The assumption that the branch sales force is financially justified on the strength of walk-in traffic is no longer viable in a post-recession market.
As retail bankers continue to probe for revenue opportunities in a tight market, many are wrestling with a fundamental question: how can branch staff become strong partners in sales without giving up a service culture?
The traditional retail sales strategy relied on the marketing team to drive traffic into the branch, where platform staff stood ready to serve walk-in customers. This arrangement worked well in the peak market conditions prior to the recession, but not anymore.
In the 2003 to 2005 era, the product value generated by the typical branch sales force represented a 3.4x multiple of average sales compensation, according to our multi-bank research. Post-recession, however, the typical “return on sales force,” or RSF, has plummeted to 1.5x — perilously close to breakeven once other costs are factored in (Figure 1).
Along with adverse trends in margins, regulation and market demand, branches are experiencing a steady exodus of customer traffic as consumers embrace electronic alternatives. This hollowing out of branch traffic is occurring independently of post-recession trends, and it kills the hope that a future recovering market will somehow magically lift sales results without the need for dramatic changes in staffing and culture.
In response, progressive banks are considering how to recast the role of the branch sales force. Instead of passive order-taking, the new approach is centered on proactive outreach. The sales interaction remains tasteful and mindful of customer needs, but the goal is to infuse more of the energy seen in other retail sales-oriented industries.
In terms of specific proactive measures, one avenue is to assign various customer portfolios to key branch staffers so they can deepen their understanding of customer needs, focus their efforts and track progress. Another avenue is to enlist branch staff in outbound calling programs, using improved lists and conversational techniques. A third avenue is to improve the outreach to small business households — a known priority that still has not kicked into high gear at many institutions.
Asking for additional business can be a natural extension of providing great service, but branch staff needs to learn how to ask for more in a customer-supportive manner. To foster this transition, retail banks will need to revise sales goals, incentives and supporting infrastructure, while elevating staff skills as well.
Retail bankers will need accurate metrics to guide the many changes that will be needed. The advantage of “return on sales force,” or RSF, is that it explicitly considers the human factor in generating revenue growth. Combined with a detailed understanding of local market potential, RSF can enhance decisions in a variety of contexts.
- In some cases, for example, staff is going all-out in some of the best local markets, and in these cases there is a business justification for actually expanding full-time-equivalent staffing to boost sales results.
- Elsewhere staffing levels may be about right, but teams could be doing far more with the correct goals, incentives, management programs and technology support.
- Then at myriad smaller outlets in slower markets, there also is a case for improving individual sales performance, but the main issue is over-capacity — restructuring is needed to realistically align costs with the revenue potential.
The assumption that a branch sales force can support itself largely on walk-in traffic is no longer viable in a post-recession market that is further restricted by new regulations and an accelerating customer migration to alternative channels. The best way to move forward is to embrace a reasonable profit-based metric for measuring branch sales staff, and begin using the quantitative insights to transform performance.
Fundamentally, branch staff needs a shift in sales orientation, from passive to proactive, so that the organization can much more fully realize the cross-sell possibilities with retail customers, both new and established. RSF is a powerful concept in driving the evolutionary changes that will be needed. It illuminates the issues in a way that permits constructive action, and the sooner banks embrace it, the sooner they can be on their way to a more productive branch sales force.
Darryl Demos is a partner in the Boston office of Novantas LLC, a management consultancy.