff enters a secure till booth and deals with the transaction, before returning to the floor.
All the staff make eye contact and smile, they use customers’ names whenever possible, they are eager to help and are genuinely interested in customers problems – not just their next sale. If a customer complains, the staff seem concerned that something has upset them – even if the bank turns out to be in the right.
Often, the customer visits a branch event in the evening hosted by a member of staff, where they enjoy complimentary refreshments and view an interactive video presentation by an expert on a specialist topic.
Efficiency at work
Customer footfall is monitored from the back office to ensure that adequate staff are always available in the public space.
The branch has been given extra full-time equivalents to cover predetermined workloads routed from the call centre. These staff provide a useful float to cover peak customer footfall in the branch, lunchtimes and absences.
All branch facilities are monitored and managed from a remote location, which deals with all aspects of utilities and security. Self-service equipment is monitored and maintained on an outsourced basis.
