How to Get the Front Line
to Price and Win Profitable
Loans and Deposits
Neil Stanley, Bank Performance Strategies
Julia Hernandez, Bank Performance Strategies
 What’s the mindset of the front line banker
today?
 What drives customer behavior?
Overview
 How do customers experience service in this
environment?
 What does this mean for financial institutions
and your organization?
The mind of the
front line banker
...
How many times have we observed
the following:
If only our deposit rates
were higher . . .
The mind of the
front line banker
...
How many times have we observed
the following:
There are
so many
rules and
regs to
follow – I
don’t
know if I
can take
on any
more. . .
If only we could
price our loans
more
competitively . . . .
I want to provide service, but
what can I really do . . .
If only our competitors
would stop offering such
crazy rates . . .
I’ll just waive those
fees and the
customer will be
happy . . .
No one will pay
that for our
service/product . . .
Then all the money available
for deposits would be in
these:
If those
statements
were true . . . .
And all of the Consumer
Loans would go here:
I want to find an expert
Make my life easier
Speak to me in “basic
English”
The mind of the
customer. . .
How do I
know
that I am
not being
treated
like a
chump?
Want the best, but
will respond to
what is fair.
I want an actual
conversation – and
walk away
understanding
What’s the catch?
No excuses, just
deliver.
A little humor about how quickly our customers expect change . . .
https://www.youtube.com/watch?v=uEY58fiSK8E
So how do we reconcile these views to create a:
• Win for the Customer
• Win for the Financial Institution
• Win for the Employees
Develop a clearly defined pricing
strategy, utilizing different price points
to address what the customer values. . .
Communicate it effectively . . . And
support it with tools and resources
Loyalty Cards
Coupons
How do other
industries
approach this?
Let’s take a look . . .
Name your own
price
Flash Sales
Utilize
Resellers
Show your
competitors
rates/prices
Let’s look at
the travel
industry . . .
Let’s look at
the travel
industry . . .
How about the
fashion
industry?
The insurance
industry?
And you see
items like
these all the
time . . .
Humans are
different and
therefore
make choices
differently . . .
One size fits all
no longer
applies
 Do we have a system as sophisticated as this
when determining how to price loans and
deposits?
 Cost pricing method
So how has the
banking
industry taken
this into
account?
 This method calls for a seller to consider the actual cost of an item, then consider his
or her ideal cost percentage. Ideal cost percentage varies, but typically lies
somewhere between 25 and 30 percent. The two are divided and voila, you have an
item price
 Competition pricing method
 The seller using this method assigns prices to items based on the general market
price or the prices assigned by the competition. Usually, the seller will either price
the item to be the same as the competing prices, price it slightly lower to get those
looking for a bargain, or price it higher to attract those looking for higher quality.
 Demand driven pricing method
 This concept is based on the economics of supply and demand. For instance, banks in
airports or concession stands at sports stadiums can get away with charging more
for their items because it is the only source in the vicinity. The demand is greater
than the supply, so people are willing to pay more for it. Banks that offer specialty
items or a unique experience can get away with charging more since it reflects both
the product and the experience.
 Study your market and your customer base before pricing your items. You will most
likely know what prices are simply too high, and the last thing you want to do is drive
your customers away. Make your prices competitive and reasonable, and make sure
you are offering the value appropriate for higher cost items.
http://www.foodservicewarehouse.com/education/restaurant-managementand-operations/a-quick-guide-on-pricing-restaurant-menuitems/c28020.aspx#sthash.T8nBTRTH.dpuf
So if we are in an era
where complexity and
price differentiation is
expected, what can
banks do about it?
Pricing - How big is the opportunity in banking?
The Bank’s
Opportunity. .
http://www.pwc.com/en_US/us/financial-services/publications/viewpoints/assets/pwc-fs-viewpoint-aligning-pricing-with-customer-valueproposition.pdf
If you want to powerfully impact the bottom line,
the top line has the greatest potential.
Pricing Loans
Thinking of Commercial Lending - How do these factors
impact the appropriate price?
 Switching from variable to fixed
 Lengthening the term of the loan
 Lengthening the amortization period
 Adding a floor to protect the bank
 Adding a ceiling to protect the borrower
 Reducing borrower’s probability of default
 Adding collateral
 Adding independent, financially solvent and liquid
guarantors
How much rate change is appropriate for each change to
these factors individually and collectively?
How should your front line communicate and negotiate with
borrowers?
Develop a clearly defined pricing
strategy, utilizing different price points
to address what the customer values. . .
Communicate it effectively . . . And
support it with tools and resources
Price Concession
Results from
Lack of Defined
Pricing Strategy
using Different
Price Points
Price
differentiation
in loans
Structural
Negotiation
Results from
Defined Pricing
Strategy using
Different Price
Points when
Offer
Differentiation is
Significant
How can you
closely
manage
pricing while
adding value
to your
customer?
Four Pricing Levers for Time Deposits
How can you
closely
manage
pricing while
adding value
to your
customer?
Offer
Differentiation
Results from
Defined Pricing
Strategy using
Different Price
Points when
Offer
Differentiation is
Minimal
Customers are
often
comfortable
with selfdirected value
exploration
Only those who adapt will survive
. . .so what now?
So, what
should we do
now??
 Create clarity – what is the unifying goal?
Conflicting goals put employees in no win
situations
 Measure and coach – continually monitor
how employees are doing and coach them
towards the goal
 Support them with tools – support your
initiatives with the best of what is
available, no need to reinvent the wheel
Enlighten your team…
So, what
should we do
now??
Equip your team…
So, what
should we do
now??
Empower your team…
1.Develop a Clearly Defined Pricing
Strategy
So, what
should we do
now??
2.Incorporate different price points
address what customers value
3.Communicate it to your team
4.Support it with Systems and Tools
Thank you for your time!
Neil Stanley
 Former Bank Executive with 25+
Years Experience
 Launched Bank Performance
Strategies in 2009
 Published Writer in Numerous Trade
Publications
 Conference Speaker
 Instructor at Multiple Graduate
School of Banking Institutions
 Master’s Degree in Economics
Julia Hernandez
•
Conference speaker
•
Former Bank Executive with 12+
Years Experience
•
Master’s Degree in Organizational
Design
•
Certified Treasury Professional
(CTP) designation
•
Lean/Six Sigma Certification