Tomorrow's branch: designing better relationships: consumer preference may be declining, but it remains an essential delivery channel. We examine some of the trends in branch design--and the approaches and tools necessary to keep the branch relevant to future customers.

• Author: Seibert, Paul

AT FIRST GLANCE, it may appear that the branch is in a state of deterioration. Consumer preference for branch delivery, for example, has declined by 39 percent since 2007, according to the 2010 ABA Bank Preference study.

But other evidence is contradictory. Look at these three recent news items: Huntington National Bank (assets: $51 billion), Columbus, Ohio, plans to spend $70 million on developing a new branch prototype. Chase Bank USA (assets: $91 billion), Newark, Del., has allocated an estimated $1 billion to rebrand its recently acquired Washington Mutual branches. U.S. banks in general plan to spend over $4 billion during the next two to three years on branch remodeling.

If the branch is dying, why are banks investing so much money on developing or rebranding branch offices?

It may be true that new bank technologies/delivery channels are coming out almost every week, but the fact remains: A well-conceived branded branch can build critical customer relationships in ways that are unattainable through virtual means.

"Banks need to become channel agnostics--every channel is equally important, branches are just one" writes Brett King, author of "Bank 2.0" in a recent ABA Banking Journal article. "The objective must be about deepening the relationship."

"Over the next five to ten years I would place my bets on branches driving the highest profits," says David J. Cavell, author of "The Branch Is Back; Global Case Studies in [21.sup.st] Century Banking." "Today, relationship building is best delivered through the branch as long as three factors are in place: great location, effective branch design and competent staff."

The evolving brand experience

The one-type-fits-all branch is being replaced with innovative new delivery solutions unique to each bank's brand and supporting delivery model. Twenty years ago, most branches looked basically the same with the exception of WaMu's (Washington Mutual's) "Occasio" branch, which is now dead--at the hands of WaMu's new owner, Chase Bank. As logical of a move as WaMu's banking-in-the-round model appeared, it did not support business banking or provide the privacy needed for consulting or selling high-value products and services--and it represented a failed brand. As Charles Scharf, CEO of Chase Retail Banking puts it, "Traditional branches are superior in every way. They might be boring, but they're practical."

There are as many branch branding solutions as there are banks. Mark Weber, president of Weber Marketing Group, a firm specializing in branding and marketing for the financial industry, finds that "Making a branch attractive and different is relatively easy; making it also deliver an accurate and productive brand experience through the environment and exceptional staff actions is the trick that delivers the big payback."

Creating an honest, sustainable and profitable brand translation in a branch starts with a strong brand. Cavell observes that "many institutions do not have a solid brand value proposition upon which to build a physical customer experience and this is one of the reasons why so many branch prototypes fail."

For an example of stunning success in the use of branches, look no farther than Umpqua Bank (assets: $9.3 billion), Roseburg, Ore. Headed by Ray Davis, president and CEO and author of "Leading for Growth: How Umpqua Bank Got Cool and Created a Culture of Greatness," this industry-innovator has built a highly successful organization and physical brand image that is out-performing regional competitors.

In 1994, Umpqua had just six branches. The financial institution was surrounded by big banks with more resources. It wanted to become a viable competitor and aggressively pursue profitable growth. Many bankers laughed when Davis sent his staff to Ritz-Carlton to learn how to deliver premier service; required phones be answered with "World's Greatest Bank;" and rolled out branches that looked, felt and acted more like sophisticated retail stores. Today MP these same bankers are seeking to emulate Umpqua's continuing success. "Our branches cause consumers and business owners to rethink their relationship with a financial institution, to understand that we stand for something more than a bank." states Lani Hayward, executive vice president, creative strategies, at Umpqua.

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