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Consumers Demand Relationship and Choice The Revitalization of Community Banks Aug. 28, 2000 (SmartPros) With all of the press about big bank mergers and buyouts, little has been said about the underground movement and upward mobility of the community banking industry. The only ones talking about it -- giggling actually -- are within the industry itself. Here is what they know. Record Numbers
The FDIC's fourth quarter report for 1999 reflected the highest number of new, or "de novo," community banks formed in nearly a decade in the United States, with 205 new charters reported. The last record was in 1989 when 192 new banks were formed. While the banking giants continue to gobble up each other, community banks are taking many smaller bites out of the industry's pie chart. The Independent Community Banker's Association (ICBA) reported in April that its members, who represent roughly 65 percent of FDIC commercial banks with less than $1 billion in assets, hold
What is Responsible for the Comeback? "Americans have been saying for centuries that they want choice," Bavisotto said. "Some of these choices include options-based banking, options that fill their needs."
And most of the community banks are able to offer customers a range of choices that mirror those available through the larger institutions, such as Internet banking, various trust and insurance products, mortgages and diversified loan options. The needs of the community and its banks, of course, vary according to local competition and customer demographics.
According to John Bagwell, president of the Bagwell Agency, a marketing firm for financial institutions, customers seek familiarity and community involvement from their banking professionals.
"Most of the community bank clientele consists of the small business market," Bagwell said. "These are businesses that could get lost in the larger financial organizations."
Finding a Niche
It's not fair to state that all big banks lose sight of customer's needs, however. Some of the larger financial institutions, such as Minnesota-based Norwest -- under parent company Wells Fargo -- actually engage a "community banking strategy" to run their operations. But Bavisotto feels that community banks are better able to come in and "fill the niches" that consumers want. One such niche-based organization is First Mercantile Bank, which has four branches in Texas. This commercial customer-based institution went from $7 million in capitalization in 1998 to $128 million in 2000. The statistics are staggering, but these community bankers are not stumbling over the growth bumps. In fact, they are thrilled with the success of their financial institutions.
According to Gary Motley, First Mercantile's marketing director, the institution's unique business structure gives it stability. With a shareholder base of 85 pure shareholders, no one owns more than 9 percent of the stock. Motley feels that situation makes it easier to build business. With a 95 percent rate of referral business switched, Motley uses a "pebble in a pond" analogy to describe First Mercantile's business growth.
"We work off the ripples," he said.
Although it is specifically a commercial customer-based business, its employees still know their customers well enough to discuss a child's most recent soccer game or the hospitalization of a family member.
"We are a friendly neighborhood bank," Mr. Motley said. "In here, you can talk about politics, religion and where you keep your money. We provide our services on a very personal level, and that's what our customers like."
Making Sales
Some also like it when banks come to them. Community banks have long been viewed as offering "relationship banking," and with the addition of sales training to the bank marketing mix, customers sometimes feel better known because they are pursued. Common techniques for adding a sales culture include "outbound calling," those tedious calls to the competition's customers. Another important element: training, training, training. Who needs to be educated? Everyone, according to trainer John Roach of Omega Performance. This includes:
The pursuit can be completed -- and the deal sometimes sealed -- with customer-relations follow up. This is appropriately handled by management, assuming they have the best relationship with the potential customer.
As long as size doesn't matter, it seems that customers are having their financial needs met through their community banks' operations. According to the statistics and these testimonials, tailor-made services and professionals who care seem to be the mainstays to earning -- and keeping -- billions of dollars in business.
Please send your comments, questions and article proposals to information@smartpros.com.
2000, Smartpros Ltd. All Rights Reserved.
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