Integrating Retail Strategy and Small Business Strategy

Transcription:

Brian Haney (00:09):

The clicker. Clicker. Perfect. You guys can hear me good. Okay, excellent. Well, thank you again for having me. I've been here a couple of times. I really appreciate the invite, Chana. It's been so far, so great, and I look forward to at least contributing to the knowledge of everybody here from what we've done at Comerica. One of the things I wanted to tell you guys is you're going to see some parallels in what Ben just said, in what we've done here. But before I start, I want to talk about what I'm trying to do or what I was asked to do. And we have the synopsis or the abstract of this presentation and this presentation said for many banks, consumer business is the elephant that dwarfs small business. Who's experienced that? I'm sure all of us experienced that frequently. Major consumer banking initiatives circumvent, push aside, slow stop, small business initiatives.

(01:03):

Does it have to be that way? I'm going to tell you, it doesn't have to be that way. I'm going to tell you that you have choice and in fact, we flip the script a little bit for this one, and then I'm not really going to talk about where does small business belong. I think that's an off debated thing here. I've been on many sides of these debates over the years, but really what I want to talk to you about is how does small business and retail align? And I'd say more importantly, how does small business contribute to retail? Usually it's the other way around. So what I wanted to show you, I want to start with, I'm not going to go into this and this is a horrible slide to put up in a presentation, so I apologize, but the reality is this is our investor page for the retail bank.

(01:43):

I want to point out two things for you guys to look at quickly. First of all, we're a $90 billion bank. Have not crossed the a hundred billion dollars threshold yet, but point number one on the left hand side, three priorities, priority number one for us in our retail bank is elevate small business. I want you guys to see that. That's kind of interesting. And then on the right hand side, I think even more fascinating, I'll get into this of five proof points that we did to our investors, five of them, four of those from the retail bank are small business proof points. So I want to tell you about what we did, but what I want to do is instead of talking about the topic is invited to talk about, I want to flip it around and say, how does succeeding in small business make the retail bank stronger?

(02:26):

And I'm hoping that all of you can take this back and say, gee, that's something that you can do or you can think about and how you might influence the retail bank at your institution if you are caught up in some of these stresses, how you might influence them to be able to move the business forward. Okay, so what did we do at Comerica? Well, we embarked on a journey about two years ago. The journey was called Retail reimagined. We brand all the journeys that we have in my experience at Comerica, and part of it is to get everybody on board, get everybody excited. And what did we do in this had five pillars. So pillar number one is we redefined our banking center roles. Pillar number two was we created signature behaviors. We wanted all bankers every time to execute with every client and every conversation.

(03:13):

Number three, it warms my heart. Having been a 17 year small business banker, we expanded small business coverage. How did we do that? Well, we did that by freeing up some of the bankers that when we focused the roles in the retail banking centers. Number four, we invested in a diverse range of experiences for our clients. I'll talk more about those. And then we simplified an investment in process, invested in process and technology enhancements. And these were for the bankers, not for the clients. If we were going to equip the bankers to deliver on small business, you'll see the theme in this. We needed to make those bankers get very, very comfortable talking with small business clients. So Ben talked about this. I'm going to talk about this. I think I've even presented this slide at this conference before in the past. Do we feel like we're the middle piggy?

(04:03):

There's no surprise that's a red one in the middle there. Yes. So I've lived in this world for a while. Right now I am one of the blue piggies on the side, but what I want to talk to you about is how do you expand the influence of that center piggy? How do you expand the influence of small business in your institution? So what we did is we broke it down into four key areas. So area number one is the segment and size conversations. I think everybody here has been a part of that small business in some institutions I've been with has been as small as 10% and has been as large as about 20%. It probably mimics where your institution is. I want to talk to you about how we looked at that slightly differently. Number two, leading with the customer. I think Ben kind of alluded to this a little bit too, and I don't want to draw his presentation into it, but I see a lot of parallels on this.

(04:54):

We bankers often lead with the bank all the time. We lead with the bank becomes a product conversation. We'll tell you how to some suggestions on how to maybe overcome that. Number three is the coverage model. How do we make the coverage model work for us and work for the retail bank as well as work for the small business bank? And the last one, and I think in my mind, the most important thing you can do is have a compelling value proposition for the small business clients. If you don't have a compelling value proposition for the small business clients, then why is that client banking with you? You need to earn the right to have that client bank with you. So let's talk about the segment size and the complexity of that segment size for just a little bit. At Comerica, when we pulled the data, small business banking was roughly 18% of the retail segment.

(05:46):

A retail includes small business. The personal side segment is roughly 82%. That's standard. Now what it does when you look at it that way, of course I think we've all experienced this, so I'm not telling you anything you haven't experienced before, but that produces a sense of trade off. The sense of trade off. Well, small business is only 18%, the rest of it's 82%. Why would I make an 18% investment decision? The next question would be, gee, small business is more complex. It's messy. I mean we all know it's messy. We've lived in this for years. So why would I make an investment decision into a more complex and messier segment when I could do it in a very clean, homogeneous segment? Really defines segments. And the last piece is of course the law of large numbers and the law of low complexity is always going to favor the investment into the retail side.

(06:33):

We all know that. I'm not telling you anything you don't know. How might you do it differently? So just a suggestion, and this is how we approached it. So some of the stats here, I'm just going to tell you are from Barlow. Barlow has given me permission to talk about these stats. What I've done is I've applied these stats to the Rican numbers just so you understand how we look at the influence of our small business segment. So number one is of course we have the 18%. It's actually 17 and a half exactly. So it rounded to 17 on this slide, but it's actually 18% percent of customers of small business customers have both their business and their retail relationships at the same institution. So that means that you're going to have double count of 68% of your small business population if you follow the Barlow standard, which means for us, that added another somewhere in the range of 12% when we pulled the numbers for us.

(07:26):

And that's a area we also know that 33% of small business customers will use consumer products and that'll be in your book. So 33% adds another four-ish percent, six-ish percent, somewhere in that range. And the last piece, and this is something that's often forgotten, has anybody seen the recent studies? The average age of a small business owner right now is 63 years old, 63, you know how old they are. So think of where they are at a lifestyle, a 63-year-old, they're looking probably to retire. They're probably have kids that have gone through school. They're probably trying to figure out where do I plant my resources? How do I fund my retirement? If you have a wealth group in your bank, those are wealth clients. And if you understand wealth, wealth, the number I've always used in wealth is that 40% of wealth clients have some relation to a small business, whether it's be a small business owner, whether it's a small business hobby on the side, those will end up in your small business book of business as well.

(08:33):

And if you look at the totals of that, it's almost 40% of your book. Now, the influence of small business is a whole lot tighter. So if you were to reframe the question, you can say, gee, it's not a 80 20 and 90 10, it's actually a 60 40. And when we pull the average value, I don't know if this is at your institution, certainly is at ours, the average value of small business clients, business clients is 2, 3, 4 times the value of a retail client. So that should come up to even closer to 50 50 in the org. So remember this as you're framing your conversations with your partners in the retail bank, you don't want to hammer them with this, but what you want to do is show them that by being successful in the small business space, they can influence that success in roughly 20% additional of their retail space. And that's very important.

(09:23):

So let's talk about one other thing that we have already talked a little bit about, but not leading with the customer first. So when we do business with small businesses, historically in almost every institution I've been with, I've sat with bankers and I've watched bankers walk in. The client says, hi, what can I help you with? The client gives a problem statement and the banker goes to product right away. Oh, oh, you need an ACH. Oh, you need a real-time payment. Oh, what about same-day, ACH? We use bankers speak. We don't solve the customer problem. We don't repeat back the customer problem. We don't start with the customer. This comes in training. You have to train your bankers to not lead with the bank, but to lead with the customer and talk about what is the customer here to see me for and how to answer that.

(10:09):

This, when you lead with product, and we all know that small business clients don't care about bank product. They don't care at all. They care about can they get their product, can they keep their business operating? Can they pay their employees? And in my case, if I were a small business owner, can I send my kids off to school? Do I have enough money for that? They care about life and they're coming to you because they have a problem and they need your help. They don't need a product push. What they need is help with the problem that they're saying. When you don't do that, when a banker doesn't do that, you create transactional banking, you create less success in sales and your higher cost of sale and a higher cost to serve of your clients because it turns over less into revenue every time you have a product conversation with somebody.

(10:56):

And then it perpetuates with our retail partners, perpetuates the myth. The small businesses a lot more difficult to do because not only is it messy, but I have to know all these really high-end products and I just can't fit them and I'm not always successful. So I'd say try instead. Try instead teaching the bankers to lead with a needs analysis for the customer. It's the holy grail. I know there's a number of vendors here who will talk to you about how to do that, but think about what would that benefit be. First of all, it would help your bankers to understand small businesses and the challenges they have as a population instead of seeing them as a deal. We've all met bankers who see them as a deal all the time. It's the next deal. I got to do the next deal, I got the next deal.

(11:40):

But when they talk to the small business client as a customer, what problems do you have? What solutions can I give you? Then what you end up doing is providing a conversation that is at a whole other level, the bankers. Now what do you do with the bankers in there? This is where your investment technology has to come in. Not all the bankers are going to be able to match need to technology or to solution. This is where technology can come in. So what you'd say is if you have really, really good tools in a way of organizing those conversations and consistency in those sales conversations, then you can train your bankers to match a client's need with a product set. But talk to the client in a solution set format, yes, Mr. Customer, I got your back on this. You need to pay your supplier because tulips in Netherlands are on sale right now and you want to get a bulk shipment of them.

(12:31):

Sure, let's come on in. Let's sit down, let's talk about how we're going to get that money to your vendor in the Netherlands, and let's take you through the options on that. Instead of saying, oh, oh, that's a wire, or that's an international ACH, and you're having a conversation, the client can really, really understand because how it impacts their business. The other thing about this is simplify, simplify, simplify. And this is because you're bankers, you want to simplify the tools that you give your bankers. You want your bankers to be able to use those tools and integrate them into the conversations that they're having with the clients all the time. Why? Because then you can control those conversations. You can control the way that that information gets translated from the client need into the product sale without having a product push. We've been somewhat successful.

(13:16):

It's a journey. Lemme just be clear. It's a journey, but we've been a little bit successful in getting down this path. And then the last thing is, and this is I think the most important when you're trying to partner with your retail partners. Remember, every single business banker or every single business client is also a retail client, has kids, has spouses, has family, possibly has wealth. If you solve the small business's problem, you've earned the right then to have that conversation around the personal challenges that they're going to have. And you want to continue to encourage your bankers to have that earning. What other mistakes do we make? I hate coming up here and talking about mistakes, but I've made them all myself through my career. So I just wanted to share a little bit of my background. The other one is separate roles and separate goals, separate roles and separate roles.

(14:04):

Produce bankers with blinders is what we always say. Well, why does it do that? Because if you have and resist the temptation of this to have bankers that all they do is focus on small business lending. I think there's a question about that just recently. Or all they do is small business deposit gathering. Your bankers are going to have blinders on and they're going to be seeking a deal and then they're onto the next deal and they're onto the next deal. It's really good from a production perspective, but it's very transactional. It's also very non-customer centric. It's very deal centric and it produces a situation where you end up having customers that may not take the deal banker onto something else. That customer does come in, you do sell the client, but you don't have that additional conversation. You may miss an entire retail experience that that client has.

(14:52):

You might miss a wealth experience that client needs support for your bankers with blinders produce problems. And the real trick is how do you get that integrated? And I would say that the real trick on that is to encourage the bankers to look at lifetime value. Now you're going to have to have some good analytics around lifetime value, but how would you look at lifetime value? Well make the bankers accountable for the entire customer relationship. I'm not going to tell you how to do, that's it. I mean every institution has its own culture and how to do that. What I would say is you want to have a culture where your small business bankers are embracing the customers, the customer's, family, the customer's, employees, all of that. You want to compensate those bankers even if they stepped out of their own product zone. You want to have retail bankers who are capable of having those conversations with small business who are equally encouraged.

(15:41):

You may want to partner them with teams, a team solution for a client. But what I would say is how many times have your personal bankers at your bank or your institution sat with the business bankers? How many times your business bankers actually sat with your personal bankers? Usually we see it personal bankers sitting with business bankers, but rarely do we ever see business bankers come in and sit with personal bankers through calls. And how many times have both of those sat with a wealth banker? Have you ever seen that happen? They do that. Well when you do that, if they don't do that, how in the world are they going to be able to set an expectation with a client that says, this is what you're going to experience when you go and sit with Joan or you sit with John. If they haven't sat down and seen the experience and had the chance to build that partnership, they're not going to be able to express that to the client.

(16:27):

And I'd say the other thing too is I don't want to give you the magic bullet because there is none for an institution here. It's going to be based on your culture. But if you produce bankers that sit together or you produce encouraging opportunities for bankers to cross sell across products, you're going to find something that works in your institution. And I remember when I was at a prior institution, ironically, I think the same one that Ben was just talking about, we had two bankers who sat together. We went to Chicago and they said, Hey, I work so well with so-and-so that when he's on vacation, I just cover off his clients. And we said, but you're a business banker and he's a wealth banker. He said, yeah, it doesn't matter. I know all the people to call. And the wealth banker said, oh yeah, when this banker's on vacation, I cover him off. All his bankers know to call me. That came from grassroots. That banker partnership was one that we took on the road. So I know I'm using another bank's experience, but I just want to tell you that it works different ways with different institutions and you can probably drive this at your own institution.

(17:31):

On the fourth one, compelling value proposition. I've got a little bit more to say on this one because I'm actually really excited. I think this is the one where we have absolutely nailed it and I'm really excited to be able to tell you guys about it and show it to you. If you don't have a value proposition for your small, then your small business value proposition is your retail value proposition. And that retail value proposition for your small businesses is no different than any other bank that that client is going to walk across. None at all. All they're going to see is, oh, it's retail. It's retail that contributes to the one third of clients that have the retail products. This is why, because you don't have a value proposition that's unique to your small businesses. Do your bankers, this is the big one here.

(18:16):

I think we've been challenged around this at Comerica. Do the bankers know the value proposition for your small business clients? Do you ask them, first of all, who goes and sits in banking centers or branches with clients? I do all the time and I know my colleagues who are here do it all the time too. But do you ask them, do you know what the value proposition for why a client should bank with us is if that banker does not know the answer to that question, you probably have some work to do. Try to figure out to impart that. And particularly important in the small business space because as we know it's messy and the clients need some advice. They come to you for advice, they come to talk to you. They don't come to you asking for ACH or real-time payments. They don't care about any of that.

(18:54):

They come to you because they have an opportunity to buy a whole bunch of tulips in Netherlands and it's a real opportunity, but they got to get the money there tomorrow and that's why they come to you. So that's why you should be having those conversations and that's why you should be making sure your bankers understand the value prop of why you should have that conversation with me. So how did we figure that out? Well, we decided to change the script a bit. Now again, the advantage is I'm the head of retail strategy for Comerica and I have 17 years of small business experience. So it was actually pretty easy to be on this slide in some small business lens into this. But we flipped the script a little bit and we said, instead of investing our bank in what we think small businesses need to be successful, why don't we invest our bank in small, what small businesses tell us they need to be successful, even if it's not banking.

(19:43):

But if we're in a position we can help. Let's explore that. So what we did is we talked to small businesses, and this started two years ago. We talked to numerous small businesses all throughout all of our markets. No surprise, they told us consistently it was, I need more time. I'm doing my bills on Sunday morning. I need more time. I need discounts. Why does a big bank get things so much cheaper? I can't get that scale. I need discounts. I need money to advertise. Nobody knows about the product or the service that I'm selling. You guys are so lucky at the bank, you guys can advertise, but I need more customers. I don't know how to get those customers. I need information. Information. They tell me, who are my competitors? What are they doing? Why is the coffee shop that competes with mine that's four blocks away, 10 times busier than mine?

(20:32):

What information do they have that I don't have? And then lastly, productivity tools to save on the time they need access to those kinds of things. And they told us that. So what did we do? We decided we would step into this and try to help out with, so we did two things, and this is public information, so it's all out in the press releases. We did two things. We did a digital approach for the clients and we did a onsite experience for the clients. So let's talk about the onsite experience first. We invented something called Comerica co-work spaces where if we are anything like you, we had banking centers that were built in the seventies. We did, right? 2,500 square feet, 5,000 square feet. Yet you have three bankers in there and a couple of tellers, right? We had all this spare space. So what did we do?

(21:19):

We said, well, that's an easy way to spark our renovation budget, create co-work spaces. So we created common space, private space, conference space and community space within our banking centers in certain markets and made them available to our customers. And with the exception of a community space that's actually available to any nonprofit in the market, that has been, I guess it wasn't a surprise to us that it was a hit because everybody told us it was a hit. But there was a whole bunch of naysayers on something like that. What you want to use this for clients? Well, I'm going to tell you something that happened last week. I'm quite proud of the banker that did this. Banker had a client, introduced the client to this. This was in Dallas, Texas. The client came in, used the co-work space for a couple of weeks, loved it, and then decided to have his own networking event, asked if he could use the community space in the banking center for that.

(22:10):

We agreed, no problem that your client, you can set it up, did that, brought in 12 other small businesses that he wanted to network with. And the first thing he set up there was, I just want you guys to know you need to bank with Comerica because look what they're doing for us. This is incredible. Well, apparently eight of those 12 are now Comerica clients, and that was one banker's initiative. So that's what I meant. Stuff happens at grassroots. You need to find it, you need to hear about it, celebrate it, and then harness it and try to make that happen more broadly. On the digital side, what did we do? Well, we partnered with a company called Size Up. Some of you have heard of Size Up and it's an information company about small businesses where small businesses can search what kind of customer base, what kind of wealth base do they have in their neighborhoods.

(22:59):

All that information that banks have had from a planning perspective from years past, we made that available to our small business clients and then taught our bankers to then show them how to use it. It's been a resounding success. Our clients who use it now, it's one of those things we have to teach the bankers to teach the clients, but it certainly builds that trust and it builds that integration and it builds that kind of relationship level conversation that you want your bankers to have with the clients. We have an advertising program. So Comerica Bank, if you're outside of Detroit, what is Comerica? Famous work? Comerica Park. What if we said, Hey, we have advertising at Comerica Park for home games. What if we said we don't need to do it. All our name's already on there. Why don't we just give it to our small businesses? They can apply to use our advertising dollars inside the park during games?

(23:52):

Double thumbs up with huge success. We have clients that are just crazy happy because they've been able to see their brand sitting inside some sports fields, some sports assets that we have through the course of games. And we decided that what? That's right, what we have, what the clients need, we can help them with that. And then sports Tickets program, which is actually interestingly an offshoot of that is we have certain allocation of tickets we found by looking at our bankers across the entire network, retail, commercial, wealth, the whole bit, not all the sports tickets were being used. We created a way that those unused sports tickets could be put into a pool and applied for by small businesses so they could take their clients to sports games so they could use our sports tickets to develop their networks. We had it at no cost. It was paid for as a part of our marketing strategy. So we were able to say, what is ours is yours? And then there, of course, there's relationship discounts, rewards program, MasterCard, easy savings. I am sure that all of you have some version of some of these things available to you at your institution. It's a matter of talking to your clients, what do they want to do? And packaging it the right way.

(25:06):

So this is an example of how we've been marketing this.

Advertiser (25:11):

Hey everyone, welcome. So we're very, so as I was saying,

Brian Haney (25:20):

The video's good too. Can we try that one more time?

Advertiser (25:26):

Workspace not working.

Brian Haney (25:27):

That's why we're not getting the video. Technical issues happens all the time to a banker's eyes.

(25:47):

Alright, let's just say that this gentleman is a small business owner, is completely distracted by everything that's going on, crying kids, the dog is barking, and then at the very end there's a guy leaf blowing right outside of his window who's worked from home and experienced that. I have a home office. Oh yeah, yeah, I've experienced that too. This one just hit home and I just thought I wanted to share this, but this, when we marketed this in the local Dallas area with the 14 centers that we had that were co-work spaces, sorry, 12 centers that we have. There were co-work spaces immediate traction on this one, and we had a spike in users to the point where we've had this out since April. We've had almost 1500 registered users of this and just in the Dallas area where we piloted it. So it was actually really, really strong, really good picking.

(26:38):

And that's registered users and people have booked it. Many of them have booked multiple times. So that's 1500 unique users of this. And every one of those clients is in your banking center talking with your bankers as a bankers, set them up or greet them, and what a way to build trust. What an absolutely wonderful way to build trust. So I just wanted to end it before I go to my final slide with just my view of where the piggy should go. But the reality is I am a small business banker in a retail role masquerading as a retail strategy person. I get the challenges of small business. So what did we do? We actually did all of these things by focusing on small business first before retail initiatives. And now I want to walk you through this dirty slide again, our investor show slide.

(27:25):

Elevating small business was our number one initiative. What did we produce from that? We produced 22% year over year customer growth in the markets where we piloted this in a market. We're getting new customers and new deposits has been really, really challenging. We all know that we have five times the number of small business bankers now it's across our network. One of our leaders is here today. We had 26% year over year loan growth because we simplified the loan process and simplified the conversations around lending. I told you it's about solutioning. It's not about pushing the product in there. And we launched small business co-ops and small business co-work spaces. Another thing you should also know is we did shred spaces. We had shred bins. What's ours is yours. We have one branch that I think they shredded 126,000 pounds worth of client documents in the program, which is crazy.

(28:20):

They're emptying that bin three, four times a day. But from our perspective, that's all people coming and seeing value for us. We're having conversations with it. It's driving traffic in the banking centers, which all of us were struggling with and we're getting customers that we're getting measurable numbers of customers out of that, which is a really interesting who thought shred bins, measurable number of customers. But yes, we did. And what was our net result? Very bottom line, what have we done in the markets where we launched this? We've had 12% productivity growth in the retail bank. That 82% has had 12% productivity growth because we focused on the 18%. And I think they did a really good job of executing on that. I applaud my team, but I just wanted to stop there. I've got one minute left. Probably don't have any time for questions, but I just wanted to let everybody know that's what Comerica has done to try to integrate both small business and retail, in fact, by flipping the script and focusing on small business first. So thank you very much.