What is the importance of Costumer relationships and sales in the banking sector?
As the competition in the banking sector is continuing to rise, it is becoming increasingly difficult for many banks to achieve growth as before. Facing fierce competition from both customary brick and motor operations and the emerging internet banks, banks fail to meet performance expectations due to poor understanding of their customer’s needs, not making the most of their staff and most importantly tend to not respond to new sales opportunities.
Banks that will be able to overcome these challenges are the ones that most likely will thrive and prosper into the future, this paper examines the importance of good implementation of customer relationship management in retail banking, and how it can deliver increased revenues and cost savings that will drive profitability and shareholder value while dealing with ongoing changes in this sector (North America Region, Genesys p. 14)
Now a day’s banks customers are more familiar with the fact that they have myriad of options on which bank they chose to work with and that banks can no longer dictate terms and conditions and expect full acceptance from their customers. No longer will customers stay in one bank only because it was the first bank they ever opened a deposit account with or simply because it seems too complicated to deal with the hassle of switching banks.
According to King (2010) “the customer of today expects a total customer experience that works for him”. (p. 40). The customer expects the bank to provide him with the services he needs in the most comfortable way since if the bank fails to do so the customer can always decide to cross the street to a competitor bank or simply click on the competitor’s website. Banks must perform a rapid and seamless service that answers their customers’ needs, one that is done with professionalism and offers the most suitable solution to a client’s problem, the bank needs to be prepared for a client to be well informed and know more about the alternatives than the staff itself.
The future success of the world’s banks will be inevitably related to the way banks will choose to serve their customers. Products will become less significant in a world where’s a competitor can copy similar products within hours, technology will be imperceptible to clients who live with continuous technological changes, different advertising methods will be focused on core branding only, and the most significant factor that will stand out is the way the banking sector will improve the level of service they offer to their customers.
The reality in which banks will emerge over the next 10-15 years will be as considerably different for these organizations as comparing retail banks today with what they were in past years. For example, in the past, bankers never had to ask the compliance division for approval on a new initiative, gathering credit risk ratings on customers wasn’t a thing of day-to-day activities, and internet banking simply did not exist.
The internet offers to numerous retail banks 50 percent of their new product applications, self-service and electronic banking accounts for about 90 percent of transactions in the developed world, banks receives approximately 50,000 calls from clients to its call centers on a daily basis.
It is safe to say that retail banking sector have gone through tremendous changes in the past decades and in order to thrive in a fierce competition banks needs to adjust themselves to customers’ needs not only in the always changing technological environment, and in the customer services, but also in regards to its approach to sales (King, 2010, p. 264).
DEVELOPING AND MANAGING RELATIONSHIPS
In order to build a long and lasting relationship with its customer’s banks need to consider not only the basic day-to-day interest of the customer when delivering him with products and services, but should take into account that in today’s competitive environment that is composed of sophisticated customers it should consider on building long-term relationship that will be mutually profitable and beneficial to both sides.
Today’s banker is no longer solely a lender of funds but acts as a manager that is responsible on managing and monitoring customer’s credit and noncredit needs. According to Richardson (1992) “A banker must make sure that the bank’s total calling effort is addressing all of the customer’s needs – investment, trust, cash, management, trade” (p. 134). While making sure this entire spectrum of activities is being monitored, the bankers should ensure that their bank is being properly compensated.
Developing relationship strategies, sales planning, sales and follow up are key factors in relationship building. The first essential step in sales planning process is: prospecting (Richardson, 1992, p.134).
SALES IN BANKING
Consultative banking identifies the significance of sales in the banking sector. Bankers are asked to initiate business, to cross-sell, and to function as consultants to their clients if they expect to attain a fair or disproportionately high share of the market.
Consultative banking is an approach to sales that offer bankers with the necessary skills to increase market share profitability and build up long-term relationships in a highly competitive environment. It provides banker with an approach for understanding the bank’s noncredit as credit products, a method for identifying customer needs and leading efficient sales interviews, and a planning and follow-up structure. Consultative banking takes into consideration the sales communication process between bankers and clients, helping bankers look at their products and services from the customer’s perspective. It appreciates the value that the client derives from the sale.
According to Richardson, (1992):
Bankers must conclude sales that are not only in the best interests of the bank, protecting its profit margin, but also in the best interests of the customer. Mutually beneficial relationships should be the rule not the exception (p. 2).
Resistance to Selling
Even though the consultative approach to sales in banking gives away bankers the chance to serve as advisers and consultants to their customers, not all bankers are contented with the idea of selling. Selling seems to many bankers to be a departure from the profession they originally chosen. In the past, bankers had at best passive selling roles in which they waited for business to approach them. However in today’s highly competitive environment, bank managements worldwide have redefined bankers’ role and currently include in their primary responsibilities active sales solicitation as an integral part of relationship management. The changes from reactive to proactive selling has been encouraged by aggressive marketing from within the banking industry, according to Richardson (1992) the reasons vary from “competition from non-banking institutions, inroads by foreign banks, new technology, deregulation, sophisticated cash management in corporations and a changing loan environment” (p. 4).
Many bankers, both new and experienced, find it hard to settle the apparent contradiction that has surfaced in their profession. Many oppose selling basically because they think that all selling is high pressure. As long as they link sales with high-pressure tactics and misrepresentations, they will rightfully reject it as unprofessional and unworthy of banking.
Nevertheless, not all selling is high-pressure or dishonest. Consultative selling is the direct opposite of high-pressure sales. Perhaps by distinguishing the various kinds of selling it will be possible to detach the negative image and contrast it with the positive benefit that can accrue to customers and bankers alike through consultative selling (Richardson, 1992, p. 4).
Image of Selling
Add information from the internet or from bank 2.0!!
Sales Role of Bankers
With sales having such a negative image, it is reasonable that some bankers respond negatively to selling as a primary part of their jobs. Bankers who refuse to accept their sales role, view sales from its worst viewpoint, as selling persons what they do not want, really cannot use, and cannot afford, rather than examining the ways in which selling can be reciprocally beneficial to the customer and to the seller. Bankers need to bear in mind that there is a vast majority of people that expects bankers to consult with them on the financial alternatives available to them, to improve their situations, to bring them new ideas, and to suit their needs. The emphasis on cash management and investment products is an example of the kind of sophisticated services clients demand from bankers.
The purpose of consultative selling is the development of long-term mutually beneficial relationships, as oppose to one-time sales. Consultative selling is distinguished from other categories of selling in its focus on the customer’s rather than on the sales person or the product. There can be no “take the money and run” situation among bankers, since bankers must be concerned in regards to their customers’ financial well-being, and the last thing they want is for customers to overextend themselves. The objective of the consultative sale is to bring to a close deals that are mutually beneficial and mutually profitable, so that long-term relationships can be developed (Richardson, 1992, p. 6).
In order to maximize sales opportunities, bankers must be familiar with a wide range of non-credit, credit related, and credit products or services that their bank offers. Throughout the sales interview, bankers ought to mentally scan for selling or cross-selling opportunities. In their sales role, unless they have had an explicit referral or inquiry from a client, bankers cannot effectively approach a selling opportunity with only one product in mind.
Doing a background research prior to making a call is a significant step in identifying customer needs. For instance, while reading a balance sheet or a company’s annual reports, banker may spot opportunities for investment instruments such as Certificates of Deposit, Master Notes, Commercial Paper, and so on. Or when noticing that the professional employees of a company travel a great deal, bankers can identify an opportunity for marketing a Direct Deposit of Payroll (Richardson, 1992, p. 10).
In order to recognize and respond when opportunities arise when dealing with a customer, bankers need to have a general knowledge of the products which are relevant in their market area. Without this basic knowledge bankers will not be able to answer the needs of their customers or prospects and will not be able to speed up processes or to maximize recognized opportunities.
Understanding the variety of products offered by their bank is often a complex and time-consuming task for bankers. Banks suggest a variety of products, an amount that can range from 20 to 200 products to their corporate, international, retail, and personal trust customers. Bankers are not required to know all of the products marketed by the bank, but they ought to be familiar with a basic number of credit and non credit products that are related to their specific market area. In most cases, without adequate product information the alternatives are lost opportunities and lost market share. According to Richardson (1992) “Without sufficient product information bankers are often reluctant to initiate cross-selling calls, and those who do take the initiative find it difficult to capitalize on opportunities and are not as eager to try again” (p. 11).
Resources for Product Knowledge
It might be helpful to examine how bankers extend their product knowledge and what resources are accessible to them. Bankers have individual contact to product specialists; they can attend seminars or product workshops; they can approach their managers with product related questions; they can listen to joint calls with more experienced officers or specialists. They can achieve product knowledge from banking literature or from banking associations, from advertisements by their bank or competitive banks. They can be mentored by managers and even be taught by their customers. They can learn a great deal from their own experience. All of these resources are accessible, but they are time consuming and not always readily available.
Features and Benefits
Features are qualities or characteristics that the bank places into the product; benefits are the values derived by the client. Features and benefits are the core of sales-oriented product knowledge. The best way to understand a product is by understanding its features and benefits, and there is no better way to sell a product than by linking its features to its benefits. Features and benefits assist bankers link the technical aspects of the product with the clients’ needs. They help bankers understand the product from the customer point of view. Understanding and linking features and benefits allows bankers to view products from a sales perspective rather than from a technical or operational viewpoint.
A significant factor in prospecting is distinguishing the qualifying criteria for the product. Qualifying criteria are the characteristics that make a customer eligible for a product. Without knowing the qualifying criteria for products, banker may miss sales opportunities or waste time discussing products that may not be appropriate for certain customer.
In order to determine whether a client qualifies for a product, bankers should have the following product information regarding specific criteria’s that render the customer eligibility: Volume of transactions, legal or geographical limitations, credit implications, past relationship with the bank, target market, industry focus (Richardson, 1992, p. 16).
For example if a customer would like to enjoy the commission free deposit account under the segment “new customers” for one year and a half, he would have to prove that in the past year he had no accounts under his name at our bank and he will need to transfer his monthly salary which will be higher than a certain minimum amount to be determined by the bank.
Sometimes bankers, in their eagerness to meet customer needs, agree to options that place preventable burdens on the operation and services area and may in fact reduce the quality of service to the customer. This often result in internal difficulties for the operations area, discontent from the customer side who does not receive what he or she thought had been purchased, and strained relations between operations and the line. By understanding the criteria and the abilities of a product, bankers can broaden internal as well as external satisfaction.
In order for a banker to capitalize on sales opportunities, bankers should have information on their competitors’ products as well as their own. Competitive information allows bankers to point out (and create) their own product advantages. Familiarizing yourself with the competitors’ products is the key of carving out a competitive edge among products that seems to be similar. Without competitive information, bankers cannot contrast their competitors’ strengths and weaknesses with their bank’s competitive selling points. Without competitive information bankers cannot react to objections concerning other offers, nor can they appreciate their own bank’s capabilities. Bankers should know who their major competitors are and also the trade names for the competitor’s products.
Pricing is an important feature of any product. Bankers should be aware of not only the fees and balances for a specific product but also the fee parameter, and special situations that require input from the technical specialists to conclude pricing. Bankers must remember that price is a product feature, and when negotiating price they should treat it like any feature by linking it to its benefits. Pricing information is critical not only to the customer, bankers should not be deprived of it simply because it is negotiable based on options or the total relationship. Bankers should be presented with pricing parameters, and instructions to defer price to specialists when the pricing requires input from them (Richardson, 1992, p. 16).
Bankers should be given with names and extensions of specialists in order for them to receive product information when necessary (especially in times of negotiations with customers). Convenient access to specialists is essential if bankers are to make referrals or have their questions answered.
Bankers should be familiar with the documents or contracts to be signed and the forms to be completed to guarantee smooth implementation. They should be ready to give details on any complex or unique agreements, such as the loan agreements.
Management should make sure that product information is channeled on an ongoing basis to line bankers in the field; it should encourage the stream of communication from the line to the specialists. The specialists have a great deal of information about the bank’s own products, and bankers who have day-to-day, in person interaction with clients often have a great deal of information about competitive products and market trends and demands. Due of their customer contact, bankers are often aware of market developments and competitive changes before specialists or management. It is important to bring up-to-date information to management and specialist in order for the bank not to lose its market share.
A prospect may be an existing client who is qualified for complementary or additional products, services, or credit, or a new entity, may it be a person or a company with the potential of becoming a new client.
Prospecting usually follows up after the sales planning phase, and it involves the process of actively searching out and developing new business sources.
One of the most important sales planning strategies is the development and organization of a practical prospect list. Bankers should identify their market area and determine the types of companies that make up their target market.
Once they identify their market, bankers should develop their prospect lists. These lists usually include information coming from the Bank’s market and research unit, present customers, published materials (trade magazines, reports, annual reports, and credit rating agencies), colleges, organizations, personal friends etc.
The prospect lists should be updated with deletions and additions when adjustments are made and should be presented with a personal input to each profile for identification reasons, examples for basic information include are: Name of a person, company or a business, relationship with the bank or with other banks, annual sales volume or yearly income, customer needs and contact dates (Richardson, 1992, pp.135-136).
Bankers need to set the numbers of prospects they should meet with, in order to attain their objectives so that they can schedule their sales activities. Richardson (1992) claims that “bankers should determine their own prospect ratio (hit ratio of numbers of prospects to be contacted to make a sale)” (p. 137). He argues that apart from the factors that influence the market, it is important for bankers to track the number of calls made to the number of sales made, in order to know their success average.
A few examples of prospect ratios could be: The amount of money to be achieved from new clients over a period of time, the amount of prospects to be approached or called to in order get an appointment for a sales interview, or the amount of meetings needed to be conducted in order to produce a new customer (Richardson, 1992, pp.137-138).
It is preferable that bankers organize their appointments in advance. This is mostly suitable with corporate customers; with small neighborhood businesses or with personal banking customers it may possibly be more acceptable to make cold calls (a call without an appointment).
The telephone is an efficient tool for arranging appointments. When calling for an appointment, bankers should try, in most circumstances, to avoid the temptation to sell over the phone with new customers.
To maximize the benefits of the telephone, bankers should appreciate its strengths as well as its limitations. As one of its major strengths the telephone is a very useful time saver for arranging to meet with prospects. Bankers should also identify the limitations of the telephone and limit their conversations to the kind of information included in the opening of their sales calls, in which they sell the appointment, and not the product.
At all costs – and it may probably cost the appointment – bankers should avoid the trap of trying to sell over the telephone, furthermore Richardson (1992) argues that appointment telephone calls with prospects should be limited to “Greeting, identifying banker and bank, using hinge, stating possible value to customer in seeking banker, requesting the initial appointment, establishing date, time and place, confirming date to tie down the appointment, repeat your name to the customer” (p. 139).
In cases where sufficient information on the customer is still missing it is customary that after the initial stage of the telephone conversation and after stating possible values in opening an account in our bank to ask direct questions regarding the customer background in order to adjust the best terms that will suit his needs.
Telephone Brush-off Objections
Due to prospects’ busy schedules, competitive strains and business pressures, prospects may resist scheduling the appointment and offer “brush-off” objections such as “I’m too busy at the moment”, “I’m rather satisfied with my bank” and “tell me over the phone what you want in order for us to save time”, Usually when such “brush-off” phrases come up it is because they often really saying that they are still not convinced that there is an advantage for them in the meeting.
The customer may not really want a dissertation on the product, but does want to know how he or she will benefit from the meeting. In attempting to resolve the objection, bankers should avoid at any cost selling over the phone and keep away from lengthy product or idea discussions. Since bankers themselves are the most central factor in communicating information, they should not rely on the telephone voices alone to establish rapport, credibility, or suitable for the time necessary for an effective sales interview (Richardson, 1992, p.140).
Usually when facing a “brush-off” objection it important for a banker to repeat the customer’s objection, restate the potential benefit that may occur to the prospect through the sales meeting, and offer a 15-minutes or half-hour introductory appointment in a time and place which is most suitable to the client. Getting the appointment with a prospect is often determined by the banker’s ability to suggest a possible opportunity to the prospect.
Bankers should work toward setting a brief initial appointment and should use their appointment time to motivate the prospect to extend the time or set a full appointment. These first minutes should be dedicated into finding out about the prospect’s financial situation, uncover the prospect’s needs, and interest the prospect sufficiently with information regarding the bank’s ability to meet these expectations.
When the opening 15 minutes are up, bankers should recognize this and ask whether they should continue, or if a second appointment would be more suitable.
According to Richardson, (1992):
The objections and responses show how bankers can keep sight of their objective to sell a personal sales interview and to retain control of the telephone conversation. Trying to sell on the telephone often result in lost opportunities. Proposals in the mail and other non-direct approaches are time-consuming and expensive, and their results are often disappointing. Personal first interviews usually cannot be replaced by phone calls, proposals, or letters (p. 143).
Telephone Calls Preparation
Planning and homework should precede all telephone calls. Preparation is essential if the time, effort, and potential of telephoning are to be realized. Bankers should be prepared with names, dates, and data. In some cases even the smallest pieces of information can be beneficial when closing a deal, insignificant as they may seem.
The calls should be taken from a relatively quiet and uninterrupted location and notes should be taken regarding new or additional information given during the conversation. It is essential for bankers to make sure they are keeping track of their progress when dealing with the customer and make sure that they are maximizing present opportunities and following up as promised or required. The telephone can be a powerful tool when planning a sales or a follow up strategy.
Even though the telephone is an essential part of the deal but acts only as a primary stage before the meeting itself, it can be used to begin and maintain a sales dialogue and reach agreements when face-to-face meetings are not possible because of geographical distance and time factors. When using the telephone to sell it is important to make a checklist prior to the call, take notes during the call, and confirm agreements in writing (Richardson, 1992, pp. 148-149).
NURTURING THE ACCOUNT
The relationship is instigated after an agreement has been reached and the contract has been signed. Relationships must be cultivated and nurtured if they are to survive. The objective of nurturing is to preserve and develop relationships and to establish long-term relationships that are beneficial to the customer and to the bank. Nurturing is a vital part of relationship management, since it is the vehicle for follow-up, cross-selling, problem solving and overall account preservation. One of the most significant functions of bankers in cultivating the relationship is to monitor the decision makers and the organizational structure. They should as well monitor the total calling effort of the bank to maximize the full profit potential of the relationship.
Follow up is a mechanism for guaranteeing customer satisfaction and therefore is essential to relationship management. As relationship managers, bankers should function as a liaison between the client and the bank to facilitate a smooth start for a new product or service and to monitor the activities of their relationships. If problems arise, Bankers should resolve them and offer customers with the service and personal attention they require. Consistent effective follow up is the weakest link in many businesses. Bankers that offer their customers an efficient and timely follow-up and follow-through are almost always guaranteed of creating their own competitive edge over a large segment of their competitors. To facilitate follow-up, bankers are ought to update their records and complete call reports immediately after the call, initiate appropriate internal contacts with product areas, develop internal leverage for credit approval, reply in a timely manner, and record monitoring and follow-up activities in their own calendars to trigger future activities. Follow-up actions can consist of providing information to the customer, setting an appointment with a specialist, or installing a new product or service. If there is no specific follow-up, bankers should put a memo in a tickler file and initiate the next personal or telephone nurturing call within a reasonable time p, regularly at least once a quarter. Energies, progress, and opportunities can be wasted unless there is closely controlled follow-up. Follow-up (a personal visit, telephone contact, a letter, an e-mail, clipping and sending of an article) is as significant to sales as sales planning, the making of sales calls, or completing sales, particularly in a highly competitive environment. Follow-up divides professionals from everyone else.
Cross-selling is an important by-product of nurturing. Since nurturing calls are excellent ways to recognize and maximize cross-selling opportunities. The term cross-selling refers to providing additional bank products and services to current clients.
All customers who have an account with the bank are targets for cross-selling. According to Richardson (1992) “Nurturing provides a way to expand relationships, since present customers are the best sources of additional business” (p.150), customers who have a relationship with the bank can often benefit from products that complement their present systems or form a new products that can meet their other financial and banking needs. For example, a customer who likes to be frequently updated with the present condition of his account will enjoy the SMS service that informs the bank’s customers of specific transactions that have been conducted in their accounts, according to their wishes.
Cross-selling is a vital factor in developing and keeping market share. Research has demonstrated that the bond between customers and the bank is strengthened significantly with each additional credit and non credit product. Because of the changes in the banking industry, customers have begun to expect their banks to be able to please the full spectrum of their financial needs. Bankers can capitalize this by initiating ways to integrate services and increase customer convenience.
Cross-selling results are not a matter of coincidence or simply being at the right place and at the right time. Bankers need to create their own luck by broadcasting their range of product knowledge and refining their communication skills so that they can recognize and maximize the opportunities that exist with each of their customers. They should take advantage of their product knowledge, customer knowledge, and consultative selling techniques to build relationships. To assist bankers in their cross-selling efforts, banks provide computerized systems that provide access to information on present customers, from which cross-selling opportunities can be determined. Relevant information can be used to identify the customer’s present relationship with the bank and to project cross-selling opportunities.
Cross-selling sets long-term relationships. It is the vehicle for not only keeping market share but also for expanding it. It helps bankers lock in their customers and block their competitors. In today’s banking environment, banks are forcefully seeking one another’s market share. The constant relationship that once existed in banking is not a part of the banking climate of today. Today’s bankers need to earn their customers’ loyalty by building a total banking relationship and they must help build in loyalty by satisfying needs through the cross-selling of credit and non-credit services. The noticeable advantage of cross-selling, as a relationship strategy, mainly for priority accounts, is that it reduces the customer’s need or desire to look to other financial institutions for financial services (Richardson, 1992, pp. 150-152)
Nurturing calls are calls to the present customers. They are vital to the banking sector and these customers are considered to be the best prospects in cross-selling.
Nurturing calls need to be more than “what’s new” or “hello” calls. Often bankers go unprepared for a nurturing call. The purpose of the nurturing should be to identify and satisfy needs. Nurturing calls that do not result in uncovering problems may not uncover opportunities. Bankers must look for existing problems, bank related or company related. Bankers who can aid in solving problems that the customer has can strengthen and expand the business relationship. When problems are understood and addressed, bankers can make recommendations that satisfy customer needs, while at the same time they promote the products or services of the bank and increase the bank’s market share.
Nurturing call involve specific preparation. Bankers should refer to sales call reports, files, and records from the period where they have conducted the last call, to analyze and evaluate the status of the relationship.
Bankers have to complete call reports, not just to “push paper” but to keep track of information that was gathered during the last contact. Memory shouldn’t play a role when contacting a customer. Far too much costly information is lost when entrusted to memory. Call reports when they are completed and filed appropriately, can give bankers or their colleagues instant and complete recall. As bankers open their nurturing call, bankers should: Greet customer, summarize status to date, ask about customer satisfaction, look for problems and if a problem arises discuss it, and provide informative data.
In case there is a need for further assistance from the customer side the banker should meet with the support personnel, plan next step or corrective step, be alert for opportunities to cross-sell, and strengthen contacts with the customer.
Nurturing is a part of sales planning, sales implementation, and sales maintenance. It is the sign of a healthy customer relationship. While nurturing, bankers reinforce the confidence that customers exhibited in choosing them and their bank initially. Nurturing strengthens established relationships and converts new accounts into a long-term relationship. Bankers who nurture their accounts are less likely to lose them, and that of course is the purpose of relationship banking (Richardson, 1992, pp. 152-153)
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