According to Barlow Research, a small business customer ($100K to $10MM in sales) will bring about $5,173 in Net Potential Revenue to a bank each year. This revenue estimate is based the value of short-term and long-term loans, demand deposit accounts and other business banking products balances and fees paid by a small business in 2010. Based on these revenue estimates, a shift in one percent of primary bank market share can increase the Potential Customer Lifetime Value of your small business banking portfolio by approximately $577 million.
Even with this potential, most banks are viewed as underserving the small business market according to research from Barlow, Aite Group, JD Powers, Greenwich Associates and others. The perceived brand of large banks (assets of $50+ billion) became especially tarnished due to big banks' questionable financial stability, slower responsiveness to small business requests and perceived dwindling appreciation for the small business customer. As a result, more small businesses than ever state that they are willing to consider a change in financial institution partner.
The path to rebuilding trust with both current small business customers and prospects is by better understanding the needs of individual small businesses and getting in front of these business owners to present viable banking solutions. But, even though the average small business has tremendous value, just like the retail bank customer, not all small businesses should garner the same amount of marketing investment.
Instead of casting a wide net across all small businesses, your acquisition efforts should be tiered, leveraging product focused and proximity-based direct mail for the smallest businesses, multitouch solution-focused communications for mid-tier small businesses and investing in high-touch multichannel Demand Generation strategies for the highest value businesses where the engagement of a small business relationship manager is most important.
As a sales person for most of my life, I understand that there is no bigger risk to the success of a marketing program, and the credibility of those people who build the program, than the quality of leads I receive. Bottom line, sales people will not work leads with enthusiasm (or at all) if they do not believe the quality of the lead is reliable. This is the challenge most banks face with their small business marketing initiatives.
The best solution we have found to this challenge is to match the marketing communication strategy to the effort needed to close the sale. For that most coveted segment, where the business banking calling officer is required to optimize the value of the sale, we have successfully used a Demand Generation team, that leverages email, direct mail and a centralized outbound calling effort to improve the accuracy of the prospect database (notoriously bad to begin with), identify the appropriate decision maker, help identify a financial 'pain' that can be solved by the bank and score the lead. Only after the lead is thought to be 'ready to buy' is the prospect lead sent to the small business calling officer.
With an investment in an effective Demand Generation program, a bank can spend their time in front of prospects with a need instead of asking the calling officers to follow-up on leads of questionble value. In addition, unlike traditional direct marketing programs that drop and we hope they are followed up on, a Demand Generation process allows for continuous, and immediate, test and learn adjustments and changes in the determination of lead value.
Is small business acquisition and cross-sell part of your marketing plan? Do you tier your marketing investment to the potential value of the relationship and the effort required to close the sale? Are you leveraging multiple channels for your efforts? I would love to hear about your strategies.