Streamline the sales cycle: enable your staff

RMA Journal, The, June, 2005 by John A. O'Connor

This article discusses the best approach for managing the sales cycle in business banking so that lenders maximize delivery channel usage and determine the best methods for utilizing relationship managers.

Over the years, the way customers view and use financial institutions has evolved from that of a traditional total relationship to a desegregated approach. At one time, banks were viewed as one-stop shopping places where customers could go to fulfill all of their financial needs, from lending and cash management to investments.

Today, nonbank financial institutions are successfully diverting lending and deposit opportunities away from banks. Some of these nonbanks have grown in size and scope to now rival many banks. They provide a variety of financial products with diverse account features, functionality, and pricing. Business owners can now pick and choose their suppliers for the products and services they need to operate and run their businesses. Increasingly, customers view some segments of their credit and deposit needs as commodities, using numerous providers rather than one single entity.

Because these organizations are able to focus on very specific, specialized services--and can typically deliver these services to the customer in a very cost-effective, expeditious fashion--many banks have lost their competitive edge due to a lack of innovation on the product and delivery side. Much of this is attributable to a discrepancy between how banks view themselves and how they are viewed by customers.

Too many banks are organized around products, not customers--or they embrace a one-size-fits-all approach. Banks understand that profitability is enhanced through the cross-selling of products to existing customers, which naturally enables them to acquire more business and improve retention, but they may not understand that "one size fits all" is not the way to achieve that.

Furthermore, banks must have a more comprehensive view of customers from a risk management standpoint. By fully understanding and monitoring customer behavior, banks will be able to improve the management of deposit and credit funds.

Banks do have opportunities to take back market share through aggregation and cross-selling, but this requires an adjusted set of behaviors and a new approach to sales cycle management.

Delivery Channels

There are a number of channels banking institutions can use to address a small business customer, including:

* Business banking officers (BBOs)--used for outside calling; for many organizations, they are also the relationship managers.

* Branches--these include branch managers and platform personnel and are major channels for most institutions.

* Retail business banking officers (RBBOs)--branch-based small business experts who have enabled banking institutions to achieve a greater market share by being in close contact with small business customers who heavily use the branch network.

* Direct mail--often used to invite customers within a specific geographical region to apply for a loan, but more sophisticated lenders have learned how to use this channel to acquire customers through the use of pre-approved applications for some small business customer segments with good portfolio results from a credit standpoint.

* Telebanking--when used with incoming calls, this strategy is reactive. Some institutions also use this channel for outgoing calls, which requires a more proactive strategy for use in three distinct ways: 1) appointment setting; 2) follow-up from mailers soliciting invitations to apply; and 3) successful management of client segments through the use of a "virtual BBO."

* Business development officers (BDOs)--focus on new business prospects through outside calling and handing off the customer early in the product delivery process.

* Internet--often used to quickly distribute information about products and services. However, few institutions source new customer credit through this channel; rather, they use it to deepen and retain existing customers.

While some channels were developed with specific customers in mind, many institutions have leveraged what other business units have already built into new delivery opportunities. However, all of these delivery channels must target specific audiences; the micro business owner, for example, might respond to telebanking or direct mail, while a customer in need of highly specialized services might respond better to BBOs or RBBOs. Thus, maximum channel usage will be obtained only through targeted delivery approaches that take the customer's specific business needs and levels of sophistication into account.

Delivery Approaches

The vast majority of small business lenders organize the delivery of products using one of the following approaches:

* Mass distribution.

* Mass customization.

* Advisory.

As banking institutions begin to plan how they will manage the sales cycle, it is important to understand the type of customer best suited for each approach.

With mass distribution, products and product packages are designed for low cost and ease of delivery. This approach is best suited for customer accounts acquired through delivery strategies such as bulk advertising, direct mail, telemarketing, and branch walk-in traffic. Typically, sales generated from this approach are reactive as opposed to proactive; mass distribution is ideal for customers who do not require specialized services, such as micro and small businesses with annual revenues of $0-3 million.