Covid-19 prompted a number of challenges for banks that extended beyond those typically associated with economic uncertainty. Yes, default risk and compliance were top of mind for the C-suite in 2020, as well they should have been, but other issues popped up as well.
Consider marketing: Consumer behaviors changed overnight when the pandemic struck, but the marketing playbook didn’t automatically rewrite itself. Marketing’s approach to closing branches offers a good example. S&P Global reports that U.S. financial services organizations closed more than 3,300 branches in 2020, more than three times the number they opened.
This acceleration in branch closures was often executed without marketing plans that reflected emerging consumer behaviors. In many cases, efforts to communicate with and retain clients at branches slated for closure still led with messaging along the lines of “Where to find a branch close to you.” That was hardly compelling pre-pandemic, and much less so when many people are doing their best to avoid in-person interactions altogether.
Marketing departments were dealt a tough hand – regardless of bank size, pivoting in real-time during a crisis is no easy feat. But as the pandemic fades, many old plans and processes must be reworked. Since banks are increasingly competing based on their digital offerings and branch portfolios will likely continue to contract, how they execute branch closures is more critical than ever and needs to be revisited.
Below are four questions that the new branch closure playbook should address.
How do you segment clients at a branch that is closing? Every branch closure campaign should answer this question first: Which clients are important to retain? Losing profitable clients can quickly smash the branch closure cost savings equation, so segmenting clients correctly is critical. This means determining the potential value each client represents if the bank had more of that person’s business. Banks have abundant information about clients and, if necessary, they can add more from outside sources. All of this information can be combined to assign “impact scores” to each relationship.
When should the campaign begin? FDIC rules about client notification often guide client communication, but this regulation-centric approach is misguided. Regulations must be followed, but Marketing should develop its own timelines based on the runway it needs to launch a multi-channel retention campaign. Ideally, planning should begin eight to 12 weeks before the 90-day closure notification is sent, although this timing depends on the complexity of the client base. There’s also a case to be made for aggressively marketing digital channel offerings to clients before the 90-day announcement goes out.
Which products and solutions help drive client retention and how do you market them? Mobile banking, mobile check deposit, text alerts and P2P payments are sticky services that can be paired with promotions to drive adoption. Core products like checking accounts and mortgages are also important, albeit not flashy, products that can sustain a client relationship after a branch closes. Don’t forget these as part of the retention campaign.
How do you assess the success of client retention campaigns? From our work with banks, we’ve found that a data-driven marketing approach that prioritizes clients can help reduce account attrition by 40 percent and balance reduction by 66 percent (measurement taken six months after a branch closes). Depending on a bank’s appetite for measurement, other factors could also be considered. For example, consider the value of transitioning clients to digital offerings, which represents long-term cost savings for the bank.
At its core, a data-driven campaign to reduce attrition when a branch closes is focused on seamlessly transitioning clients away from their existing branch relationship to another. Success achieved in this area can also be applied to other problems that stress the bank/client relationship.
Switching people from one set of products to another, like switching card issuers, always brings risk. By identifying the most valuable clients, banks can promote individualized solutions and launch multi-channel outreach efforts with personalized messaging to maintain relationships and ensure the branch closure or product shift is executed with a client-centric, bottom-line mindset.
Garry Capers is president of cloud solutions at Deluxe Corporation.