Best Practices guidelines for determining the value of the club and reporting to senior management

Transcription

1 Prving Bank Club Value HCI Best Practices Best Practices guidelines fr determining the value f the club and reprting t senir management The HCI Bard f Advisrs determined at its Bard meeting that the mst critical issue facing ur bank clubs tday was the cncern that senir management might dwnsize r discntinue the bank club. Therefre, they felt the mst imprtant questin that ur bank club directrs needed assistance answering was the fllwing: Hw d we prve bank club prfitability and/r value? In respnse, HCI has created this dcument t help ur bank club directrs evaluate, discuss and ultimately use n a regular basis in reprting t their senir management. Prving Prfitability Definitin f club prfitability: A club is prfitable when it generates mre revenue than it spends. Revenue surces cme frm the banking services it sells and fees it charges as well as frm the prgrams it spnsrs. Expenses include all the csts fr thse services and prgrams including verhead, marketing and payrll. Banking services The bank earns mney n the ttal prtfli f banking services it sells and fees it charges (depsit building services, lending, investments, trusts and s n). There are times when the banking services ur clubs sell (checking, savings, CDs, etc.) are nt prfitable fr the bank due t ecnmic factrs. We are currently in that cnditin tday, which means that ur banks are selling services which cst mre than they make. During this time, while ur bank may be prfitable, ur bank clubs may nt be prfitable. Club Prgrams Club prgrams are very brad including banking prgrams such as financial planning, banking seminars, and general educatin abut mney management. There are als scial prgrams such as travel, mvies, lunchens, card games, bing and s n. Sme f these will cst the club mney, while thers, like travel, can generate prfit. When ur bank clubs shw a net prfit r at least a break even with ur prgramming, we will have gne a lng way t prving ur club prfitability. Prving Value (beynd prfit) Definitin f club value: The value f the club t the bank cmes in tw frms banking and cmmunity. The bank wants t be successful and prfitable and believes that mre custmers will d mre business with the bank if they have a strng trusting relatinship with the bank and its emplyees. The bank als wants t be seen in the cmmunity as a strng cntributr t the cmmunity gd, which it des by being successful and philanthrpic. Where the club can help build the banks relatinship with its custmers and with the cmmunity, it will be prving its value t the bank.

2 Building Relatinships The key t prving value is t build strng trusting relatinships, which is dne by ur club directrs in incredibly diverse ways. First we must get t knw the custmers, which we d with direct cntact n cnstant basis in the bank and utside the bank. As we get t knw them we build the trust n a regular basis thrugh a huge variety f prgrams ur custmers find attractive. The mre cmfrtable they are with the bank and its emplyees the mre cmfrtable they are investing their mney with ur banks. Value vs. Prfitability Many f ur banks are nt cncerned with ur bank clubs shwing a prfit. Rather they are mst cncerned with the Public Relatins r custmer relatinships nly as a purpse sufficient t generate enugh banking business that the bank will be successful. Whether yur club requires yu prve prfitability r simply wants yu t be a valuable marketing tl, there are many pieces f infrmatin yu culd be gathering n a regular basis and reprting t management whether they are asking fr it r nt. In mst cases, it is imprtant t cmpare the numbers frm the club vs. the bank verall. At an abslute minimum, here are thse things yu shuld always knw abut yur members and reprt hw these numbers change and grw n a regular basis t management: The BIG FIVE critical queries regardless f ecnmic times: 1. Membership Ttal number f husehlds wh are club members Ttal number f all members 2. Accunts/Relatinships/Services wned by these husehlds members vs. nn-members Ttal number f accunts/relatinships/services wned all members Ttal number f accunts/relatinships/services wned per husehlds Average number f accunts/relatinships/services wned per husehld 3. Depsit Balances members vs. nn-members Average depsit balance per husehld % ttal bank depsits held by club members and $ ttal bank depsits held by club members eg: A bank with $250 millin in depsits and the club hlds 25% f all depsits 1. Reprt that the club hlds 25% f all depsits fr a ttal f $62.5 millin that is an impressive number 2. % f grwth in depsits and membership each mnth r quarter Incme Generated by Depsits Ttal club member (vs nn-member) depsits multiplied by the Net Interest Margin 4. Prfit and Lss statement f all prgrams such as trips

3 5. Hw many members pened a checking accunt after becming a member ie: they cnverted and made yur bank their primary bank. Hw ften t reprt Yu shuld cnsider gathering this infrmatin n a mnthly basis r at the very least a quarterly basis. If the infrmatin is easily pulled frm a strng sftware system, then yu can d this as frequently as every week. The imprtant thing is t be cnsistent and t cmpare yur numbers every perid t track and reprt yur prgress and success. Cncluding Ntes Mst f ur bank clubs fall within the marketing departments f ur banks and are generally lked at as a part f the marketing expense budget. S lng as this is true, the club runs the risk f being cut back r even clsed when times are tugh. T ften, businesses including banks lk t save mney n the expense side by curtailing certain cst items that fall within the marketing budget such as advertising, dnatins and s n. The club can easily fall in this categry. When the belt tightening cmes, it is imprtant that the club be able t stand n its wn financially and prve its wrth t the bank in real numbers that are valuable t the bank. As the club directr, it is very imprtant that yu understand these numbers and can defend the club frm cutbacks, staff reductins and even phasing ut f the club altgether. This is especially true when yu are cntemplating retirement r cutting back yur wn time. There is n reasn the club can t flurish withut yu. After all wh are yu ging t travel with nce yu fully retire! Many f ur club directrs are nt bankers with a deep knwledge f banking. Dn t be intimated! Yu d nt have t have a deep understanding if yu can regularly pull certain infrmatin abut yur members and their value t the bank. The bankers yu reprt t will understand the numbers, see their value, and seriusly cnsider keeping the club active and an imprtant part f the bank. Sme f ur club directrs are part f the management team and sit at the weekly meetings t reprt n the club in the same way ther departments reprt. This is an extremely valuable pprtunity t stand ut and cntinually prve the value f the club t the bank. S, t prtect ur jb, ur gd custmers, the club and the bank itself, it is imprtant t track ur club s value and prfitability n a regular basis. The fllwing attachments represent ideas brught frth frm yur peers t further prve yur clubs value and prfitability. Lk ver these lists and help us t imprve. Are yu ffering different services, prgrams, cmmunicatins tls, and relatinship building ideas than thse listed? Please add t the list s that we might make it even mre useful t ur membership. Yur club is strng because f yu and yur custmer s value t the bank. These ideas may help yu prve the value f bth t senir management.

4 I Additinal Key factrs t determine club prfitability, which can be queried include: 1. Average lan balance 2. % f members wh have been with the bank fr 10+ years 3. Husehld incme % that have incme f $20,000 r less % $20,001 - $50,000 % $50,001 - $100,000 %100,001 - $150,000 %150,001 - $200,000 % ver $200, % that wn their wn hme 5. Hme Values Fr example (depending n yur real estate values) r cnsider just a Lw, Middle, Upscale, Retired type f scale. % that have hme values f $150,000 r less % $150,001 $200,000 % $200,001 - $300,000 % $300,001 - $500,000 % ver $500, % that have lived in their hmes 15+ years 7. Shw that the average depsit per member increases with the lngevity f their membership 8. Track activity n website General activity Online banking Activity t club page II Accunts/Relatinships/Services ffered Our clubs are als smetimes evaluated based n the number f banking services the members wn. Fr many banks the gal is t grw these services t 3-5 per custmer and sme as many as 7 per custmer. Here is a list f sme f the services ur banks ffer: Bank Club yes, yur bank club shuld be cnsidered a banking service as it des require financial investment t belng. Checking Free Checking Mney Market Savings Lans Investment accunts CDs Debit cards Online banking Online bill pay Trusts Credit cards

5 Rewards prgram Direct Depsit accunts ATM cards Safe Depsit Bx III What prgrams d ur bank club directrs ffer that build a strng relatinship? Travel Day trips Theater Sprting events Shpping Reginal trips Mystery trips Extended turs Cruises Internatinal turs Travel shws Celebrate life events Birthday cards Anniversaries Graduatins Births Deaths And s n Special and Regular Events Bing Annual style shw frm lcal wmen s clthing stre Dad s treat Father s Day celebratin Mvies Seminars Health issues Financial planning Fraud and security prtectins Digital phtgraphy Cell phne usage and ptins Flwer arranging Gardening tips Meals Hliday meals Ptluck meals Wine and cheese pen huse Picnics Cffee Times Walking Tac parties featuring different bank departments trust, investments and s n AARP renewals

6 Surveys t learn what they like abut the club and what they wuld like club t ffer IV What cmmunicatin marketing ideas d ur banks use t build relatinships? Newsletters High tech editin Lw tech editin N tech editin Facebk pstings Birthday cards when turning age eligible t jin and invite them t jin the club V What d we need t learn abut ur custmers t establish a trusting relatinship? Wh they are What their banking relatinship is with the bank What is their ccupatin current and befre retirement Children and grandchildren Anniversary Birthdays Pets Health / Parents health Treat them like friends Learn their likes and dislikes One f ur bankers ffers this slgan - A bring persn talks abut himself and a smart persn asks abut yu and yur life.