The Common Thread

We’re devoting this entire issue of Bank Director magazine to excellence in retailing. While “retail banking” has long been an industry buzzword, it was largely honored in the breach, with precious few banks showing anywhere near the savvy of the truly great retailers.

In the past five years, that’s changed dramatically. Never before has a small group of commercial banks emerged from the pack and, through aggressive and sophisticated marketing, distanced themselves from peer-group banks in terms of deposit growth. Perhaps most important, this growth hasn’t come from high-cost purchased deposits, but by growing customer bases the hard wayu00e2u20ac”by offering better service and better products.

We’ve looked at a number of banks recently and have whittled down our top-retailers list to four: Umpqua Bank on the West Coast, Commerce Bank in the East, Fifth Third Bank in the Midwest, and the newly bicoastal retail powerhouse, Washington Mutual, now branded Wamu. Each takes a very different path to marketing excellence, but as we’ve looked at these retailing winners, it’s clear there are some common threads:

A leader who is passionate about the business. Charismatic leadership and effective communication are essential to building a great bank. Like Apple’s Steve Jobs, like GE’s former CEO Jack Welch, all of our hero banks have a high-profile leader who eats and breathes the business, who cares about its culture, who talks the talk to all who will listen. These leaders create disciples of their employees to the point that they not only become champions of the culture inside the bank, but they also step outside and create an awareness of it among the general public.

Employees who believe. At Umpqua Bank, more and more hires come to the bank because they have impressed someone in their present job. The Umpqua true-believing employee hands the person a card and suggests he or she file an application to join the bank. It works, not because the bank employee gets a reward for the referral, but because the employee believes in the work environment of the bank and believes in the bank’s culture.

No fear of failure. Retailing initiatives can fail. When they fail in a Home Depot or a Best Buy, a product is marked down and moved out. When financial products fail, banks tend to keep them on the shelf forever, rarely weeding the garden. Today’s successful bank retailers aren’t afraid of trying new products and new promotions, recognizing that some of them will fail, and counting an occasional strikeout as part of the cost of hitting home runs.

“Not invented here” as a virtue. The laggard banks hire from within the bank and the profession, almost never innovate with products adapted from other industries, and rarely even scan the landscape for new products that are working in other banks. The most successful banks, conversely, look to other industries for their employees, frequently hiring (and sometimes preferring to hire) people with no bank experience at all, and they constantly search for products that have worked well in other banks. And the best of them aren’t afraid to look at products in other industriesu00e2u20ac”such as when Commerce Bank saw coin counters working well as a promotion in supermarkets and successfully adapted them in their stores.

Branding permeates everything. All brand, all the time. The successful retail banks recognize that everything they do affects their brand. Run an annoying television spot, put in an unreasonable service charge, and the brand is tarnished. Help out a school’s band, stay open in a snowstorm, overstaff to keep teller lines short, and the newspaper picks it up, word-of-mouth takes over, and the brand shines.

The customer really is king. Banks have given lip service to putting the customer first forever. But misapplying the 80/20 rule, banks everywhere proceeded to drive away low-balance customers through a punitive pricing policy that telegraphed a lack of appreciation for the customer’s business. That’s changed as today’s successful retailing banks realize that every customer can be a profitable customer by tailoring services for all segments and pricing them fairly.

I couldn’t help but notice one other common thread as we talked with these banks: Up and down the line, managers and employees are having fun as they build the bank. That’s worth noting, I think, as directors and officers observe the bank’s employees at work. Whether or not they’re having fun on the job might just be the canary in the coal mine, an early warning of how well your retail strategy is working.

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