Branching out: time to add more branches? Here's how to proceed.

• Author: Sullivan, Joseph
• Position: Marketing edge

Changing customer values, especially 9/11, have driven people back to the branch in droves. What was once thought to be an outdated mode of financial interaction is becoming again a significant part of the overall delivery strategy.

Branches are popping up in many communities similar to the way gas stations did in the 1960s. Many banks have adopted the "me too" theory that branching is back, and they need to jump on the Bandwagon. But is it right for your financial institution? The expanded number of branches has sparked increased competition, rate wars and escalating land costs.

Before jumping into branching, banks need to know how to research, locate, design and position today's branch to compete and thrive. Here are four basic steps.

Step 1: Understand your culture

The key question is: Who are you and can you do what you're good at in a particular market and at a particular site? You must begin by assessing the current position of your bank in terms of sales philosophy, niche focus, deposit and loan footings, and product offerings.

Conduct a series of interviews to assess your bank's culture, strengths and weaknesses, and to identify your unique value position. These interviews will allow you to evaluate market (and site) opportunities based on whether you can successfully execute your mission in that market or at that location.

Step 2: Investigate the site's physical and demographic characteristics.

You need to consider whether the site is

* A storefront or for a freestanding branch with drive-through capability.

* Close to a retail or commercial draw (i.e., shopping center, business park, etc.).

* Visible and accessible---and has traffic flow.

You must also determine the size of your trade area after visiting the site. Trade area is impacted by proximity to retail or commercial draw such as a department store, grocery anchor or discount chain (as mentioned above). Trade area is also impacted by the type of branch built. Freestanding locations tend to have larger trade areas than storefronts since they generally have more comprehensive product offerings and better visibility, access and parking.

Currently there is a trend toward storefront locations, partially due to lack of availability of good shopping center pad sites, but also due to cost and a shorter development lead-time. A storefront could be considered for retail or commercial loan production offices (LPOs) as an entree into a new market, an investment boutique or a mortgage...