Small airline, community banks face similar challenges

Northwestern Financial Review, Sep 15, 2001 by Bengtson, Tom

Q: How do you describe good service?

Good service is delivering what you promise. Good service means touching the customer in terms of their needs, and satisfying those needs.

As a business strategy does it make sense to try to accommodate a variety of needs, or does it make more sense to identify one or two needs and really focus on that?

If your staff is properly trained, you should be able to meet a variety of customer needs. It is important to pick people to work for you who have the sensitivity and flexibility to deal with difficult situations.

Are there some guiding principles you can offer smaller companies like community banks, in terms of competing with the really big guys like Wells Fargo and U.S. Bank?

There's actually a strength and uniqueness in being small. Part of it certainly is being close to the customer. Community banks offer that human element that you don't necessarily get at the big bank. I think you can benefit from that because there are an awful lot of consumers out there who feel they have been left to ATMs and left to the bigness of major corporations that don't have the sensitivity to care.

Smaller institutions usually don't have the volume of business or sizeable customer base to offer the lower prices that come with volume. How can a small company make up for that?

Small companies make up for it by offering a higher quality of service. The key question then is "are people willing to pay for quality?" I think to some degree they are, although they are not willing to pay significantly more. There is a resistance factor. Typical customers are willing to pay only so much. So from a smaller institution point of view, the key is to be really tight on your expenses so you can handle thin margins, and still be sensitive to customer service. I think there also is a frustration out there about the bigness and coldness of major corporations. This is a leverage point that smaller institutions can count on to get closer to their customers.

You have been able to leverage your relationship with regulators to help your business. Any advice for bankers on that score? Sometimes there is an adversarial relationship there.

The absolute opposite needs to be true. Relationships with regulators are very important. And the time to develop a relationship with them is when you don't need them, not when you do. I go to Washington periodically to call on the appropriate people, not to ask them for anything, but just to develop relationships. I believe you have to be proactive with the regulatory institutions, and not treat them as adversaries. Let everyone else treat them as adversaries. You be that point of difference. Two elements are key. The first element is to make their job easier. Believe me, it works. Provide all the information, do their work for them. The second element is to develop those relationships and a trust factor, so that when you do screw up - everybody does from time to time - you can pick up the phone, be pro-active and say, "we failed in this, here's what we are doing about it," before you ever hear from them.

For small companies, how important is growth? If you pursue growth, do you risk becoming like one of the big guys?

Measured growth is necessary because as you grow a certain amount of your fixed costs don't grow. Consider the airline business. You add another airplane, most of it is variable costs, not fixed costs such as salaries of the administrative support people, or the rent on the building. The more units you put out, the more airline seats you put out in the marketplace, the more leverage you have against the same set of fixed costs. If we have 20 airplanes, we are making a greater contribution to fixed costs than if we only have 15 airplanes. I am sure the same principle applies for a small bank.

In general, do you find that technology is worth the investment? Does it make it easier for smaller companies to compete against larger companies?

Yes, there's no question about it. I think technology has helped level the playing field. The Internet has broken a lot of barriers and permitted us all to be much more efficient in terms of communicating with our employees, our customers, our vendors, and keeping our head count down. Now we are able to tightly control expenses - which we always have to do - because we have the technology tools to get the same job accomplished with less overhead.

David A. Banmiller is president and chief operating officer of Sun Country Airlines.