Winning Small Business Customers: Best Practices to Acquire, Cross-Sell, and Retain Them: Hungry for Personalized Service, Millions of Small-Business Owners Are Ripe for the Picking ... but Reluctant to Make the Change to a New Financial Institution. This Article Offers Ways to Attract the Attention-And the Accounts-Of Today's Entrepreneurs

By Carr, Marilyn | The RMA Journal, February 2006 | Go to article overview

Winning Small Business Customers: Best Practices to Acquire, Cross-Sell, and Retain Them: Hungry for Personalized Service, Millions of Small-Business Owners Are Ripe for the Picking ... but Reluctant to Make the Change to a New Financial Institution. This Article Offers Ways to Attract the Attention-And the Accounts-Of Today's Entrepreneurs


Carr, Marilyn, The RMA Journal


There once was a time when mom-and-pop shops barely earned a spot on a bank manager's priority list. But those days are long gone as small businesses continue to bolster the nation's economy as well as the bottom line of some of today's top financial institutions.

According to the most recent U.S. Census Bureau statistics, there are 23 million small businesses, which create approximately 75% of new jobs and represent 99.7% of all employers. Impressive numbers, but consider this: Nearly 16 million of these small businesses are self-employed persons and have no payroll. "That leaves seven million employer-businesses that all of the financial institutions are chasing," says Maggie Scarborough, research manager of corporate banking at Financial Insights, a Framingham, Massachusetts research firm that delivers information technology advice to the financial services industry.

As illustrated by Scarborough's calculation, today's banks are facing steep competition as they vie for a limited number of small business accounts. Hoping to grab a larger slice of the pie, many banks are breaking with tradition and finding new ways to attract small-business owners. Slowly, age-old direct mail campaigns are giving way to customized financial services, face-to-face customer relations, electronic channels such as Internet banking, and cross-selling strategies.

A Tailored and One-on-One Focus

One of the most popular ways that banks are winning new small-business customers is through tailored financial services. It's not enough simply to provide standardized loan and credit programs. Instead, an increasing number of financial institutions are delivering cash management and convenience services to lure local entrepreneurs.

"What today's banks have done is put together a very impressive array of services for the small business owner," says Marilyn Landis, president of Basic Business Concepts, based in Pittsburgh, Pennsylvania, and a provider of CFO-level services. For example, Landis says an increasing number of banks are plumbing their databases of personal accounts to identify candidates that may be interested in complementary business packages, such as insurance coverage and bookkeeping. Meanwhile, others are bundling their business services to include no-fee checking accounts, direct payroll deposit, and online banking.

While packaged services are appealing, Marti Rodamaker says that word-of-mouth is one of the most effective marketing channels available to banks today. Rodamaker would know. She is the president of First Citizens National Bank in Mason City, Iowa. "We really try very hard to develop business internally," she says, adding that the community bank's officers often ask existing customers for references.

But that's not all. Rodamaker says that First Citizens National Bank also relies on community outreach programs to attract the attention--and accounts--of local business owners. These programs include participating in technology and agriculture showcases, holding on-site seminars on topics such as 401(k) management, teaming up with the town's Chamber of Commerce to host community events, and occasionally sending branch officers to teach courses at community colleges on subjects such as business administration, entrepreneurship, and strategic planning.

One-on-one relationships between bank officers and business owners can be a high-priced marketing channel, especially if a particular bank representative opts to work elsewhere and ends up taking clients along for the ride. However, studies indicate that an emphasis on personal relations is well worth the investment. According to a recent Financial Insights report, 35% of small businesses interact with their relationship managers in a 30-day period. It's no wonder, then, that high-touch local community banks have a 44.8% small-business penetration rate.

Nevertheless, many entrepreneurs simply don't have the time to pay their bank branch representatives a daily visit. …

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Winning Small Business Customers: Best Practices to Acquire, Cross-Sell, and Retain Them: Hungry for Personalized Service, Millions of Small-Business Owners Are Ripe for the Picking ... but Reluctant to Make the Change to a New Financial Institution. This Article Offers Ways to Attract the Attention-And the Accounts-Of Today's Entrepreneurs
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