As the world of banking changes and the pressure on sales forces increases, it is going to become increasingly necessary for banks to professionalise their sales forces to sustain growth and customer value.
The demand for sales performance
There are always a range of economic factors driving a range of sales targets. The annual PwC analysis of the major banks’ financials highlights the importance of deposits in 2012 to 13. The report predicts that retail deposits will be cheaper than wholesale deposits as a source of funding for banks. Operationally, this will translate into aggressive sales targets.
Net interest margins on unsecured lending have been good over the past year. There is a market swing towards these products in the retail banking space. This will no doubt mean aggressive sales targets.
Then, there is the annual quest for the bottom line growth that meets shareholders’ expectations. Those requirements cannot be met through cost reductions alone. A better top line is imperative, conceivably generated by fewer, more productive staff. Higher sales targets. And offsetting the cost of Basel 3? Higher sales targets?
All in all, the pressure is on for sales as it has never been before. And the world in which these sales have to be made is changing rapidly.
Sales staff in retail banking have to achieve more with less
A number of trends are continuing to make the banking sales environment more challenging than it has ever been previously:
• Bank brand differentiation and loyalty still does not provide access to customers when they purchase financial products. As reported in Time Magazine, generally, brand and product differentiation in banks remains elusive. ‘ “A survey conducted by marketing research firm Brand Keys found that consumers make no differentiation — none — between bank brands. “They’re still among a group of brands where there is zero differentiation,” says Brand Keys’ founder Robert Passikoff. ‘ In most banking sales situations consumers essentially believe they are buying commodities on a transactional basis, rather than expecting a value-adding sales process, and no bank brand yet provides any degree of certainty that it will have access to its existing customers when next they buy a financial product or solution.
• Competition is more focused and more vigorous when purchasers do decide to buy. Competition for share of wallet is intensive. To illustrate, Capitec Bank claimed approximately 900 000 new customers last year, primarily in the less affluent customer segments, and there are major initiatives to capture market share in these segments by the other major banks. When will the segment reach saturation? Cross selling is more important than ever in this segment because there are fewer and fewer unbanked customers. The example serves to illustrate the more embracing reality – competition is increasing for all segments and all product categories. The proportion of customers who have an exclusive relationship with any single bank is declining.
• Buying behaviour itself is changing. Technology is exerting a dramatic influence on consumer behaviour, and this trend will continue. The internet is already enabling consumers in some segments to become more and more informed about competitive bank offerings and pricing, and very importantly, service standards. Customers are more self-empowered, and far more able to buy comparatively, and as a result competitors are introduced earlier in the consumer’s buying process. This means that a proactive, informed and professional approach is required to win business, and that the speed and agility of the sales force and the selling system becomes ever more important.
• Compliance requirements make the sales process more administratively demanding. With particular reference to the less affluent segments, a dramatic upswing in unsecured lending has already attracted the regulator’s attention, amid concerns that indebtedness remains too high and savings too low. This illustrates the increasingly hawkish regulation of financial product sales, which is already ruled by acronyms: FAIS, FICA, NCA, CPA. While these acts have increased customer protection and helped manage other risks, they have also created considerable compliance requirements and diverted resources away from discovering customer value and into administration, and more can perhaps be expected. The proportion of staff training effort that is dedicated to compliance has become disproportionate, and is exerting a negative influence on banks’ ability to develop effective sales teams.
Sales consultants in retail banking are needing to achieve more, with more sophisticated customers to whom they may have less effective access, in a more competitive environment, in a regulatory context that becomes ever more stringent. This reality becomes even more pronounced in business banking, where the solutions are more complex and the stakes higher.
One conversation: the difference that makes a difference
Many banks are investing heavily in their selling processes and technologies to match this emerging reality. Alternative channels, detailed micro-market analyses, elaborate MIS, exact performance targets, marketing integration, incentive schemes, and sales portals are all being developed and deployed. The list goes on.
What does this mean for a sales force, that must use new technology and new process to sell in changing markets under new conditions?
Clearly the historical platform of passive lead sourcing for sales teams, and an order-taking mind-set, cannot prevail. And in the emerging world, more of the top line in retail banking hinges on the quality of one conversation – the sales conversation – than ever before.
A poor sales conversation leads to an order taken. A great conversation, on the other hand, leads to a multiple value-opportunities discovered, value positioned, solutions or outcomes sold, a relationship built, cross-sell ratios improved, and a greater share of wallet. And a more satisfied and better –serviced customer.
That one conversation should be so valuable is sobering.
What sales behaviour makes a difference?
This is a very different question to asking what new training is needed.
Behaviour is what people do that makes a difference. Effective sales behaviour is empowered by systems and guided by performance support tools, but nothing can substitute for an agile, purposeful and skilled sales force. Training is but one component in shaping behaviour – but it is an important one.
Research and analysis over the past few years in South Africa, along with international benchmarking, all point to the fact that there is a need for a new sales workforce in banking: a professionalised one. Developing this sort of workforce will be a new and unfamiliar challenge for Learning and Development and for bankers in general.
Sales theory tells us that great sales results come from the ‘SNAP’ formula:
(The skill of the sales force) x (the number of applications) x (the allocation of effort) x (the selling process)
Getting this right will be likely to require new behaviour at various points in the sales value-chain. Over and above the compliance requirements and systems and product knowledge, the following behaviour in sales teams will have to be optimised:
• Decisions regarding where to allocate sales effort for greatest reward;
• Understanding the customer life cycle and the changes that drive buying behaviour;
• Gaining access to customers at the right time;
• Analysis of customer buying behaviour, and what constitutes full value from the customer’s point of view;
• The conversational skills to facilitating the buying process so that the customer can realise full value from a range of products. This is not the same as ‘selling products’ – it is a more sophisticated conversation that focuses on product only to the extent that these are the vehicles that deliver customer value.
The skill set underpinning this behaviour – and this is not by any means the complete set – is far broader than the skill set underpinning the traditional order-taking role fulfilled by many sales people in banking. This behaviour does not emerge by tucking a couple of days of sales training into a curriculum that focuses on product, compliance and system knowledge. It requires a new approach with a focus on professionalising the sales force. What is required is a new paradigm for learning and development for sales roles.
Perhaps the historical quest for differentiation through operational efficiency is being superseded by the opportunity for differentiation in the sales process – and hence in the service process. Detailed analysis shows that it can be done. It will however require a rethinking of some of the traditional assumptions regarding effective sales behaviour.
The bank that gets this right will certainly enjoy rich rewards.