sharpen your small business focus

ABA Marketing Conference

SHARPEN YOUR SMALL BUSINESS FOCUS

PRACTICAL TOOLS TODIFFERENTIATE YOUR BANK

Susan Brown-Monforte, Senior Vice PresidentMarketing Group Manager, California Bank & Trust ($10B), San Diego, CA

Buck Bierly, PresidentMZ BIERLY CONSULTING, INC. Malvern, PA

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A Definition or Two

• Defining Small Business*• Small Business: Businesses with less than $10,000,000 in Sales• Business Banking: $10,000,000 to $25,000,000 in Sales

• Defining Sustainability• Sustainable Top Line Revenue Growth in Segment• Sustainable Profitability in Segment• Sustainable Asset Quality in Segment

• Wallet Share• Capture 65% of the Relationship (“Relationship” includes both the

Business and Consumer Opportunities)

• Relationship Manager (RM)• Branch Manager• Business Banker (< $10,000,000 segment)• Small Business Representative

* Not Effective for the < $750,000 Business

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Building SUSTAINABLE GROWTHin a Crowded Market

1. If the economy remains in a slow recovery, loan demand will remain

“tepid” as Business Owners use “retained earnings” for capital

expenditures and look for “efficiencies” in their operational processes

2. The industry’s continued “reduced dependence” on investor real estate

lending will create increased competition for well run operating

businesses

3. “Re-pricing” loans will become a constant as Banks use pricing to build

market share or to survive

4. Liquidity continues to be important; low cost deposits remain key

5. Revenue replacement is still a critical issue, replacing lost fee business

6. The acquisition [and then expansion] of new clients remains a focus

7. Successful “Business Development” Processes will focus on

“differentiation” in the market. (Bank and RM differentiation!)

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A Changing Environment. . . with Opportunities

1. Banks require increased discipline on resources and segmentation to drive profit growth:

• 85-90% of profits driven by 10% of clients• “High Value” companies (high profit accounts) require high touch,

distinctive service• “Low Value” companies require good cost effective service that instills

loyalty but does not over-serve

2. Advice remains a critical need, a notable opportunity remains for banks to successfully differentiate and win/retain business acting as a partner.

• Only half of banks provided “advice” and that the advice currently provided is typically a thinly veiled product sell.

Data from Greenwich Associates, June 2012

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A Changing Environment. . . with Opportunities

3. Strategic options are on the minds of business owners.

• More than 30% of small firms are considering a merger, acquisition, or sale of the business in the next 24 to 36 months.

• RMs must initiate dialogues with business owners early to identify M&A financing, and wealth management opportunities.

4. About 16% of firms are actively seeking a new Treasury provider.

• Flawless execution on delivery and demonstrating value are critical

Data from Greenwich Associates, June 2012

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Building Relationships, Growing Recurring Revenue

Business Owner

DDA DDA

MMA MMA

Internet Banking Short-Term/Long-Term Investments

Line of Credit Retirement Planning/Retirement Plan

Equipment Loan/Lease Mortgage

SEP HELOC

Liability Insurance Term Life Insurance

Employee Relationships

Total: 8 Total: 7

Professional Practice: 10-years, $800,000 in sales 65% of the “Relationship”

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Business Owner

DDA DDA

MMA MMA

Web-Based Banking/Cash Management Web-Based Banking

Line of Credit Investments

Equipment Loan/Lease Retirement Planning/Retirement Plan

Commercial Mortgage Jumbo Mortgage

401(k) HELOC

Liability Insurance Life Insurance

Key Man Insurance, Buy/Sell Agreement

Total: 9 Total: 8

Business Services: 15-years, $3,500,000 in sales 60% of the “Relationship”

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Business Partners(s)

DDA/Cash Management DDA

MMA MMA

Line of Credit, Acquisition Financing Web-Based Banking

Equipment Loan/Lease Private Banking

Commercial Mortgage Investment Management

Merchant Account Retirement Planning/Retirement Plan

401(k) Jumbo Mortgage

Liability Insurance HELOC

Key Man Insurance, Buy/Sell Agreement Life Insurance

Total: 9 Total: 9

Professional Practice: 18-years, $8,500,000 in sales 60% of the “Relationship”

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What is the Brand you are Building?

The Focus prior to the Recession

“Excellent customer service. . .”

“Highly responsive to opportunities and requests”

“Faster turnaround than our competitors”

“Give you what you ask for. . .”

Today, these are some aspect of a “brand” that your competitors are already focused on. These are now the price of entry, not a “differentiator”

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Adding Value is not a Concept

In a highly competitive (or re-pricing) environment...

• What value is your RM adding?

• As a “Line of Business”, does the Sales Team have a “Plan” for Adding Value?

Every thing has changed, in Today’s Environment. . .

Sales Team Leaders and RMs need clear direction and on-going guidance

This study correlates skills with “Customer Satisfaction” and with the likelihood a Business Owner would

refer you to other Business Owners.

Data from the Corporate Executive Board

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Business Owners and “Value Added” Skills

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Business Owners and “Value Added” Skills

Business Acumen

The Questions that drive results and

satisfaction.

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Business Owners and “Business Acumen”

The Key Questions that drive

satisfaction.

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Business Acumen

Relationship Development

Strategies that drive satisfaction.

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Business Acumen

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Business Owners, Business Acumen andUncovering Financial Opportunities

Business Acumen Leads to Financial Opportunities More

Effectively

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Business Owners, Business Acumen andUncovering Financial Opportunities

Business Acumen Leads to Financial Opportunities More

Effectively

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Adding Value: Business Acumen vs. Product Acumen

• Business Acumen* is bringing Business Issue Insights and Unsolicited Financial Ideas to the table. It is a significant “differentiator” in a competitive marketplace and is highly effective in proactive situations

• Product Acumen is important in reactive situations. It is less of a differentiator in proactive situations

* Business Acumen is Conversational Competence in Business Issues; it is not the same as a “Business or Industry Expert”. Business Acumen, as we are discussing it, is Conversational Competence around “Industry and Business Issues”.

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Levels of Relationship and Relationship Development

1. Not all Decision Makers want the same level of relationship with an RM.2. Not all RM can build all levels of relationship with a Decision Maker.

Business Acumen

Product Acumen

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Level 3: Providing a High Level of SupportWhat gets you to Level 3 is the Client’s understanding that you are providing more “financial ideas” than your competitors are providing.

Identifying opportunities to support the short-term, mid-term and long-term business objectives of a decision maker is a well established method for building Level 3 relationships.

Putting together a team of Business Partners, presenting an overview of a Client or Prospect’s current and future plans and looking for ways to help them get to where they want to go. . . before they request your ideas gets you closer to this level.

Many banks are capable of doing this but few do it consistently.

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Level 4: Focusing on Business Issues

The Level 4 Relationship is focused on business Issues. Clients know that you provide better service and support than competitors; what they see now is that you understand their industry, trends within their industry, and “business issues” those trends are creating for their businesses.

At Level 4, you generate ideas for addressing more than explicit financial needs; you focus on topics like efficiency, productivity and market strategies. At Level 4 you provide [1] industry and business insights that help Business Owners see mid-term/long-term issues more clearly, [2] on-going education, [3] “benchmarking” of business/financial operations.

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Changing the Conversation toward Business Acumen

1. Where are you banking?2. What products are you using?3. How are they priced and structured?4. What 2 things do you wish your bank was

doing but they’re not?5. Can I have a copy of your statements to

put together an offer of how we would handle your banking relationship?

Where are the Business Issues here? These questions focus on products; comparing your products with a competitor’s. These

questions demonstrate product acumen!!

Consider these Questions. . .

2

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These questions align with a Business Owner’s Business Strategy, Business Plan, Business

Objectives, Business Operations. These questions demonstrate business acumen!!

Use this Question Set to Demonstrate Business Acumen and Building

Relationship Momentum.

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1. Keys to success affect current and future decisions.

3. Industry trends, business changes in next 3 years.

2. Industry trends affecting the business today.

4. Current and future changes force changes in current and future business operations.

5. Current and future changes in business operations force changes in current and future financial operations.

6. Changing financial operations create changes in the financial needs and then an evaluation of the solutions currently in place.

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Relationship Development Process Overview

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Relationship Development Process Overview

Three Sources of Business. . .

Three Steps:Identify, Plan, Execute

Market Management Process

Relationship Development Process

Face-to-Face Meeting Process

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Sustainable Performance is Driven by Leadership

High Performing Sales Leaders . . .

1. Provide “Targets” to Team Members and

2. Keep a focus on the quality of the calls made on those Targeted Businesses

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The Market Management Process “proactively” focuses on 3 sources of leads. . . Customers, Prospects and COIs .

Sustainable growth in top-line revenue (and asset quality) is driven by developing leads with “targeted” relationships within these lead sources. Typically. . .

1. Retention Relationships (Key Customers)

2. Expansion Relationships (High Potential Customers)

3. Acquisition Relationships (Key Prospects)

4. Current and Prospective COIs

The Market Management Process

Identify the Right Targets

Target Industries Limited Appeal Industries

Distributors Transportation Businesses

Law Practices Trade Contractors

Architect, Engineering, and Business Service Firms Real Estate or Construction Businesses

Financial Service Providers Retail

Insurance Brokers or Firms C-Stores and Gas Stations

Wholesalers Used Car Dealerships

Medical, Dental, and Health Practices Restaurants

Accounting Firms Farming

Manufacturers Mini-warehouses

Retail Trade

Define the industries you want more business from.

Identify the Right Targets

Business Characteristics

In business over 3 years

Sales revenue between $750,000 and $10,000,000

Employing more than 5 people

Plant located within 10 miles of a branch location

Privately held

Experienced management team

Borrowing needs greater than $100,000

Satisfactory commercial borrowing-track record

Profitable (Net Profit After Tax) for at least two consecutive years

Tangible Net Worth greater than $250,000

Leverage (Debt-to-Worth) less than 4 to 1

Deposit balances average more than $50,000

Using or needing 5 or more business banking products

Define the businesses you want more business from.

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These questions align with a Business Owner’s Business Strategy, Business Plan, Business

Objectives, Business Operations. These questions demonstrate business acumen!!

Use this Question Set to Demonstrate Business Acumen and Building

Relationship Momentum.

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Defining the Conversation with the Business Owner

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A Model for a Marketing and Sales Partnership

So, this what sales teams need. . .

This is where the

Marketing Partnership

is both Key and Necessary

for Sustainability

A Model for a Marketing and Sales Partnership

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PRACTICAL TOOLS TODIFFERENTIATE YOUR BANK

Susan Brown-Monforte, Senior Vice PresidentMarketing Group Manager, California Bank & Trust ($10B), San Diego, CA

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Segmentation

Segmentation 101

What is it?Segmentation is the process of defining and subdividing a large homogenous market into clearly

identifiable segments based on similar needs, behaviors, or characteristics.

How do you build it?It depends on the business objective a company is trying to answer. The initial discovery process

determines the approach used and it centers on answering two main questions:

How will you take action?

How will you measure success?

How does it add value?Segmentation is a tool companies use to solve specific business problems. For example:

“If I develop a new product…What will the demand for the product be? Who is most likely to buy it? Where do I find them? And how do I speak to them?”

“Where should I place my TV and Online ads in order to best reach my intended audience?”

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CB&T Business Segmentation Exercise

Why It Was Important

Gain better understanding of customer base

Identify and align opportunities for growth within organization – expansion and acquisition

Calculate opportunity for any geography, trade area or market

Transition from a product focus to a segment focus

Support relationship emphasis versus transaction emphasis

Optimize sales and marketing efforts

Help inform other decisions

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The Process

1. C-Suite Sponsorship

2. Selecting the Right Partner

3. Understand the Goals & Objectives

4. Receive Data & Audit it

5. Match the CB&T data to our Universe of Businesses

6. Append everything we know about each Business

7. Create ‘Buckets’ & segments (with known, measureable, & implementable metrics)

8. Add the Descriptors (operational metrics)

9. Apply the segmentation to CB&T’s ‘universe’

10. Deliver results and continue with implementation plan

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Segments were defined with known, measureable, & implementable metrics Type of business (SIC code) Size of the business (small, medium, large, etc)

Segments were described by CB&T operational metrics SVA (Shareholder Value Added) Market Penetration GAP (Market Opportunity) Products

Checking Business Loan Internet / VRU Money Market Debit / ATM Installment Loan Savings / CD Cash Management International Merchant Services

Drivers

Descriptors

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Bucket# of

Employees# of Segments

Analysis Business %

Comp

Universe Business %

Comp

Business % Pen

Business Index

B1 1-3 46 38.26 49.86 0.95 77

B2 4-9 46 31.05 28.88 1.33 107

B3 10-24 45 17.28 13.26 1.61 130

B4 25-49 51 6.59 4.11 1.98 160

B5 50+ 48 6.82 3.90 2.16 175

Total 236 100.00 100.00 1.24 100

Buckets were determined by logical, meaningful and manageable breakpoints in the data.

Employee Size is the key metric for defining buckets because it is a reliable and well populated metric on both customer and prospect files.

The CB&T Buckets

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Making the Results Actionable

Market Opportunity Prioritization

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County Potential

SVA County

Potential SVA

Alameda County 158,244,214 Orange County 350,167,230 Alpine County 243,695 Placer County 38,011,572 Amador County 4,589,333 Plumas County 3,567,607 Butte County 21,598,301 Riverside County 144,391,367 Calaveras County 4,536,616 Sacramento County 126,307,083 Colusa County 1,919,942 San Benito County 4,088,750 Contra Costa County 87,974,697 San Bernardino County 145,392,031 Del Norte County 2,175,153 San Diego County 298,726,235 El Dorado County 17,065,325 San Francisco County 128,127,691 Fresno County 70,897,746 San Joaquin County 48,407,044 Glenn County 2,418,451 San Luis Obispo County 32,873,040 Humboldt County 13,680,059 San Mateo County 80,766,723 Imperial County 11,722,321 Santa Barbara County 43,056,806 Inyo County 2,666,534 Santa Clara County 201,955,950 Kern County 57,076,771 Santa Cruz County 29,203,212 Kings County 8,309,586 Shasta County 19,047,705 Lake County 6,386,023 Sierra County 524,652 Lassen County 2,609,325 Siskiyou County 5,190,087 Los Angeles County 952,943,679 Solano County 33,526,296 Madera County 9,702,545 Sonoma County 53,662,740 Marin County 38,324,989 Stanislaus County 40,953,271 Mariposa County 1,932,907 Sutter County 7,620,693 Mendocino County 10,966,162 Tehama County 5,254,867 Merced County 14,287,026 Trinity County 1,347,755 Modoc County 1,547,349 Tulare County 30,205,178 Mono County 3,063,320 Tuolumne County 6,061,773 Monterey County 39,281,426 Ventura County 78,350,288 Napa County 18,433,391 Yolo County 16,467,043 Nevada County 13,300,345 Yuba County 4,678,635

Modeled Demand (SVA) By CountyMarket Opportunity Prioritization

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Segment Opportunity Prioritization

Methodology to prioritize segments Combine size buckets to create three 0 – 9, 10 – 49, 50+

Balance three critical elements:

A. Number Businesses in CA for a segment (The Market Size)B. Penetration in CA (How well CB&T traditionally does with a segment)C. SVA per business (The anticipated benefit to CB&T when acquired)

Priority Score (Weighted Value) = 50% of A, 15% of B & 35% of C

Identify high risk segments with Business Partners

Result – 28 unique segments identified as priorities

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Development of “Segment-In-A-Box”

Everything a banker needs to know about a segment/industry in one complete package

Designed to help bankers be more effective in the sales process and demonstrate industry expertise

Aligned with relationship sales process and brand positioning

Applicable to both customers and prospects

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Segment-In-A-Box includesSegment Information:

Segment Profile Industry Profile (by First Research) List of Associations (by geography) List of Primary Trade Publications Business Journal Editorial

Calendars for major market business journals

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Segment-In-A-Box includesMarketing Materials:

Customizable Sales Letter Template

Segment Specific Pitch Book Slides

Segment Specific Flyers

Segment Specific Brochures

List of Additional Sales Collateral to use on sales calls

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Segment-In-A-Box also includesSales Tools

Market Plan / Call Planner Call Prep Questions

(by First Research) Telemarketing Scripts Prospect list for each segment

(loaded in Salesforce.com) Customer lists Packaged product offerings

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Measuring Success

Metrics are always important,

but the story they tell is what is critical!

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Measuring Success

Measurement #1 Success Stories

Survey used to gather success stories from the field

Gift card drawing used to encourage participation

Success Stories published bank-wide and posted on Intranet

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Measuring Success

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B1 B1 B1 B2 B2 B2 B3 B3 B3 B4 B4 B4 B5 B5 B5

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250 CB&T Segment-in-a-Box, 2008 - 2011

2011 Index2010 Index2008 Index

Measurement #2

Tracking Segment Penetration Over Time

Compared to 2008 (and relative to changes within the state of CA), CB&T’s concentration in 2011 has increased in key segments

Compared to 2008 (and relative to changes within the state of CA), CB&T’s concentration in other key segments has not experience as much of a decline

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Measuring Success

Measurement #3 – CRM Reporting

Track use of segment specific prospect leads

Monitor usage of segment specific materials

Track segment specific campaigns

Monitor pipeline for segment specific deal activity

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Key Learning's

C-Suite Sponsorship and Region Management buy-in

Sales management and sales process must be aligned with marketing and segmentation strategies

Clean customer data provides the foundation for insights derived and it instills confidence in the results

Data inputs used in the analysis are dependent on the business objectives you are trying to achieve

It’s crucial to understand the data in the results to determine which factors impact performance metrics over time

Requires a long-term perspective and investment

sharpen your small business focus

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