advertisement

feb-sme-cwendel-trends

50 %
50 %
advertisement
Information about feb-sme-cwendel-trends
Education

Published on January 9, 2009

Author: aSGuest9815

Source: authorstream.com

advertisement

Slide 1: Charles B. Wendel IFC Symposium on SME Finance In India February 11, 2002 Financial Institutions Consulting Overview: Trends and Winning Strategies Slide 2: 1 Our Focus Key Messages Why is this market attractive? What does an SME customer want? How to build a top performing SME initiative Other issues to consider Takeaways Slide 3: 2 KEY MESSAGES Winning in the SME market requires: Focus — on specific customers and products Cost Management — process streamlining, product standardization, and clear role definition Linkage to the Branch — for sales, service, and cross-sell Data Centralization — for marketing, profitability analysis, cross-sell, segmentation Strong Risk Management — strong policies and procedures; no exceptions Technology Leverage — to support all of the above Slide 4: 3 Developing Market SME ROE: 0-10% 10 20 30 40 In established markets, the SME segment continues to generate above market returns versus other businesses MARKET ATTRACTIVENESS U.S. Market Size and Profitability Revenues ($BN) 50 100 200 SME Insurance 800 Credit Cards Mortgages Mutual Funds Consumer Finance ROE (%) Slide 5: 4 Developing Market SME Total Bank Profitability: 0-5% SME’s usually generate significant revenue and profit Retail Bank Commercial Bank Small Business Segment ~30% of total bank profitability Slide 6: 5 However, in most countries the small business market is just being “discovered” Corporate bankers have overlooked small business while focusing on bigger deals Consumer/branch bankers avoid focusing on what some consider a complex segment Insufficient knowledge exists concerning small business related profitability and potential But, SMEs are “bank dependent” to a much greater degree than large corporates Slide 7: 6 Note: Analysis shows that today two areas generate virtually all profits Small Business Profit Distribution Deposits 70-85% Loans 10-15% All Others 5% Small Business Profitability 100% Slide 8: 7 CUSTOMER WANTS In established markets convenience and service drive bank selection Average 26 51 66 83 78 46 88% *As a percentage of small businesses selecting provider as primary Reasons for Maintaining Accounts With Bank Slide 9: 8 Most customer product needs are narrow Product Use by Small Businesses Slide 10: 9 In general, larger small businesses express greater satisfaction with their bank “Do you agree with the following statements?” (by revenue segment) US Example Slide 11: 10 STEPS TO TOP PERFORMANCE Perform internal evaluation Conduct local market analysis Define your customer target Agree on product development priorities Ensure infrastructure support Redirect marketing Slide 12: 11 Examine existing customer base Separate small business customers from consumers Evaluate current products Assess retail staff activities and capabilities Perform internal evaluation Conduct local market analysis Define your customer target Agree on product development priorities Ensure infrastructure support Redirect marketing Key steps to top performers Slide 13: 12 Small business market size and marketing Competitor activities – local and out-of-market players Market gaps/niche players Local macroeconomic projections Perform internal evaluation Conduct local market analysis Define your customer target Agree on product development priorities Ensure infrastructure support Redirect marketing Key steps to top performers Slide 14: 13 Match internal capabilities to customer segments (e.g., retail branch focus and microbusiness retailers) Analyze segment profit dynamics: products used, likely balances, growth and cross-sell potential Determine competitor gaps Begin with a narrow focus, then expand Do not strive to be all things to all customers Perform internal evaluation Conduct local market analysis Define your customer target Agree on product development priorities Ensure infrastructure support Redirect marketing Key steps to top performers Slide 15: 14 “If you don’t segment, you are spending too much money trying to be all things to everybody.” Small Business Market Manager Bank One Slide 16: 15 Size segments within small business differ in product/service requirements and economics Segment $500K-1 MM $1-2.49 MM $2.5-4.9 MM $5-10 MM Key Product Needs (Additive) Deposits Insurance Credit overdraft line Line of credit Equipment leasing Accounting/tax services Investments 401(k)/retirement Cash management Advisory services, e.g., succession planning Economic Leverage Factory/ “consumerized” approach Standardized products Focus on emerging targets Investment wallet share US Example Slide 17: 16 Base product set on customer target Build a few, core products Carefully evaluate projected product profitability; determine implications on minimum required balances and pricing Avoid rebranding retail products; start fresh Key steps to top performers Perform internal evaluation Conduct local market analysis Define your customer target Agree on product development priorities Ensure infrastructure support Redirect marketing Slide 18: 17 Dick Kovacevich, Chairman of Wells Fargo, on lending: “I believe that the loan has reached a level in our industry that its only value is as a hook for a total relationship, a loss leader if you will…like Crest toothpaste at 39¢ at K-Mart. It should be viewed as the means to the ultimate end—which is 100% of the business—not the end itself.” Slide 19: 18 Traditional Commercial Account (one product fits all) Basic Small Business Account Microbusinesses Low transaction activity Fixed monthly fee Limited number of transactions No minimum balance Core Small Business Account Larger small businesses High transaction activity Unlimited check writing, debit/credit Minimum balance requirement Fees based on average balance Business Money Market/ Interest-bearing Account Larger companies Low activity High minimum balance requirement Monthly maintenance fee Positioned to compete with non-bank sweep account Best practice banks have tailored their products to meet different customer needs Slide 20: 19 Focus on branch activities Frame small business owners as priority retail customers Create/hire product specialists (e.g., small business lenders) Build centralized marketing capabilities aimed at small businesses Perform internal evaluation Conduct local market analysis Define your customer target Agree on product development priorities Ensure infrastructure support Redirect marketing Key steps to top performers Slide 21: 20 Top banks provide a solutions based offering Best Practice Relationship Manager Banker as a solution provider Specialists introduced as necessary Lending as “just” one product Success-based compensation Integrated personal and commercial needs Highly targeted customer Slide 22: 21 Traditional Bank Approach: “Selling is what I do after completing everything else.” Best Practices Approach: “We sell like crazy.” Slide 23: 22 Sales culture requires that banks break out of traditional approaches Function Traditional New RM Role Administrator, sales, Sales team manager underwriting Cross-selling Single product sales Product suites Compensation Merit; subjective Incentive-based Credit Separate unit; Part of sales team; gatekeeper consultant/advisor Creation of a New Sales Culture Slide 24: 23 “Our branch people shy away from selling to businesses. They think it is too complex, and it scares them.” “There are a lot more consumers than small businesses.” “Why should we focus on serving their customers?” Challenges for retail-based sales efforts: Slide 25: 24 Many successful approaches used to enhance marketing lever the branch Segment branch customers by profitability; demonstrate business owner attractiveness Allocate small business profits to branches Change compensation factors; reward branches for small business success Redirect customers to appropriate products (even if it means lower returns) Build/convert small business branches Examples Slide 26: 25 Operations/transaction platforms/systems Compensation/HR Centralized marketing, administration, etc. Overall integration into retail infrastructure Key steps to top performers Perform internal evaluation Conduct local market analysis Define your customer target Agree on product development priorities Ensure infrastructure support Redirect marketing Slide 27: 26 OTHER ISSUES Organization SME activities generally fit in better with the retail, not commercial, organization Compensation Sales performance needs to be tied to a significant upside Touch vs. Technology Banks need to establish factory-like approaches to credit quality while emphasizing the “Norm” factor Culture Will an SME effort be stifled in the existing bank? Is a separate discussion or Newco required? Bank Disintermediation New entrants (vendors and non-banks) hold significant share won at point of purchase Slide 28: 27 TAKEAWAYS BOTTOM-LINE DISCIPLINE “We don’t put on a loan unless we get the deposit account.” SELECTIVITY “We sell deposits and loans. Period. The lion’s share of small businesses really don’t want or need more than that.” CREDIT THOROUGHNESS “We visit every company on-site before we make a loan.” PARTNERING “We partner up with specialists. They do the work; if we generate business, we get fee income.” Slide 29: Charles B. Wendel IFC Symposium on SME Finance In India February 11, 2002 Financial Institutions Consulting Overview: Trends and Winning Strategies

Add a comment

Related presentations