Marketing science: the new chemistry in middle-market commercial banking: banks can use analytically based strategies to improve relationship manager productivity.

A long-standing challenge in middle-market commercial banking is making the best use relationship managers (RMs). Directly interacting with customers, these field representatives play the most visible role in generating balances and revenues. But they also represent some of the most senior--and increasingly scarce--talent in the bank.

In their push to improve RM productivity, many banks have focused on streamlining underwriting and off-loading basic service activities to central help desks. Such initiatives have freed up more time for prospecting and client interaction, yet valuable opportunities still can be forfeited, depending on where and how bankers spend their time. All prospects are not created equal, nor do all aspects of the selling process equally justify senior staff attention. The answer is not as simple as beefing up staff resources and providing more training. And this holds for other sales officers as well.

It is within this context that some of the core marketing principles used in other industries and areas of financial services are becoming critical to commercial banking success. Through centrally generated customer analytics, for example, progressive banks are improving their ability to systematically identify high-potential commercial customer groups and model their likely needs, which in turn enhances prospecting, cross-sell and overall sales management.

Such analytically based strategies can be invaluable in the smaller end of the middle market, the heart of which encompasses roughly 150,000 companies with annual revenues ranging from $10 million to $250 million. Marketing science, the analytically driven process of identifying, understanding and fulfilling target customers, is the key to taking full advantage of the rich individual client knowledge possessed by the RMs.

The opportunity is compelling, yet there are delicate management issues to deal with as the bank institutes a more systematic approach to interacting with middle-market commercial banking customers. RMs, who at the zenith of their influence controlled almost all aspects of the customer relationship, naturally tend to be wary of centralized initiatives that substitute analytically based guidance for personal discretion. Information technology and customer analytics also come into play, with a need to integrate internal and external data to build a picture of the total customer relationship. Thus, a graduated approach that involves pilot programs will work best for many institutions.

Paths to Improvement

Marketing science largely remains absent from the lexicon of commercial banking, where it's probably fair to say that analytically based customer strategies are more nascent, compared with the elaborate constructs seen in other industries and other areas of financial services. But now is certainly the time to begin closing that gap. The terms of competition are changing in middle-market commercial lending, and first movers will gain profitable market share at others' expense.