A relationship-banking culture can help banks compete
Competition is fierce in banking, for both loans and deposits. Traditional banks today face off against other financial institutions and familiar non-bank players (like payday lenders) as well as newcomers to the fray, including online-only banks and fintech companies. Every customer relationship is important, especially as banking becomes viewed as a commodity by more and more consumers. "As you look at your relevance as an organization, you have to realize your audience is changing," said Dirk Gasterland, CEO of Coulee Bank, La Crosse. "Because people have been viewing banking as a commodity, we have to draw the relationship element in by allowing customers to transition generationally." Shifting your bank's culture from "sales" to "relationship building" can mean the difference between connecting with your community and losing to the competition.
A relationship-based culture is critical in banking, because the industry has a unique relationship with its customers, according to Matt Middendorp, owner/founder of Sales Math Consulting LLC. "We're the only industry where, sooner or later, our customers will resent us," he said. "They'll write a check for their loan payment and forget that the loan allowed them to buy a home or piece of equipment that allowed them to grow their business." To combat that, strong relationships are key, since they remind the customer of the value their bank provides.
Loyal customers also create value for the bank and are less rate-sensitive. Research firm Novantas has found that primary financial institution (PFI) customers will accept rates 20% higher on loans and 20% lower on deposits than their unengaged/non-primary peers "due to the convenience and value they receive from the relationship." While non-primary customers can still be good customers, ultimately banks should endeavor to make them loyal (PFI) customers, and in order to do that, you need a relationship foundation with them, according to Kristen Talbott, SVP – chief retail officer at Tri City National Bank, Oak Creek and chair of the 2018-2019 WBA Marketing Committee.
Another key reason to undergo the herculean task of changing your bank's culture: higher employee engagement. "I find that bankers accept a relationship approach much better than a high-pressure sales approach," explained Kay Fett, professional improvement and training consultant. "We hire bankers today who are people-oriented. They want to develop relationships in order to offer the most appropriate services to their customers." The relationship-based approach leverages those skills and abilities, which bolsters employee engagement. "If you're getting the customers you want rather than just the ones you can get, employees feel like they're empowered and able to grow themselves," Middendorp explained. "They feel they're spending more time getting customers they're excited to work with."
Finally, establishing a relationship-based culture can help banks compete with larger institutions and digital disruptors. "It's a way for community banks to compete with evolving technology," Talbott explained. "There are people who want a relationship with their bank, and you can't compete on that front unless you have a platform that allows you to put interaction ahead of transaction." When bank culture places emphasis on building customer relationships, it makes it more difficult for the competition to poach away those customers. "Someone else is trying to undermine your relationships with your customers at all times," said Middendorp. "If you're not in control of that relationship you're automatically at a disadvantage."
Creating and sustaining a culture shift is a difficult, but rewarding, challenge. For banks ready to make the change from a sales to relationship-building culture, the following four tactics can help lead to success.
1: Start with why.
Gasterland recommended the philosophy Simon Sinek outlines in his popular book Start With Why: "Shift your focus to be on why you do what you do, rather than what you do or how you do it," he said. "The why answer shouldn't be the same as the bank down the street or across the country. It's individual to your institution." When your staff understand and embrace the bank's why, they have a solid foundation on which to begin building customer relationships and differentiate the bank from other institutions at the same time.
2: Take a top-down, top-to-bottom approach.
"A relationship-building culture can only be created from the top down," said Fett. "Bank leadership and management must demonstrate trust and relationship establishment in their own daily activities." Trust is a key element of a relationship-first culture, Fett explained, because putting the customer relationship first requires breaking down silos between different areas of the bank. Each banker must be able to refer a customer to colleagues in other areas and trust that their customer will be taken care of. "A retail banker doesn't need to know the details of the mortgage industry, but they need to know enough to recommend a meeting with one of the mortgage lenders when appropriate," Fett continued. Eliminating silos between departments also means every staff member needs to put the customer relationship first. "Everybody needs to think about the customer, from top to bottom, whether you're in a forward-facing position or in the back office," said Middendorp. "From the president on down, everyone needs to think that way."
3: Be consistent across all channels.
"What makes relationship orientation truly work is that it's a universal experience for the customer regardless of the entry point," Gasterland explained. "It's adhering to that methodology at every touchpoint." Talbott recommends re-examining the bank's omni-channel approach from the customers' perspective, watching for areas that may cause confusion or seem unnecessary. "With relationship banking, you need to figure out how to earn relationships through other channels," she said. "Face-to-face is important, but you also need to have a digital engagement strategy."
4: Measure what matters.
Key performance indicators (KPIs) will vary by role and institution, but should ultimately reflect the bank's strategic priorities, according to Talbott. Common key indicators include checking account attrition rates, wallet share (number of accounts per customer), and inter-departmental (or cross-product line) referrals. Measuring a culture shift is difficult, Gasterland acknowledged, but also valuable. "The way to implement this culture is all predicated on talking to your people and asking them to provide the feedback necessary for you to make their lives easier," he said, explaining that Coulee Bank sends out a quarterly "Pulse" to its employees seeking that feedback. "The accumulation of that data allows us to see where we're moving the needle in the right direction." Ultimately, if the bank has succeeded in creating a shift from sales to relationships, it will impact the most basic metric of all: "Sometimes we over-measure, so the simplest solution is sometimes the best," said Middendorp. "Look at the bottom line."
No matter which approach the bank takes to building a relationship-based culture, it is important for senior leadership to recognize that such a strategy is a long-term investment and will require resources and focus accordingly. "This is not a one and done solution," said Gasterland. "That's ultimately the challenge." However, it is worth the effort. As customer expectations change and competition increases, strong relationships will become a necessary foundation for bank success. "Going forward, in order to remain relevant, this can't be something that you just hope to do well," said Talbott.
Sales Math Consulting LLC is a WBA Associate Member.