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Turning around the sales approach in retail banking
Retail banks have evolved their sales practices over the past decades. From their inception with salary accounts starting in the 1960s, the inaugural branches themselves have evolved and additional services and channels have been added. The most notable additions comprise ATMs and self-service devices in the 1980s, telephone and online banking and later mobile banking since the 1990s, and outbound call center services for at least 20 years now. Yet the fundamental sales model remained unchanged.
High street lenders plan their branch networks depending on frequency of footfall. Branch concepts have been varied to cater to different circumstances, with city branches, flagships and self-service outlets being part of the mix. The general idea remains the same: Placing an outlet where there is footfall, decorating it appealingly and branding the outside, and hoping people will step inside. The bare facts, however, are devastating:
- High street lenders struggle to add customers to their base (even if supported by promotions), as our 2022 Retail Banking Monitor confirms once again - in contrast to challenger banks
- Network cuts, on the other hand, show (very) limited effects in terms of attrition, even after some time (cutting the network by half, as some have done, means losing barely more than 20 percent of customers anymore, very different to a decade ago)
- Sales KPIs do not benefit from the changes made, with sales appointments per advisor remaining between 1 and 2 per day, and the share of service over sales tasks tending to increase in a cut-down network
- Offline-only customers now account for less than 20% of the base1 - just half of their share only a decade ago, with this downward trend continuing
Alternative formulas to the main one of cutting into the network are hard to find (in our 2021 Retail Banking Monitor, our analysis indicated that by 2023 40 percent of the 2019 branches would be gone across Europe). A few mass market and consumer finance-focused lenders are pursuing outbound-oriented models with branches focusing on converting leads. One of the earliest examples is still out there and is going back to the times where Citibank operated retail banks in various European markets. Already in the 1990s, Citibank branch advisors were only available by appointment - either pre-arranged or on-site, with a meeter-greeter guiding service customers to the self-service area.
Modern D2C approaches across industries
For more modern examples, we need to look elsewhere. In consumer goods, direct-to-customer (D2C) strategies have become core sales approaches. Sports companies apply a full range of multi-channel lead generation strategies, from running/sport apps to web sales and community features to own stores globally - all linked by customer profiling across channels and online lead generation. Even insurers (typically more hampered in direct sales than banks, as their agent networks ‘own’ customer addresses) are fueling sales through online content marketing, financial super app/aggregator services and online sales, yet linking back to their (tied) agent networks as they understand the importance of personal conversion, at least in certain lines like life and health. Online mortgage brokers now consistently follow personal conversion approaches, where online leads are immediately assigned to local sales agents for follow-up - knowing that conversion rates are at least 10 percentage points higher than in a purely online process. Only banks seem to hold back from this approach.
Towards an outbound sales model in retail banking - with branches
Since evolutionary changes will not suffice, the branch-based sales approach requires a complete operating model overhaul – from inbound to outbound. Instead of waiting for footfall customers to enter branches (inbound), retail banks should use centrally triggered, targeted lead generation with subsequent decentralized, local follow-up of the leads to guide (potential) customers into the branches with a first view of their needs and convince them of the products and services offered (outbound).
The following example will help explain our view of the future outbound sales model:
While Robert is searching the internet for "mortgage loan", he gets an ad for a bank’s white paper explaining all the options on mortgage financing (content marketing). To get the white paper, Robert shares his contact information with the bank (lead generation). The bank’s personal banker Anne then contacts Robert with an offer to talk about mortgage loans. In this message, Robert can directly select an appointment, virtual or in-branch. Robert opts for an in-branch appointment and meets Anne there a few days later. During the conversation, Anne puts together an offer involving the bank’s partner network to match Roberts needs and price sensitivity. Robert then signs up for a mortgage loan with the bank and a term life insurance policy with one of the bank's partners.
The future branch operating model requires retail banks to engage in content marketing and leverage targeted digital advertising to guide the right customers into their outlets. We estimate that this outbound sales model will have the potential to drive customer-facing time from currently 15-25 percent to 75 percent and provide a new future for sales staff in a slimmed-down network, but also make each sales meeting more effective and targeted. Sales staff will interact with their customers both digitally and personally, to discover their needs and increase customer satisfaction.
The biggest challenge for retail banks will therefore not be about density of the branch network, but about the retail banks’ ability to embed physical branches into a digitally-driven outbound model.
7 steps needed to successfully implement an outbound sales model
To successfully CONVERT to an outbound model, retail banks should consider the following seven steps:
- Centralized lead generation and multichannel marketing
- Outbound steering of lead qualification and allocation
- Network optimized for proximity and accessibility by appointment rather than for footfall frequency
- Virtual and personal married together, with skills and technology upgrades for advisors
- Ease in products and processes, to work seamlessly across channels (enabling conversion without advisor support)
- Reward based on conversion, and beyond traditional bank branch incentive mechanisms
- Talent intake and development around advice & conversion rather than around support and service
This is the second article of our Retail Banking Monitor 2022 blogpost series. Also check out the other blogposts on Reinventing and Repositioning, Reinventing Products, Purposeful Repositioning, Repositioning for Embedded Finance, and Performance Review.
Marc Peiter and Dominik Berner also contributed to this report.
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