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

8/7/2019 RETAIL BANKING. Improvement of competitive position in Small Business and Trade segments (PRAGMATICA MC)

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Index

Introduction, focus, and objectives of the work

Proposed methodology

page2PRAGMATICA Management Consulting


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Introduction, focus, and objectives of the work




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A substantial change in the environment of financial entities has been

occurring in recent yearsPrice war, that has affected "very comfortable" traditional segments for the entities ina very significant way

Drop in profitability & risk of the mortgage portfolioGrowing 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 toguarantee future competitiveness

Orienting themselves toward market segments that can still provide them growth andprofitability

The small business and trade segments, traditionally "reserved" forentities of a national scope, represent a good opportunity

They are the main drivers of economic growthThey are much more profitable than big corpsThey need to adapt themselves to a more competitive environmentThey provide more business volume per captured than for individualsThe possibilities of profitability are broader than individuals: Wider range of and moresophisticated products

Induced business attractiveness

Introduction



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Focus

We define the competitive position/market share of an entity asthe combination of 3 factors

Competitive position/market share

Penetration Product share Share of walletX X

Number of clients of theentity over the totalnumber of potentialclients in the area

Degree ofloyalty/entailment of theentities' current clients

over the base of a(minimally) previouslydefined profile called

"basic range"

What part of the businessof each client is for theentity?: 1st., 2nd., 3rd

relationship...

Competitive position/market share



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Focus

The commercial activity is the basic axis over which theimprovement of the competitive position turns

Commercial activityRecruitmen

t

(Sale)

Loyalty

(Crosselling)

Relationship

(Balances)

Penetrationincrease

Better productshare

Relationship levelincrease

Commercial activity

relationship


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Barcelona Bologna Bruxelles Lisboa MadridCentro Luxor Rua da Misericrdia, 76 1200 Lisboa

Tel: (3511) 321 02 90 Fax: (3511) 321 02 99

Paseo de la Castellana 50, Planta 3 28046 MadridTel: (34) 915 647 209 Fax: (34) 915 629 869

Focus

As an initial step, it is important to bring the entity's strengthscloser to the success factors of the objective segments

%

ofimp

ortanceinclient

selection

Success

factors

Secondarycriteria

Marginalcriteria

Bankrate

Worse than the leader Better than the leader

Commiss

ions

Depositrate

Physicalproximity

Smallbusinessspecializ

ation

Network

width

Greater orlesser need

ofimprovemen

t


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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 stresson the recidivist commercial visit

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

Focus

As well as to adequately plan the commercial activity

Lack commercialactivity

working

one time

relationship

"Adoption cycle"


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Focus

All of this will allow the adaptation of the entity's offer to themarket needs

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

Checking accountTrade allowance

Direct debiting payments

Tax management Company creditcards

Overseasoperating

Credit line

Social insurance

managementDirect debiting receipts

Leasing

Interest earning checking account

Payroll management

Time/term deposits

Insurance

Personal securedloan

Secured mortgageloan

Investment fundLiquid assetpoints

OverdraftFactorin

gCredit card

machine.

Liabilityproducts

Asset products Compensationtransfers


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Focus

... to increase the client's level of entailment

Client typeNumber of

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- 1 asset contract (credit policy, discount...) plus- 2 services (card and payments by direct debit)

Medium loyalty- 1 contact in view plus 3 services or- 2 contracts plus 3 services or- 3 contracts plus 0, 1 or 2 services

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

Total 100%

Minimum profiledemanded

Medium/highentailment

level

Minimum profiledemanded



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Focus

... and their relationship with the entity

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

23 %

20 %

57 %



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Analysis of the entity'sclient portfolio and

sales process

Work launch

Diagnosis and maincourses of action

Commercialinvestigation (clients

and non-clients)

Environmental

analysis

Design andimplementation of the

Action Plan



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Work launch

Objective Resources

To increase the efficiency of the work by the

collaboration of the entity with Consulting team

- Preparatory meetings

- 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 ofentity management; from the first moment



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Environmental analysis

Objective Resources

To identify the fundamental characteristics of theenvironment in that which the entity operates and

the habits and financial needs of the SmallBusinesses and Trades

- Interviews with key managers

- Analysis of macroeconomic information

- Analysis of the main competitor's information

- Analysis of information about Small Businesses andTrades

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 towardsthe analyzed segments

Recent evolution and current situation of the entity and its vision of the "business" with SmallBusinesses and Trades

Drawing up of a numerical census of Small Businesses and Trades: Type, location, and mainimportance

Importance that Small Business and Trade has in general economy and in particular, the bankingbusiness

Expected results



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Analysis of the entity's portfolio and sales process

Objective Resources

To determine the entity's current situation regardingits clients and degree of penetration and coverage in

each analyzed segment

- Analysis of the evolution of the client portfolio

- Analysis of a client sample

- Analysis of the information from Banking regulator,

Banking 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 ofclients

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 officesRevision 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



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Commercial investigation

Objective Resources

To identify the habits and financial needs of SmallBusiness and Trade in the area of analysis

- Interview the entity's Small Business clients andnon-clients

- Survey the entity's Trade clients and non-clients

- Questionnaires adapted to Small Business andTrade

- Available census' and statistic basesExpected 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 TradeAspects 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



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Competitive diagnosis of the entity in the analyzed segmentsand main courses of action

Objective Resources

To determine the current competitive position of theentity in the Small Business and Trade segments andto establish the first courses of action to improve it

- Macroeconomics and banking environment

- Current situation of the entity in the Small Businessand Tradesegments: Sales process, offer, client portfolio

- Carried out commercial investigation

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 SmallBusiness and Trade

Strong points and weak points in the Small Business and Trade segmentsComparison 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...

Expected results



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Design and implementation of the Action Plan

Objective Resources

To establish an Action Plan that gathers the entity'sshort and mid-term objectives in the Small Business

and Trade segments

- Interview the entity's Small Business clients andnon-clients

- Survey the entity's Trade clients and non-tradeclients

- Questionnaires adapted to Small Business andTrade

- Available census' and statistic basesExpected results

Short and mid-term objectives of the entity in the Small Business and Trade segments in theanalyzed areas

By segment and, if applicable, clientele sub-sector

Area and office implications

Action Plan for the securing of said objectivesActions 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


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

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