In our last installment on branch optimization and transformation, we addressed the array of improvements banks are making in their branches and what enhancements will mean in terms of total spend. We reviewed best-case examples of refreshed, transitioned, and transformed spaces and discussed how banks are deploying improvements across their networks. Addressing the in-person experience – or physical channel – represents one of the financial industry’s thorniest problems, in large part because decisions about tiers of transformation have a lot riding on them. With renovation costs at a premium, decisions must be made purposefully and strategically. So, how are banks doing that?
In today’s fast-moving environment, mergers and acquisitions in the financial sector continue to rise year-over-year. A loosened regulatory environment has provided more opportunity for banks to fill the gaps of their operation by merging or acquiring another bank. These mergers can only amplify an existing problem in banking: marketing is often not aligned with branch strategy. That means that different sides of the house working on creating the right experience to the right audience are not even tied together. Even without the specter of a merger, most financial organizations have one team dealing with physical spaces and another entirely different marketing team dealing with branding.
For branch strategy to be successful, banks must actively work to break down those organizational silos. In other words, a bank’s approach to branch experience must be coordinated with their approach to reaching people. Marketing is the team typically handling how a bank targets certain people in a certain way in a certain market. But are the strategic decisions on the branch level being made in tandem with marketing? For example, if a bank is marketing to high net-worth individuals, are they placing branches where high net-worth individuals are located? Further, is the bank creating experiences that high net worth individuals want? That’s why bringing marketing into branch strategy is so vital.
Once marketing is married to branch strategy, banks can strategically align each branch’s experience with its market potential. To do that, they will need both robust data and meaningful analysis. On data, banks should start with a branch health index that’s essentially a State of the Union of the entire network. This includes everything from traffic flow and architectural elements to retail communications and operational technology in each branch. Data on branch health is gathered by traveling from location to location and scoring each branch on a series of key indicators. The buckets in which these indicators are organized often include Exterior, Interior, Architectural Conditions and Retail Communications.
So now the bank has achieved thing one: evaluating what they have. They can now move on to thing two: evaluating the experience of it. Assessing how customers experience their bank branch is typically determined by surveying. In general, that’s not something a lot of financial institutions have the internal bandwidth to do. So, they bring in experts to help develop and deploy a meaningful survey, gather all of the data and put an expert eye on grading it. Once the branch health index and survey data are complete, it’s time to marry all that information together, oftentimes in a database like AMP. A tool like this empowers decision-making by allowing users to track and assess current conditions of their entire retail network.
The flip side to this internal data on branch health and consumer experience is an analysis of market potential, mostly done through an array of market studies. The market study approach evaluates the promise and potential by developing insights from the marriage of different datasets. Geographic information systems (GIS) provide rich local demographic data. Valuation modeling allows banks to forecast potential and prospects. Mobile user tracks consumer traffic patterns allowing banks to design traffic density models and maps. Beacons use mobile data to evaluate and estimate how target audience members might behave in and around branch locations.
For successful bank strategy, market potential must align with market planning. A gap analysis between branch experience and market potential helps banks prioritize markets within their branch networks. When plotted on a grid, market potential (1 to 5) and branch conditions (1 to 5) help drive decisions. For example, if a bank branch has a market potential of 5, but a current state of 2, that's a big gap (3). That gap likely signals a high priority branch for conversion, because while the market potential is high, the bank is not maximizing it. What banks are looking for is both efficiency and long-tail impact. In short, successful branch strategy means you evaluate it, you score it, you rank it, and then decide it.