A FINANCIAL INSTITUTION ACHIEVES A "CORE CUSTOMER" RELATIONSHIP when the customer says your name when asked, "Where do you bank?" When your bank reaches this level, it is called achieving primary financial institution (PFI) status, and it is likely that, once established, this relationship will remain profitable for a long time.
But, to achieve PFI status, you first have to get the customer. And, you also need to increase what we call gross customer engagement. That is, you have to get customers to use your products and services, and to engage with your team.
Before attemptinga program to acquire more PFI customers, your bank should ask itself:
* Do you want more PFI relationships?
* Does your organization have room for more PFI customers?
* How do you get PFI relationships?
* What defines success in acquiring them?
Since the early 1990s, branch traffic has continued to decline. Some of this has been by design. Our industry has offered customers more and more channels to access accounts, and transactions have moved to channels such as online bill pay, online banking, mobile and remote deposit. These transactions were more convenient for the customer but also more efficient for our organizations. On the flipside, some of the decline was caused by transactions completely migrating from traditional banking systems to nontraditional providers such as PayPal, Dwolla or Google Wallet.
Where does that leave traditional financial institutions?
* Traditional financial institutions have large branch networks that operate at a very low capacity. That means empty branches where, on most days, you could fire a cannon and not hit anyone.
* Infrastructure and compliance costs have continued to rise, which means new regulations and new channels that led to greater investments in people and technology. The large banks play a different ball game. While they too have capacity to spare they also have three times as many customers per branch as the average community bank. National banks definitely have a different business model and more resources. If smaller institutions try to copy big banks, they will always lose.
* While transactions have moved out of the branches, studies continue to show brick-and-mortar is still important when it comes to acquiring new customers. Not everybody is comfortable opening accounts online. Customers want to know that they can come to the branch. At the average community bank offering online account openings without a special rate promotion (that is, without a checking deposit rate that is far above market), only 5 percent of new openings are generated online.
Bottom line: Community banks need to take advantage of the costs sunk into existing branch networks by attracting more PFI relationships to their underused locations.
How is it done? Successful PFI customer acquisition is more than a mere marketing task. It has to be an overriding bank strategy. Here are 10 steps to successfully acquire profitable...