Growing Small Business Portfolios: Techniques for Financial Institutions
In Part 1, we discussed why small businesses are so critical to the US economy and how they represent significant profit potential for financial institutions. As banks and credit unions think strategically about how to approach this market, it’s important to review three key techniques for growing small business portfolios:
1. Develop deeper relationships with existing customers
Select customers with larger financial services wallets. Effectively cross-sell critical products and services to grow unit profitability.
2. Improve customer retention
Invest in service quality to ensure satisfaction at “moments of truth”. Make relationships “stickier” across the many disruptive events in the life of a small business.
3. Acquire more small businesses
Develop an end-to-end value proposition to enhance your appeal and win more small business customers.
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This series takes a deeper dive into small business acquisition and specifically on product design as one of the key drivers. We’ll focus on product design for two reasons: 1) it’s one of the dominant features that drives customer acquisition and attrition, and; 2) it’s perhaps the feature that can most easily be changed.
But wait…why do small businesses change banks in the first place? First, let’s level set on when small businesses switch banks, and why. Roughly 3% of small businesses switch banks each year. However, those that do tend to do so for a limited set of reasons. Either they move and want a more convenient bank, there is a material (real or perceived) difference in service experience, or there is a material (real or perceived) difference in the product offering.
So what can help you capture these businesses when they do seek out a new financial institution? There’s no silver bullet for growing your small business portfolio, but opening more branches near small businesses can help. Another is by redesigning your sales strategy to identify who within your organization is responsible for acquiring, onboarding, and servicing small businesses. The key piece that we’ll discuss in our next installment is the critical role that product design plays in attracting – and keeping – small businesses as long-term clients. If you can’t wait for the series finale—you can find Vantiv’s full whitepaper, and access a webinar, at the Winning with Small Businesses home.
1 Vantiv, “Winning with Small Businesses”, 2015.