“Commitment in the face of conflict produces character.” – Mark Twain
Dear readers, last week I shared some sentiments about how relationship banking can be optimised as a risk management tool. I concentrated on how customer visits and face to face meetings with borrowing customers could reduce loan defaults to a minimum. Visiting customers’ premises is very key from day-one of the loan process. Early warning signals can be seen and nipped in the bud. Many financial professionals know they should be communicating on a regular basis, but time gets in the way and busy schedules may become big roadblocks. Consistent communication with clients is an essential ingredient to long-term success.
Banks that practice relationship banking take a consultative approach with customers, getting to know their particular situation and needs and adapting to changes in their financial or business lives. Whether for an individual or small business, relationship bankers engage in relationship services to try and make their banks a ‘one-stop shop’ for their A-to-Z needs. Sometimes they are called ‘The Customers’ Friends’.
Cross-selling is the modus operandi of relationship bankers, but they must be careful to ensure it is done in the customers’ interest. I am sure you have not forgotten my recent article that featured the abuse of relationship banking at Wells Fargo Bank in America. Relationship banking went too far. A flawed and aggressive incentive (and punishment) system that the bank implemented for relationship bankers at a number of retail branches, from around 2011 to 2016, led to millions of new account openings.
The problem was that customers did not authorise the bankers to open them. Trust is the foundation of successful relationship banking, but Wells Fargo broke that trust for millions of customers. A bank must have a culture of ethical service to practice relationship banking for the mutual benefit of bank and customer. Customers are able to take advantage of a bank’s desire to develop relationship banking by obtaining more favourable terms or treatment with regard to rates and fees, as well as to obtain a higher level of customer service.
We all know that banking is all about accepting or sourcing funds from idle sources for use in deficit units. Without depositors or investors, no bank can effectively get idle funds to manage and make a profit. In some banks, when a large depositor ‘coughs’ the bank “shakes to its bones”. Such large depositors are rates-sensitive, and often dictate interest rates on their deposits because they know that any threat of disinvestment will give the bank Treasurer a big headache. Once again, will look at some real-life cases of how customer visits and face to face calls can make a big difference to the bank’s bottom line:
The Bank’s largest Single Depositor
How do you handle your investors? With regular shows of concern in their business operations, proactivity in managing their payment systems such as payments of their clients, workers’ salaries, extra care in managing service and product delivery to their executives and other persons of influence in the organisation, you have a good deal. Let us look at the case of Mr. Kumi, one of the largest depositors in Bank A.
After several months of no communication from his bankers, he received a call from his relationship manager. She informed him that one of his fixed deposits, running into tens of millions of cedis, was maturing in two days’ time. This was timely because he was having some cash flow problems. He therefore asked the lady how much the new rates were and told her his need to redeem part of the investment.
The relationship manager had not been meeting her targets recently and was praying that Mr. Kumi would not touch the investment. She suddenly felt jittery and alarmed on the phone, saying she would call him back later. In fact, she did not do so and rather allowed the investment to roll on – and unfortunately at the same interest rate, despite the fact that rates had gone up. A month later, Mr. Kumi wrote to the bank to disinvest all his funds! You can imagine the stress on the bank’s liquidity.
Dear relationship manager, business is rough and the competition is rough – but do not abandon your customers after the sale is closed. When you leave the customer’s premises, another relationship manager from another branch is entering his office to offer better and more juicy deals. Even if the market is rough, you still have to update your customers and discuss their investments with them.
You will be surprised to know that some customers patronise your products based on their emotions. So long as you offer premium service, they are comfortable and may not even move their funds elsewhere even if your rates are not competitive. When you feel for the customers, some will also feel for you during your bad times. Yes, that is how far customer loyalty can go.
On this note, let us create some more tips on relationship management of customers:
Be more visible
Do you want your clients wondering why they never hear from you? Whether by email or hard copy (or both), you can consistently stay in front of clients with valued-added material. Relationship Managers should be just a mouse-click away.
Customers really do appreciate that you are keeping them informed. By regularly sending communiqués, latest services and products they can benefit from, you convey a sense of trust and belonging while enhancing your brand. Your newsletters become another tool to demonstrate your expertise, and sometimes some customers forward your information to family and friends…creating a pool of potential prospects.
Avoid technical jargon
Correspondence to customers should be simple and in terms they will grasp. Stay away from jargon! If you feel you must use jargon, then take the time to explain the terms in language they will grasp. What message do you want to reach clients with? Personalise it. Go one step further and feel free to share pictures of your company’s corporate activities. It humanises you and makes you more relatable.
Reinforce the Sale
Communication can serve as a valuable reinforcement tool to solidify the purchase. For example, a salesperson who stays in touch with a customer in the period immediately following a sale can reinforce the benefits of his product or service and how they meet the customer’s needs. They can also quickly address any problems the customer may have, such as attempting to figure out how to use a new product. In the process, the salesperson can also lay the foundation for a long-term relationship leading to repeat sales.
Staying in Touch
Failure to communicate with customers for extended periods can cause them to forget about you or make them think you no longer care about their business. When the time comes when they need your services again, they may decide to look to your competition instead. Even if a customer doesn’t have a current need for what your business provides, the simple act of staying in touch with a newsletter, email or even the occasional in-person visit can reassure them you’re still there to assist them whenever they need you.
Uncover needs and trends
Businesses and people change over time. What they once valued or needed may no longer be valued or needed. The only way to prevent yourself from losing customers to competitors or becoming irrelevant in your industry is to be in contact with your customers and find out what is happening in their lives and businesses.
This gives you valuable insight into the minds and needs of your customers, and helps you find or create the right solution for them.
Some bankers fear their customers’ feedback – so much that it prevents them from following-up after sales. But the feedback your customers share with you, whether it is positive or negative, is the key to building a better business. Your customers, who have experienced your products and services firsthand, will provide priceless insight into the quality, affordability, customer service and benefits you offer compared to what else is available in your industry. And, if you choose to listen, they will help you create greater products and services that are more competitive and relevant to your market.
Never underestimate the power of a trusting business relationship. You have already invested time, money and energy into getting your customers; why not do everything in your power to keep them as well? People want to be valued for who they are and not just how much they spend with you. A quick phone call to see how they are going is a great way to build a relationship with your customers and inspire loyalty and trust.
These days, so many businesses have an agenda when they contact their customers. However, you leave an indelible mark when you call just to see how they are going.
My final words
Dear banker, risk management is a more preventive method than waiting for losses to occur and looking for the root-causes and culprits involved. Let us use relationship management in all customer interactions and go the extra mile – and guess what? Frauds, both internal and external, as well as losses will be reduced to the barest minimum…..and also I will not have much to nag about!! I wish you all a happy banking experience.
ABOUT THE AUTHOR
Alberta Quarcoopome is a Fellow of the Institute of Bankers, and CEO of ALKAN Business Consult Ltd. She is the Author of two books: “The 21st Century Bank Teller: A Strategic Partner” and “My Front Desk Experience: A Young Banker’s Story”. She uses her experience and practical case studies training young bankers in operational risk management, sales, customer service, banking operations and fraud.