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Spring Cleaning | Spring Into Shape

By Abby Progin 16 May 2016

It is that time of year again folks. With the weather here on the east coast turning warmer, the days are getting longer and swimsuit season is just around the corner. At this time of year many of us are revisiting, revising and revamping our fitness routines. Just as our personal fitness and health requires thoughtful analysis, hard work and effort, so does a financial institution's long-term well-being. A "set it and forget it" approach will get you by, but in order to bulk up revenue, strengthen ROI and stretch your portfolio, it is important to address the fitness of your financial institution.

Bulk up Revenue

Although financial institutions do many things well, they sometimes struggle with converting account holders with only one or two product relationships at the financial institution, to account holders who hold many relationships. Cross-selling into your current account holder base is one focus that is helpful when looking to increase revenue. Before you can determine the amount of new products you can potentially sell, it is important to identify the amount of products already sold. The formula below, using savings accounts as an example, can be used to gather information on your penetration into the market.

# of   Households with Savings Accounts

= % of Product Penetration

# of   Households with Financial Institution

Once you understand your institution's penetration by location and product, you can use this information to measure and analyze. For instance, if you find a certain branch has an increased percentage of credit card products sold among the account holder base, then you know to identify the practices that helped drive their success and apply them to other branches. It is critical to start with a baseline and drive that number up and up. Being able to quantify the potential cross-sell opportunities as well as the actual dollar value of sales achieved is helpful as financial institutions drive conversation on this topic from the top down.

Strengthen ROI

Clearly define what class, category or type of account holders you will be targeting and even more importantly what product to promote to strengthen your return on investment. Once defined parameters are identified and campaigns are executed, valuable insight can be obtained from discovering how much money was spent to acquire each new account holder or increase the number of products for your current account holders. More specifically, the formula below is widely used by many financial institutions to measure the profitability and gauge the cost per account holder acquired.

Campaign   Sales + Marketing Cost

= Account Holder Acquisition Cost

# of   Account Holders Gained

 

Stretch your Product Portfolio

What is your financial institution's risk appetite? Developing a portfolio approach that delivers growth is an important contributing factor to a financial institution's long term well-being. A healthy portfolio is likely to consist of core business, expansion into neighboring business areas and opportunities for new products and markets (think lifestyle or merchant lending). So do not be afraid to raise the ideas of new markets and products in order to stretch the limits.

Getting real results takes old-fashioned hard work using proven methods. But the rewards are just as predictable. Plan accordingly and put in the effort to "spring into shape" and you’ll be the person walking around like a rock star.

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