Archive for the 'Brian Diepold' Category

Cross-selling equals customer retention…but who’s buying?

Published on November 20, 2009 in Brian Diepold. 0 Comments Tags: , , , , .

Brian Diepold, Pitney Bowes Business Insight

It’s pretty well recognized that the deeper the relationship with the customer, the more valuable it is for the bank and the customer.  For years we have been preaching cross-sell as the way to build relationships, gain lasting customers, and run a profitable bank.  It’s also generally regarded that cross-sell leads to customer retention.  There may have been a bit of chicken and the egg with this part, but I think that has been resolved by looking at the timing of most cross-selling.  As we all know very well by now, the great majority of cross-sell takes place within the first 90 days.

I’m willing to take that as evidence of causality – cross-sell does in fact lead to customer retention, not the other way around.  The luxury of having millions of customer data records is that one cannot find themselves bored.  It seemed like a worthy endeavor to quantify the actual impact of cross-sell on customer retention.  And with that, enter 80MM customer account records.  By quantifying this relationship, we can see the direct impact of a firm’s strategic initiative and diagnose the types of households where cross-sell is more important to strengthening the relationship and increasing the probability of retaining the household.  The analysis uses a logistic model to determine the impact of cross-sell on the probability of retaining a household.

The bottom line is that regardless of how you measure cross-sell ratios, you can find the intuitive relationship that more products per household lead to a higher probability of retaining that household.  We also find a diminishing marginal return – i.e., the first cross-sell is the most important to establishing the relationship.  While each additional product does increase the likelihood of retention, the biggest jump is with the first cross-sell.  Rather than rewrite the research paper, I’ll just highlight some of the key findings:

  • Moving from one product to two for the household yields the greatest increase in the probability of retention.
  • Households with low deposit dollars yield an 8 – 10% increase in the likelihood of retention through cross-sell.
  • Households with mortgages or interest-bearing deposits as the lead product also yield an 8 – 10% increase in the likelihood of retention through cross-sell.

If you have the luxury of focusing your resources on certain types of households, these are the ones where you can make the biggest impact.

Attack Back With Financial Literacy

Published on November 11, 2009 in Brian Diepold. 0 Comments Tags: , , , , , , .

Brian Diepold, Pitney Bowes Business Insight

You couldn’t go ten minutes at BAI Retail Delivery without hearing about – or talking about – NSF fees. It’s natural that it would be a hot topic as it is certainly getting its share of media and congressional attention these days. Richard Davis made a great point that the industry needs to educate Congress and the public that these fees are not necessarily immoral – after all, as he so nicely pointed out, we are providing a service for the consumer and we are charging for that service.  I agree, and we need to take Mr. Davis’ advice that we need to tell the story in a more positive light.

I also think it’s important that we do more to educate our consumers. This economic crisis is very tightly linked to the lack of economic education and financial literacy in our country. We don’t do enough as a society to arm our population with the necessary tools to think about the world the same way we do as bankers, financial advisers, and economists. Not everyone needs to have a passion for these topics, but they certainly need to have a basic understanding in order to manage their personal finances. The national and state councils on economic education do everything they can to support these initiatives for our youth, but we also have an adult population that lacks this knowledge.

Let’s take it upon ourselves to help solve that problem. Banks could generate goodwill by offering simple educational programs at the point of sale. Let’s take 15 minutes to teach a new customer how to use their checking account. This may just allow them to avoid the extra fees down the road, while at the same time allowing you to guide them to being a profitable customer in other ways.

Not only is it good for the customer, but it would have to go a long way to convincing Washington that we are serious about addressing the issue ourselves – without Congress imposing their own solution.

Worst case – you are the only bank in your market that makes this effort. In that case, it should allow you to differentiate your offering and build that goodwill or brand value with the market. It’s a win-win.

The New Normal in Branch Activity

Published on September 22, 2009 in Brian Diepold. 1 Comment Tags: , , .

Brian Diepold, Pitney Bowes Business Insight

Among other effects, the current recession is likely to have an immediate and lasting impact on the branch deployment strategies in our industry. The immediate impact is fairly easy to predict. That is, net branch growth rate will decline significantly, most likely with some contraction over 2009 and 2010. But, what should we expect to see happen after the recession?

In the period just after past recessions, we have experienced a short-term spike in branch growth, likely due to some catch-up effects, followed by a return to the normal trend. It would be easy to assume that we could be in for the same kind of response after this recession.

But, I think there are several factors working against a return to the old patterns of branch growth. Most importantly, we have the ever-present alternative channel argument. While the maturing of remote banking may play a role in future branch growth, I believe that the dominant effect will be driven by overall residential development patterns.

If we look at the pockets of high branch growth over the past decade, much of the net new branches have logically followed the suburban development patterns. With every new McMansion development, branches followed to serve those communities. Unfortunately, many of those communities are being hit the hardest by the collapse of the real estate market. Prices are dropping much faster in the outer fringe development than they are in the urban core in many places. One could argue that these developments represent much of the excess inventory in the residential housing market today. As a result, it’s unlikely that we will see more of these developments popping up any time soon.

As the real estate market corrects itself, one of the numbers that is going back up is the percent of the population that rents instead of owning a home. Renters tend to reside closer in to the urban core in more densely populated parts of the market. Coincidentally, banks already have mature branch networks in these parts of the market. That is not to say there will be no new branches built, but simply that the decisions may move towards relocations, renovations, and need-based in-fill of the network, rather than continuing to grow with the residential development.

This is a unique recession, and as a result there will be unique events that unfold during the recovery period as well. One of them, I believe, is going to be a modest transformation of residential development patterns. We should see a move back towards more densely populated residential development. I don’t expect this to be a radical change, but as it changes on the margin, that should have an impact on where we look for new branch opportunities.

The result for branching is a new normal that probably doesn’t include a return to steady branch growth. There will be some branch growth, but I expect it to be more in line – finally – with household and population trends.

Announcing PBBI’s New Predictive Analytic Solution for Network Performance Management

Published on July 22, 2009 in Brian Diepold. 0 Comments Tags: , , .

Brian Diepold, Pitney Bowes Business Insight

After almost a year’s worth of development time, we are excited to launch the new Network Performance Management solution. Network Performance Management offers a suite of solutions focused on evaluating and improving the sales performance of financial services distribution networks. NPM traces its roots back to the PERFORM goal setting software PBBI has provided historically. While maintaining, and improving, the underlying predictive analytic models, we have greatly expanded the software capabilities and value for our clients.

NPM is delivered through an integrated desktop and web application that allows corporate office users and field staff to benefit from the same analytics and the same delivery platform. The technology also allows for other web applications to be seamlessly included in the client experience to enhance the tools available to the field staff.

Users have access to:

·         Local Knowledge reporting, that provides a complete view of each branch’s customer base, trade area characteristics, competition, and performance metrics.

·         PERFORM goal setting module maximizes branch performance by establishing objectives that are specific, measurable and attainable.

·         Network Analysis module provides sophisticated summary reporting across branches and management hierarchies, which allows corporate and regional management to identify top performers as well as those branches that require attention.

·         Custom Tools within NPM allow for additional solutions to be attached to NPM to ensure smooth communication between applications. The software is designed to link to other web portals through the Custom Tools module. These additional functions can greatly enhance the end-user experience and truly create actionable outcomes to empower your branch staff. The types of tools available could include:

·         Lead management
·         Prospect lists
·         Directing marketing solutions
·         Sales tracking

Our existing PERFORM clients, with additional deliverables on contract, will automatically be upgraded to the new solutions, which are now available. [More Information on Network Performance Management]