RETAIL BANKING.Improvement of competitive position in Small Business and Trade segments

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					                                   PRAGMATICA Management Consulting




                                            Retail Banking


                              Improvement of the competitive
                             position of the Small Business and
                                       Trade segments




                                                January 2011




                                                Paseo de la Habana, 152
PRAGMATICA Management Consulting                28036-MADRID- Spain       page1
           Index




           Introduction, focus, and objectives of the work




           Proposed methodology




PRAGMATICA Management Consulting                              page2
           Introduction, focus, and objectives of the work




           Proposed methodology




PRAGMATICA Management Consulting                             page3
           Introduction

           A substantial change in the environment of financial entities has been occurring in recent
            years
               –Price war, that has affected "very comfortable" traditional segments for the entities in a very
                significant way
               –Drop in profitability & risk of the mortgage portfolio

               –Growing facility to change entity ("the client does move to other bank")

               –Increase in the clients' financial understanding, "culture"

               –“Global environment": Disappearance of some actions, narrowing of margins...

               –e-access: electronic access & operations available



           For this reason, financial entities should adapt their strategies to guarantee future
            competitiveness
               –   Orienting themselves toward market segments that can still provide them growth and profitability

           The small business and trade segments, traditionally "reserved" for entities of a national
            scope, represent a good opportunity
               –They are the main drivers of economic growth
               –They are much more profitable than big corps

               –They need to adapt themselves to a more competitive environment

               –They provide more business volume per captured than for individuals

               –The possibilities of profitability are broader than individuals: Wider range of and more sophisticated

                products
               –Induced business attractiveness



PRAGMATICA Management Consulting                                                                                         page4
            Focus
            We define the competitive position/market share of an entity as the
            combination of 3 factors




                                                Competitive position/market share




                  Penetration               X              Product share                X         Share of wallet




          Number of clients of the entity           Degree of loyalty/entailment of         What part of the business of
            over the total number of               the entities' current clients over       each client is for the entity?:
           potential clients in the area               the base of a (minimally)            1st., 2nd., 3rd relationship...
                                                   previously defined profile called
                                                             "basic range"




PRAGMATICA Management Consulting                                                                                              page5
             Focus
             The commercial activity is the basic axis over which the improvement of the
             competitive position turns



                               Recruitment                 Loyalty                     Relationship
     Commercial activity
                                  (Sale)                (Crosselling)                   (Balances)




                                                                                                      relationship




                                                                                    Relationship level
                           Penetration increase     Better product share
                                                                                        increase




PRAGMATICA Management Consulting                                                                                     page6
                     Focus
                     As an initial step, it is important to bring the entity's strengths closer to the
                     success factors of the objective segments
                               % of importance in client selection




                                                                                                             Commiss
                                                                                                               ions                                                                                                    Success
                                                                                                                                                                                                                       factors

                                                                           Bank
                                                                           rate


                                                                                                                                                                  Small                                              Secondary
                                                                                                                                                                 business
                                                                                                                                                                                                                      criteria
                                                                                                                                                                 specializa
                                                                               Physical                                                                             tion
                                                                               proximity

                                                                                                                                                                                                                       Marginal
                                                                     Deposit                                                                                                               Network
                                                                                                                                                                                                                       criteria
                                                                                                                                                                                            width
                                                                      rate


                                                                                     Worse than the leader                                                        Better than the leader



                                                         Greater or
                                                      lesser need of
                                                       improvement


    Paseo de la Castellana 50, Planta 3 · 28046 Madrid
       Tel: (34) 915 647 209 · Fax: (34) 915 629 869                                                                                                                                       Centro Luxor · Rua da Misericórdia, 76 · 1200 Lisboa
                                                                                                             Barcelona · Bologna · Bruxelles · Lisboa · Madrid
                                                                                                                                                                                                Tel: (3511) 321 02 90 · Fax: (3511) 321 02 99

PRAGMATICA Management Consulting                                                                                                                                                                                                                  page7
           Focus
           As well as to adequately plan the commercial activity

                                                                "Adoption cycle"




                                       Lack commercial
                                           activity




                                                           working                  relationship
                                                                        one time


           Both cases lack commercial activity. However, the commercial strategy to be followed
            has to be different in each entity:

               –Entity A: Taking advantage of its positive image, it should first and foremost stress on the
                recidivist commercial visit

               –   Entity B: Should stress on the adaptation of its offer to the market needs


PRAGMATICA Management Consulting                                                                               page8
           Focus
           All of this will allow the adaptation of the entity's offer to the market needs


                                       % of product use with the leading entity and % that work with the analyzed entity




                                                                                  Leasing Insurance
                                                                                       Factoring
                                                         Overdraft
                                                    Credit line
                      Liquid asset points Investment fund Trade allowance                     Credit card machine.    Overseas
                                                                                                             Tax management operating
                   Checking account Time/term deposits             Secured mortgage loan                                                Company credit cards
                                                                Personal secured loan
                                                                                                                       Social
                                                                                                        Payroll management insurance debiting payments
                                                                                                                                 Direct
                                                                                                                              Direct debiting receipts
                                                                                                                          management

                          Interest earning checking account




                           Liability products                   Asset products                             Compensation transfers




PRAGMATICA Management Consulting                                                                                                                               page9
            Focus
            ... to increase the client's level of entailment



                                                                                        Number of
                                                          Client type                    clients    % of clients


                           Only a contract in view
                           Low loyalty
                            - Contract in view plus 1 or 2 services or
                            - 2 contracts plus 0 or 1 service

                           "Basic range"
                            - Contract in view, plus
     Minimum profile
                            - 1 asset contract (credit policy, discount...) plus
       demanded
                            - 2 services (card and payments by direct debit)


                           Medium loyalty
                            - 1 contact in view plus 3 services or
                                                                                                                    Medium/high
                            - 2 contracts plus 3 services or                                                       entailment level
                            - 3 contracts plus 0, 1 or 2 services


                           High loyalty
                            - As a minimum, 3 or more contracts or 3 or more services

                           Total                                                                       100%




PRAGMATICA Management Consulting                                                                                                      page10
           Focus
           ... and their relationship with the entity



                                   Position of the entity (with its clients) by business volume




                                      23 %




                                      20 %




                                                             57 %




PRAGMATICA Management Consulting                                                                  page11
           Objectives of the work




                                   Identify the main characteristics of the environment in that which the
                                    entity operates

              Analysis             Analyze the recent evolution and current situation of the entity

                                   Carry out a commercial investigation in the Small Business and Trade
                                    segments, as much with clients as with non-clients




                                   Diagnose the entity's competitive position in the Small Business and
             Diagnosis
                                    Trade segments




                                   Design a combined Action Plan that allows the obtaining of a significant
            Action plan             improvement of the position in the two client segments




PRAGMATICA Management Consulting                                                                               page12
           Introduction, focus, and objectives of the work




           Proposed methodology




PRAGMATICA Management Consulting                             page13
           Proposed methodology




                                                        Work launch




                                                   Analysis of the entity's
                                                                               Commercial investigation
                         Environmental analysis   client portfolio and sales
                                                                               (clients and non-clients)
                                                           process




                                                    Diagnosis and main
                                                     courses of action



                                                        Design and
                                                   implementation of the
                                                        Action Plan




PRAGMATICA Management Consulting                                                                           page14
           Work launch




                                          Objective                                                        Resources




                                                                                 - Preparatory meetings
                        To increase the efficiency of the work by the
                       collaboration of the entity with Consulting team
                                                                                 - Mixed work groups




                                                                       Expected results

                    Clear understanding of the work to be carried out by part of first level management
                    Obtaining of the necessary collaboration of key personnel (area managers, regional managers, office
                     managers...)
                    Improved efficiency in all the collaboration phases
                    "Complicity" with the results to be obtained and the activities needed to be carried out by part of entity
                     management; from the first moment




PRAGMATICA Management Consulting                                                                                                  page15
           Environmental analysis




                                          Objective                                                     Resources


                                                                               - Interviews with key managers

                        To identify the fundamental characteristics of the     - Analysis of macroeconomic information
                  environment in that which the entity operates and the habits
                   and financial needs of the Small Businesses and Trades - Analysis of the main competitor's information

                                                                               - Analysis of information about Small Businesses and
                                                                               Trades


                                                                    Expected results

                    Evolution of the relevant macroeconomic magnitudes and the situation by economic sub-sectors
                    Fundamental characteristics of the banking environment
                    Apparent strategy of the main competitors and the differentiating aspects of their strategy towards the analyzed
                     segments
                    Recent evolution and current situation of the entity and its vision of the "business" with Small Businesses and
                     Trades
                    Drawing up of a numerical census of Small Businesses and Trades: Type, location, and main importance
                    Importance that Small Business and Trade has in general economy and in particular, the banking business




PRAGMATICA Management Consulting                                                                                                        page16
           Analysis of the entity's portfolio and sales process




                                           Objective                                                      Resources


                                                                                - Analysis of the evolution of the client portfolio

                                                                                - Analysis of a client sample
                    To determine the entity's current situation regarding its
                    clients and degree of penetration and coverage in each      - Analysis of the information from Banking regulator, Banking
                                      analyzed segment                          associations in the area, etc.

                                                                                - Interviews with key managers


                                                                      Expected results

                    Number of clients by type, recent year evolution, average age, new client capturing and loss of clients
                    Identification of client habits (for a sample): Types of products used and their level of use
                    Penetration and coverage of the entity in each segment (credits and deposits)
                    Possible differences by areas and offices
                    Revision of the entity's current sales process with Small Business and Trade
                       –Participants, roles, and organization
                       –Assigned time and resources
                       –Activities to capture new clients and product sale to clients
                       –Available systems and commercial information




PRAGMATICA Management Consulting                                                                                                                page17
           Commercial investigation




                                           Objective                                                     Resources



                                                                                - Interview the entity's Small Business clients and non-
                                                                                clients
                  To identify the habits and financial needs of Small Business
                                and Trade in the area of analysis              - Survey the entity's Trade clients and non-clients

                                                                                - Questionnaires adapted to Small Business and Trade

                                                                                - Available census' and statistic bases

                                                                     Expected results

                    Financial products and suppliers used by Small Business and Trade in the analyzed areas
                    Criteria to purchase Small Businesses and Trades
                    Small Businesses and Trades' main financial needs
                    Entailment level of Small Business and Trade with the entity
                    "Wallet share" of the entity in Small Business and Trade
                    Aspects highlighted by Small Businesses and Trades in their relationship with the entity
                       –Relationship quality (with the area manager, officer manager...)
                       –Degree of satisfaction with the attention received
                       –Commercial visits received
                       –Adaptation of the entity's offer to their needs




PRAGMATICA Management Consulting                                                                                                           page18
           Competitive diagnosis of the entity in the analyzed segments and main
           courses of action



                                           Objective                                                     Resources



                                                                                - Macroeconomics and banking environment
                   To determine the current competitive position of the entity in
                  the Small Business and Trade segments and to establish the - Current situation of the entity in the Small Business and
                               first courses of action to improve it              Trade
                                                                                   segments: Sales process, offer, client portfolio

                                                                                - Carried out commercial investigation

                                                                     Expected results

                     Adaptation of the entity to the market
                        –Regarding product offer
                        –Regarding commercial action
                        –Regarding internal operating
                     Competitive situation of the entity and quantification of the improvement potential in Small Business and Trade
                        –Strong points and weak points in the Small Business and Trade segments
                        –Comparison with their main competitors
                        –Degree of response to the financial needs of Small Business and Trade
                     First courses of action to improve the competitive position in the analyzed segments
                        –Possible need of changes in the products, marketing mix actions and/or offer
                        –Possible need of modifications in the sales process
                        –Potential omissions in the territorial implementation
                        –Need of organizational changes...



PRAGMATICA Management Consulting                                                                                                           page19
           Design and implementation of the Action Plan




                                           Objective                                                      Resources



                                                                                 - Interview the entity's Small Business clients and non-
                                                                                 clients
                   To establish an Action Plan that gathers the entity's short
                   and mid-term objectives in the Small Business and Trade       - Survey the entity's Trade clients and non-trade clients
                                          segments
                                                                                 - Questionnaires adapted to Small Business and Trade

                                                                                 - Available census' and statistic bases

                                                                      Expected results


                    Short and mid-term objectives of the entity in the Small Business and Trade segments in the analyzed areas
                      –By segment and, if applicable, clientele sub-sector
                      –Area and office implications
                    Action Plan for the securing of said objectives
                      –Actions needed by department
                      –Designation of management
                      –Economic calendar
                      –Material and human resources and needed investment
                    Economic-financial quantification of the Action Plan
                      –Projection of main importance
                      –Sensitivity definition and analysis



PRAGMATICA Management Consulting                                                                                                             page20

				
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Description: PROPOSAL, Methodologic Approach.RETAIL BANKING. Improvement of competitive position in Small Business and Trade segments