Why is a bank branch like a golf course?
I’m a member of a local golf club and over the past few years I’ve volunteered to oversee the management of our course maintenance.
Every year our costs go up. Labor costs go up. We try to see if we can get by with fewer people, but we need to have enough people to operate at peak times. It’s tough to always have the right number to match our daily needs. Real estate taxes go up. It costs more for fuel. It costs more to maintain the machines.
By and large, these costs are the same no matter how many rounds of golf are played. If it’s 1,000 rounds per year or 25,000 rounds per year we still have to maintain it. The grass needs to be cut the sand traps need to be maintained and on and on.
Every year we struggle with how to pay for this. We start by looking at every line item and try to take it down. Do we really need this? Do we really need that? Can we get one more year out of that mower? After that exercise is over, it always seems to be the same – we can’t cut anymore and we still have a problem – too much expense – not enough revenue. How do we close the gap? We have an asset with a fixed cost and to pay for it we only have two options. Increase dues or admit more members.
Well, I hope I’ve made my point. The cost of operating a branch is pretty flat, no matter how much traffic comes through. Yes, you try to schedule staffing so you don’t have waiting lines at peak periods and idle staff at slow times, but for the most part the cost is flat.
To make more money you need to get more customers or get more revenue from your existing customers. This is hardly a new idea, but when you look at the two options a couple of things become clear. Getting a new customer is very expensive – getting more revenue from an existing customer is not – or, I should say – does not have to be.
Some quick numbers. Lets say that every 80% of referrals end with a sales appointment with a qualified customer. And 40% of them buy something from you. And the average gross revenue is $2,000. That means that one more sales appointment per branch per day translates to $160,000 in new revenue per branch per year.
It seems that during the course of a day, each branch should be able to generate at least one additional sales appointment. Unfortunately, it is not that easy. But it can be done. You need to start by understanding exactly what stands in your way. You guessed it. That’s the topic for my next installment.
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3 Responses to “Why is a bank branch like a golf course?”
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Stewart, I liked the analogy to maintaining a golf course to the fixed costs of a bank’s branch. Bob O.
Stewart-
Although not a golfer myself, I like use of an analogy to make the point that making money in banking is relatively simple – acquire more clients, sell them more stuff that is profitable, and keep the good / quality ones for as long as possible.
But “simple” does not translate into “easy”. Take the idea of “selling them more stuff that is profitable” – i.e. “cross-selling”. Banks have forever touted their ability to capture share of wallet – but what does that really mean – how do you first determine the size of each clients wallet and then ascertain what share you have? In the simplest form, you get to know your clients through a thorough needs based discussion – and you build on that initial discussion with every interaction you have with the client – whether in person or through the transactions they perform with your firm or through your firm. But how many of us bankers have really spent the time and resources necessary to fully understand our clients? I would argue that while banks should have more data on their clients than nearly any industry, we are loath to actual translate that data into useful and actionable information. Until an organization can effectively utilize the data resident inside its systems/databases, and through the transactions and interactions it has with clients, it can not act in an efficient manner. Stated in other words – a sale is a part of the process of serving a relationship – not the end goal.
Training front line employees on the importance of asking the right questions and recording the responses – whether that be to ensure that phone numbers and email addresses are correct or whether it includes information about where else clients have banking relationships and what the extent of those relationships are … that is where it has to start … then the importance of managing and slicing and dicing that data into discrete and useful information needs to become a “C level” issue … then we can begin to make useful and informed offers and “cross-sell” our services.
Unfortunately in today’s world consumers view bankers and those associated with financial institutions in a fashion not seen before – where there was trust before, there are skeptics today … so uncovering the data is ever more difficult.
John W’s point is well taken. Simple is not easy.
Marketing is part art – part science. Having more information about a customer should make cross selling much more effective. Some banks have been very sophisticated here both capturing data directly and buying data overlays and doing predictive modeling to forecast a propensity to buy certain products. But in many cases it has had limited success and high costs.
I agree that personal interactions are far more effective. And I very much agree with John W., that the sale is simply a by product of a well serviced customer relationship.