Can a DCN impact your branch experience? Banks can look to retailing for positive experience...

Banks hardly need telling that the retail banking business is extremely competitive. All too often consumers consider banking products and services to be commodities. This presents a huge challenge for retail banks to develop meaningful marketing initiatives both to acquire new customers and

Yet it's vital to succeed because the incremental profit on sales to existing customers is high (assuming high-margin products). In addition, the more products a customer has at an institution, the less "flight risk" exists. Research has established that the cost of retaining existing customers by improving the products and services that are perceived as being important is significantly lower than the cost of winning new customers. Further, enhancing customer satisfaction can increase a firm's share of portfolio with its customers, and thereby its total revenues and long-term profitability. As relationship or internal marketing has been found to be most appropriate to retain profitable customers, banks should redirect a portion of these marketing dollars from mass advertising to customer in-branch communications.

All of this is leading banks to invest in branch marketing and communications by means of a digital communications network ("DCN"). Citizens Financial Group-Charter One, Providence, R.I., for example, has a DCN installed in over 760 branches. TCF Bank, Minneapolis, has announced that it will be extending its DCN to over 430 branches. Many other banks, both in the United States and around the world, have or are in the process of deploying such networks.

Communications can be targeted

A branch DCN is defined as visual messaging displayed in the retail area, delivered digitally through a centrally managed and controlled network. Messages are delivered via flat panel screens that can be located at the bank entrance, strategically placed in the branch lobby, and/or behind the tellers. DCN-delivered messages are efficient, as compared to mass advertising, in that they are directed at customers and potential customers while in a bank, and can serve multiple communication objectives. A DCN also affords a bank unique programming opportunities that are aimed at customer acquisition, retention, and up-sell. Programming can be designed to increase consumer awareness of a bank's mortgage programs, for example, or it can offer product and service education, or enhance the bank's brand by highlighting community involvement or local news.

Enhancing the customer experience

Retailers that distinguish their stores perform better than those that do not. Increasingly, the place of sale will become one of the most significant vehicles for marketers to effectively communicate with consumers, which is leading to an increased focus on the retail environment. This issue is more acute for retail banks than for non-bank retailers, because financial institutions provide a limited number of complex, intangible products and services. As a result, many financial institutions now focus on the customer experience as a means to achieve differentiation and gain market share.

When considering most experience-enhancing methods, what has been lacking has been a timely and cost-effective method to deliver messages to bank customers while they are in the branch. This is changing, as the implementation costs associated with a DCN are dropping. For instance, if a bank desires to position the branch as a financial resource center, messages can be delivered regarding the institution's range of products and services, access to experts, on-demand topical information, etc.

Branch benefits from DCN

The following section outlines some of the attributes of digital communication networks based on research with retailers and financial institutions.

Building customer loyalty. Messages are more relevant when tailored to a specific audience, and a DCN offers the ability to segment messages to a specific in-branch population. Messages can be altered to address various environmental factors, including a particular geographic area or branch demographics, individual branch and/or bank promotional activities, and weather and other localized activities.

Wait time. Customer service is a critical component of a customer's bank experience, and customer wait time is a major input of customer service. Improving wait times--or the perception thereof--is important to customer satisfaction. Digital communications and other networks have been found to have a positive impact upon reducing wait time perceptions, resulting in a positive impact on customer service.

Branch productivity. With highly complex products, such as a mortgage, a great deal of personal customer interaction is required. On the other hand, when more routine functions are involved, such as opening a checking account, a lower level of service involvement is required. Matching the level of bank employee involvement at the beginning of the customer engagement cycle can have a meaningful impact upon branch profitability. In this regard, messages delivered by a DCN can effectively impact customer behavior by educating customers to seek the appropriate level of service, with the result of increasing both branch productivity and customer satisfaction.

Consultative sales. According to Booz Allen Hamilton, "Most customers don't see banks as providers of advice-based services--the holy grail of wallet penetration." If banks desire higher rates of customer retention and increased customer wallet penetration, "they must reinvent the branch from a glorified transaction center to a product sales and advisory service center." A DCN can be a central component in this process by impacting the customer buying process. This is accomplished by directing customers to associates with the right competences, by presenting in-branch education and seminars, and by providing on-demand access to expert professionals within a financial institution on a worldwide basis.

Customer and employee education. As banks transition from transaction driven to consultative selling, education becomes critical. Higher-margin products and services require an increased level of explanation, and a DCN can deliver messages in a non-threatening, passive manner that will be well received by customers. It can also be utilized to educate staff.

New product/service and promotional trials. Messages carried on a DCN are both immediate and flexible. This ability to deliver, test, and refine messages rapidly is an important benefit of a digital signage system.

Measurement methodologies

The measures of effectiveness of a bank DCN are specific to each institution. In a bank branch, both direct benefits, such as productivity gains attributable to redirecting customers to self-service options, as well as indirect benefits, such as impacting the customer experience, are relevant, and should form a part of the measurement process.

Outcomes. From each bank's strategy, various outcomes will be established. Below are various data-set test outcomes that bank management may consider when evaluating the effectiveness of a DCN. This information is accumulated in various ways, including customer observation and interviews, comparing productivity and revenue changes at enabled versus non-enabled branches, etc. The specific output(s) should be relevant to and weighted in light of the bank's DCN strategy.

Behavioral

* Customer transaction processing time.

* Customer retention and churn.

* Observed viewing of digital signage.

* Length of customer relationship with the bank.

* Number of customer transactions with the bank.

Attitudinal

* Convenience.

* Actual versus perceived wait time.

* Reported viewing of digital signage.

* Customer satisfaction.

* Customer product inquiries.

* Brand and product perceptions.

Revenue related

* New product sales per customer.

* Revenue per customer.

* Products owned per customer.

* Promotional impact.

Branch productivity

* Transactions per full-time equivalent employee.

* Cycle time to complete a transaction.

* Self-Service Usage.

Data analysis. The testing of outcomes will produce an extensive amount of behavioral, attitudinal, revenue, and productivity data. Such variant data sets can make it challenging to extrapolate concise findings.

Issues that arise include, applying a logical model from which to draw observations, data that may conflict with other data, and false positives or false negatives. Yet understanding, interpreting, and responding to such research is key to leveraging a DCN. In this regard, various techniques may be applied, including customer lifetime value and a data-weighted approach.

By Steven Keith Platt, director and research fellow, Platt Retail Institute, and Peter VanSickle, branch marketing officer, Bank of Montreal. The Platt Retail Institute, Hinsdale, Ill., is a retail think tank and consulting firm. This article is a summary of a Working Paper, which may be purchased from PRI (www.plattretailinsitiute.org).