January 10, 2005
Deposit
Growth Strategies: On-Boarding
This Newsletter is the second in a series on the deposit growth challenge banks will face in 2005.
With the economy and stock market recovering, banks are already seeing a slowdown in deposit growth from the heady 7% annualized rate during 1998-2003 to a more normalized 2-3%. For most banks, this is not enough to fund anticipated loan growth.
So what can your bank do to optimize deposit growth? First and foremost, have disciplined sales, service and marketing strategies during the initial “on-boarding” process – the early days of a new relationship when the majority of sales opportunities occur.
Research
has shown that the first 90 days can make or break a new deposit
relationship. In fact, about 70% of all cross-sell opportunities come in
the first 90 days of a new customer relationship. So time is of the
essence in identifying customer needs and cross-selling products and
services.
Why is this case? When consumers change banks and initiate a
new financial relationship, they're doing so for a reason. It could be
that they've just moved to a new community, or that their financial
circumstances have changed, or that they've grown dissatisfied with
their previous financial relationship and want some fresh options.
How does your institution handle customers immediately after an account is opened? What products do you offer these newcomers? And in what combination? Finally, who does the selling and how are you measuring the effectiveness of your initial marketing efforts?
Relationship growth and profitability are dependent on the following key strategies:
- Product Packaging and Pricing – our client experience demonstrates that refinements in product packaging can significantly improve account acquisition and balance growth. Product engineering is well worth the effort: 20% improvement in profitability is not unusual.
- Account Sequencing – the specific products and services offered can have a tremendous impact on profitability and retention. Don’t discount service sales in this process. A simple example: if a low balance customer signs up for direct deposit, their average balances levels will automatically increase. It may only be a “service” sale, but the impact on profitability and retention is very real. Sophisticated account sequencing strategies can help your institution significantly improve balance growth.
- Relationship Anchoring Strategies – different products require different “pathways” to profitability. Not every customer starts their relationship with a checking account – or with the same type of checking account. Our research has shown that strategies need to be adapted to the account type which initially “anchors” the relationship
- Problem Resolution – it’s not just the majority of sales opportunities which occur in the first 90 days, but also the majority of service problems – and the majority of attrition. The causes: incorrect account setup, unmet customer expectations, etc. This is the time to have detailed programs in place to identify customers at risk so you can be sure to retain all the customers you have worked so hard to bring on-board.
Peak Performance has put together a First 90 Days Program so that its clients can maximize the return on this once-in-a-customer-lifetime opportunity. The key to succeeding with new accountholders is taking a very disciplined approach to product offers; in other words, making sure you offer just the right sequence of products to the right individuals at the right time.
Let us help you with an assessment of your deposit growth opportunities. Please email or call us at 616-454-9443.
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Peak Performance Consulting Group is one of the leading consulting firms specializing in financial services. For additional information please email info@peakconsultinggroup.com,call us or visit our web site.
Peak Performance Consulting Group
616-454-9443
(c) Peak Performance Consulting Group, 2005