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May 2000 Volume 1.10
"Business
levels at the branch were too low to sustain it"
by Rodger Gallagher
"Business levels at the branch were too low to sustain it"
These were the words used by an Area Manager of a leading New Zealand
Bank when he was explaining the reason for the closure of the final
bank branch in the southwest suburbs of Hamilton New Zealand. The
Area Manger went on to explain the reasons for the closure, "It
is the sort of branch which has a lot of transactions - deposits
and withdrawals, but insufficient use of our other facilities like
loans, investments, and insurance. It is like a dairy where people
only buy milk and bread. It wouldn't last long." It seems strange
doesn't it, that the people of this large area would not want to
use bank facilities such as loans, investments or insurance? We
know from the work covered in previous articles about the PNC Bank
that bank branches with highly dis-satisfied customers have 32%
less bank revenue than branches with highly satisfied customers.
We also know that in just over a year, that when a customer's attitude
to their bank branch changes from highly satisfied to dis-satisfied
that there is huge loss of business. The share of a customer's business
that the bank receives drops away to 20 or 30% when Customer Value
drops well below parity. With a Consumer Institute survey of New
Zealand banks indicating satisfaction for this Bank's customers
at the bottom end of the range for all banks, probability suggests
that some branches would provide less than satisfactory service
to customers. In a previous article we pointed out that while having
highly satisfied customers makes good business sense, when customers
slip from being Highly Satisfied, banks bear the brunt of their
wrath as customer bank account balances fall as funds move elsewhere.
And it is unlikely that the funds will move to a different branch
of the same bank.
The slippery slope
When a bank customer slips from Highly Statisfied to Satisfied,
there is a huge loss of business.
The slippery slope graph dramatically illustrates what happens
to the customer uptake of loans, investments, and insurance facilities
offered by a bank branch when customer satisfaction falls. Of course
people would continue to use the bank for transactions when it is
convenient for them. They wouldn't close their accounts. But they
would have most of their loans, investments, and insurance with
another bank. As the Area Manager said, "It is like a dairy
or convenience store where people only buy milk and bread. It wouldn't
last long." If a convenience store stopped providing good service
and the value it delivered to customers dropped then they would
stop using it for most of their purchases. The convenience store
would move into the going out of business corner of the Value Map.
But is closure, the only option for the bank branch or the convenience
store that provide poor customer value?
Another option would be to improve the Customer Value provided
by the branch. This can usually be done at the same time as reducing
the operating costs of the branch. The way to do this would be with
a Customer Value project targeted solely at the wayward branch.
The project would begin with interviews of the bank staff at the
branch based around all of the interactions that customers have
with the branch. There would be a special focus on the interactions
surrounding the most profitable products for the bank including
loans, investments, and insurance. Once an understanding of the
business processes for the branch had been obtained, a number of
in-depth interviews with a selection of the customers of the branch,
and of other banks would be undertaken. With financial services,
in-depth interviews often work better than focus groups due to the
need expressed by many people to discuss these matters in private.
The customer views collected allows the purchase criteria important
for these customers to be revealed, so that the key purchase criteria
can then be incorporated in a Customer Value questionnaire. Although
most bank charges may be similar, perceptions of charges can vary
quite a bit. In addition a branch with poor service may be driving
additional costs onto its customers. For example, consider the true
story of a customer of this branch who decided to set up a single
mortgage offset account for all business. The Personal Banker at
the branch promised the customer that all electronic banking payments,
direct credits, and direct debits would be transferred to the new
account. In the end none of this happened and the Bank did not keep
its word. The result for the customer was additional cost and the
inconvenience of arranging payments by cheque, and setting up the
electronic payments herself. For these reasons it is important to
look at Costs & Charges as well as the Products & Services
delivered by the Branch.
Econometric modelling of the data representing the customer views
captured in the survey would indicate the areas where the branch
needs to quickly improve the value it deliver to its customers.
Improving these areas will turn the branch profitability around
within a year.So there is another option to closure of a bank branch.
Managers need to weigh up the pros and cons of the increased market
share coming from keeping a branch open or the lower market share
and reduced costs that a closure achieves for the Bank.
 Frittata
I find it quite relaxing to head to the kitchen and see what I
can create. For a while now I've been experimenting with frittata.
This starts with 3 slices of bacon from Highway Meats, the butcher
next to the cycle track in Hamilton. He cures pork using traditional
methods so you don't get the sloppy type of tasteless bacon that
most supermarkets sell. I chop up the bacon into small pieces along
with four button mushrooms, and then sauté it on high with a little
olive oil in a non-stick fry pan. At this time of the year you can
often find field mushrooms sprouting in the Waikato so I use those
if I come across any while I am out walking. While the bacon and
mushrooms are cooking I cut up one spring onion, a quarter of a
red capsicum and a quarter of a green capsicum then add them to
the frying pan along with some freshly ground black pepper. Then
its time to beat four eggs blending them in with the bacon, mushrooms
and vegetables.
At this time I turn the heat down to low so the egg doesn't burn.
While the egg is cooking I free the edge of the frittata with a
spatula. After 4 or 5 minutes of cooking on a slow heat, the bottom
half of the frittata is fairly firm but the top is still uncooked
and quite liquid. At this stage I slide the partly cooked frittata
onto a large ovenproof dinner plate, and sprinkle grated parmesan
cheese over the top. Next I put it under the grill for a few minutes.
When the parmesan has slightly browned the top part of the egg has
finished cooking and the frittata is ready to cut in half and enjoy
with Virginia.
Saporito.
Rodger Gallagher
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