In our last article in the branch optimization and ROI series, “What’s Your Fair Share?” we looked at fair share, a key measure for how much business in a market a bank could realistically expect. This defining metric informed the tiers of transformation across a bank’s branch network based on an expectation for realistic returns. Now, banks must assess what they have – through the Branch Health Index – and how to marry that branch network current state to its market potential. In this final installment, we will define the branch implementation range for maximum ROI based on a realistic picture of branch current conditions.
While potential ROI gets bank brands excited about their future prospects in the market, having an accurate assessment of current conditions is where they must start. A well-rounded process incorporates both physical branch surveys and qualitative analysis to accurately assess current conditions. Technology enabled measures incorporate tools like 3-D surveys that create a virtual walk-through. With powerful 3-D visuals, all stakeholders can get a real immersion into current branch conditions by navigating through the branch, even if they’re thousands of miles away.
In the branch health assessment (BHI), scores are assigned to all branch current conditions, using qualitative analysis to evaluate all areas and assets across the branch. The evaluation categories incorporate exteriors – like ease of ingress/egress and signage – and interiors – like teller areas and conference rooms. Architectural current state is also evaluated, including overall condition of the building from floor to ceiling. One indispensable category to include is retail and brand communications. Understanding how aligned branches are to the current brand standard is vital to designing the ideal experience.
Based on the branch health index (BHI) score, next banks can begin to estimate a cost per square foot of a renovation. The lower the BHI score, the greater the financial investment will be. For example, a branch that has a very high BHI score of four will cost the least to optimize at $90 per square foot. Whereas a transition branch that has a low BHI score of two will be $200 per square foot. Once multiplied with the branch average square footage of 3,500, now banks have estimated renovation costs, based on the location, its BHI score and opportunity ranking where it should fall in an implementation tier.
While these figures can get complex, what bank brands are trying to peg is their current state and then determine minimum and maximum spend and what the return would be with each level of investment. This cost is based on BHI scores in combination with size of format to create a per-facility investment. Also important is the opportunity – calculated by fair share capture and gross margin – to create a spend threshold to achieve a certain level of market impact. In short, each branch cost and size create a minimum spend, while opportunity creates a maximum spend to achieve a target ROI.
Through a combination of insights and statistical and mathematical modeling, banks can drive decision-making based on targeted and actionable data. In branch optimization, banks don’t want to over-invest, nor do too little. Ultimately what they are looking for is a way to ensure the investment they are making into their branch networks is precisely tailored to how much impact they can have in each market. To speak with one of our banking experience experts or request a copy of our white paper on branch optimization and transformation, contact us at firstname.lastname@example.org.
Adrenaline is an experience design agency that creates and implements end-to-end branded experiences through creative and environmental design. We enhance our clients’ customer experiences across digital and physical channels, from their branding and advertising to design and technology in their spaces. After transforming an organization’s brand, Adrenaline extends it across all touchpoints — from employees to the market to in-store environments. And, we focus on serving industries that sell human experiences including financial, healthcare, sports and entertainment.