There are more than 31 million small businesses (6.0 million employer and 25.7 million nonemployer firms) in the U.S. and the vast majority of banks provide a range of banking services to this segment. However, many banks do not have a dedicated small business marketing programs. This is in part due to the small business segment often falling between two key segments: consumer and commercial.
For banks to effectively grow their small business banking franchise, they need to identify the unique characteristics and financial needs of this segment, and then build an integrated series of marketing initiatives to drive small business awareness, interest and engagement.
The following are 7 areas where banks should focus attention in developing small business marketing initiatives:
- Incorporate small business into bank advertising campaigns. It’s expensive to develop dedicated small business advertising campaigns; only small business finance specialists (such as Kabbage) or the very largest banks do so. However, banks can highlight their commitment to the small business market by featuring small business owners and services in bank-wide brand campaigns.
- Build marketing initiatives and offers around National Small Business Week. National Small Business Week is organized by the U.S. Small Business Administration (SBA) and takes place each year in May. Many banks now celebrate the week with special offers, events and other initiatives targeted toward small business needs.
- Participate in/host dedicated small business events. Many banks speak at, exhibit at or sponsor small business events in their footprints, which helps to position them as a provider of advice and services to small businesses, while also allowing banks to engage directly with small business owners. Banks that have invested significantly in small business events include Chase (which hosts regular Chase for Business Conferences in various cities, most recently in Pasadena and Columbus) and Wells Fargo (which participates in Small Business Expos throughout the country).
- Leverage the branch network. A Mercator survey found that 79% of U.S. small businesses visit a bank or credit union branch at least once a week. Owners also want to create and maintain networks within their local markets. Banks can leverage business owner branch affinity and networking needs by hosting events in their branches. In addition, banks should deploy dedicated small business bankers in larger branches, as well as incorporate small business signage and collateral into all branches.
- Carry out small business surveys. A wide range of banks now carry out regular surveys that both provide a gauge of small business health (optimism, key challenges, opportunities) and reveal small business attitudes toward hot topics (e.g., tax reform, regulations, technology usage). Banks are increasingly publishing findings in more creative formats, such as infographics. It is also worth noting that banks conduct these recurring surveys at different intervals:
- Create dedicated small business portals. Most banks have built and branded online small business portals that act as a one-stop shop for small business information and advice. To encourage repeat visits to these portals, banks need to provide a range of content (articles, case studies, podcasts, webinars, videos, infographics) organized around key small business needs or life stages (e.g., starting a business, selling a business), and designed to create an excellent user experience. Prominent small business banking portals include:
- Develop a dedicated small business social media presence. Banks can emphasize their commitment to the small business market, as well as promote various small business events, offers and other initiatives, by creating a dedicated small business presence on social media, particularly on Twitter. Banks with dedicated small business Twitter handles include:
- Chase for Business (@ChaseforBiz, 191,851 followers)
- Wells Fargo (@WellsFargoWorks, 57,715 followers)
- Capital One Spark Business (@CapitalOneSpark, 42,318 followers)
With the wide range of marketing options at their disposal, it is vital that banks do not use a scattergun approach to their small business marketing initiatives. Instead, banks should look to create an integrated small business marketing plan that includes goals and objectives, reflects overall bank positioning, has consistent messaging and creative execution, and works in tandem with the bank’s small business sales and service channels.
In reporting their quarterly and annual financials, leading U.S. banks reported continued declines in their branch networks.
These declines are driven by banks’ need to cut costs, as well as reflecting the significant shift to digital channels by consumers and businesses for their everyday banking needs. However, There is plenty of evidence that banks remain fully committed to their human channels, especially the branch channel.
- JPMorgan Chase announced last week that it plans to open up to 400 branches in the next five years in new markets.
- At its 2017 Investor Day, Citigroup discussed its retail banking campaign in Manhattan, which featured three new Citigold Centers as well as the addition of 70+ relationship managers and financial advisors. This campaign led to a 16% rise in checking deposits, 18% growth in assets under management, and 35% increase in personal and home equity loans.
- Wells Fargo has a branch presence in more than 460 markets, which it considers to be a competitive advantage over national banking competitors such as Chase and Bank of America, both of whom are in less than 250 markets. Wells Fargo also highlights that it is in the 15 fastest-growing U.S. markets.
- Fifth Third presented its “bricks and clicks” approach at its Investor Day, which articulated the roles of both digital and branch channels as well as the importance of integrating these channels.
Why do banks remain committed to human channels?
- While digital channels are effective for day-to-day banking needs, bank clients tend to prefer human channels for their more personal and complex banking needs.
- With the switch to digital channels for everyday banking, banks no longer need highly-dense networks in order to establish or maintain a physical presence in new markets.
- Reflecting their changing role, branches are increasingly staffed with specialists (e.g., mortgage bankers, small business bankers, investment bankers) who increase branch effectiveness as a sales channel.
- Maintaining a branch presence in a market is key to raising and maintaining brand awareness and affinity.
Banks need to invest in both human and digital channels, in order to reflect customer needs, preferences and behaviors. A truly integrated channel strategy and structure, which is built around the customer journey, and which reflects the unique attributes of both human and digital channels, is vital for banks to optimize returns on their channel investment.
According to the FDIC, U.S. banks have been cutting branches steadily in recent years. Offices in FDIC-insured institutions reached a high of 99,500 at the end of 2Q09, but have declined by almost 8% since then, to less than 92,000.
Bank branch reductions are primarily driven by two factors: cutting costs in a low-revenue-growth environment; and the belief that customers’ increase use of electronic channels for everyday banking needs means that banks need fewer branches. According to the American Bankers Association, 73% of U.S. adults identified the Internet and mobile as their preferred banking methods, with only 14% naming branches. However, customers remain committed to branches. According to a March 2016 Accenture survey, 87% of North American banking customers expect to still use bank branches two years in the future. A branch strategy that simply consists of branch cuts fails to take into account customers’ ongoing branch affinity, as well as ignores the significant role that branches can play in helping banks meet sales and service goals. Here are four strategies that banks can follow to optimize their branch investments:
- Create specialist branches. Some banks are opening offices to target specific segments, such as commercial clients or high-net-worth individuals. For example, BMO Harris opened a commercial banking office in Dallas in June 2016, while Wells Fargo opened a Middle Market Banking office in Albany in August 2016. These branches are located, designed and staffed to cater to the characteristics and unique financial needs of these segments. Unlike traditional branches that tend to form part of a network, these specialists branches can operate on a standalone basis, thereby ensuring that costs stay under control.
- Use branches to promote digital services. Recognizing the transition to electronic channels for everyday banking transactions, banks can leverage their branch network to demonstrate the ease-of-use and value of these digital services to customers who are slow to embrace technology, while also showcasing innovations to early adopters of new technologies. Bank of America has deployed 3,800 ‘digital ambassadors’ in its branches who help customers understand and use its online and mobile banking services.
- Overhaul branch staffing. Smaller branches require fewer personnel, but the staff must be comfortable with performing a range of service and sales activities. Embracing this model, PNC plans that half of its branches will have converted to ‘universal branches’ by 2020 (18% have done so to date)
- Scale down the overall branch footprint. As they seek to reduce branch costs, banks need to take into account the benefits of having a physical presence in markets. This can involve using smaller branch formats (one extreme example is PNC’s portable 160-foot “Tiny Branch” on the West Virginia University’s Morganstown campus), reducing branch density, replacing a series of existing branches with one big flagship store, or even opening new branches in high-growth/high-potential markets. Decisions on the number, location and format of branches should be based on analyzing a number of key factors, including: competitive intensity; market size, growth and composition; current branch usage; short-term costs; and longer-term savings.