Site selection insight.

• Author: Beery, Al
• Position: Fundamentals

Determining the ideal branch location is like choosing the right engine for a racecar. It won't matter what the paint job looks like or how good the tires are: If the engine is bad--nothing will run. Adding new branch offices (or relocating existing facilities) are strategic moves that can dramatically improve market share growth, increase customer profitability and improve brand awareness.

As an illustration: A bank based in the West with $4 billion in assets conducted site selection research to determine the best locations for its branches. By identifying optimal sites for expansion and relocation within a major Western market, this bank was able to increase consumer deposit levels and profitability by more than 15 percent. In the end, the branch network was more efficient, served a greater number of potential customers and was less expensive to operate.

Another case: An East Coast bank with $1 billion in assets developed an aggressive site selection strategy that gave it a competitive advantage over rivals in a high-growth suburban market, The financial institution froze the competition out of the market by replacing an under-performing downtown facility with two new offices (a full-service branch and an in-store office) in affluent, high-growth areas.

In the past, banks believed that they could place branches anywhere, and the customers would come flooding in. This is no longer the case. When it comes to site location, banks need to think more like retailers. Convenience retailers such as restaurants or gas stations know the value of good visibility. If your customers can't see your sign or find your building, they won't visit your branch. If the customers don't come, your bank is going to have difficulty realizing its sales expectations. There are numerous examples of banks that have done an excellent job of selecting the right market, yet placed their branch in a location with inferior access or visibility.

Site selection, however, involves much more than just picking a site with good visibility and access. It also requires effective research on competition, demographics and market demand. Retailers, such as drug store chains, have mastered the art of locating close to their customers. Locating near your best customers can make or break sales volumes.

Back to the auto racing analogy, placing a branch in the wrong location is like driving a stock car at the Indy 500. So, what can banks do to make sure that they have the opportunity to win the race? How can banks identify the best site locations for new branches or relocations?

Ten steps to successful site selection

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