This document discusses how community banks and credit unions can leverage internal and external data for strategic decision making. It emphasizes using data on local markets, customers, and transactions to optimize branch networks, target growth opportunities, and better understand customer preferences and behavior across channels. The document provides examples of segmenting customers based on account characteristics and channel usage, analyzing branch market areas, and identifying small business banking prospects. It stresses measuring results and adjusting goals based on analytics of customer, market and competitive data.

1. LEVERAGING AND OPTIMIZING
INTERNAL AND EXTERNAL DATA
FOR STRATEGIC AND TACTICAL
DECISION MAKING

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Subjects to discuss
• Current community bank and credit union concerns
• Emphasis on superior local knowledge and data
• Leveraging available institution data
• Value of location in a digital age
• Measuring behavioral change
• Setting market based goals

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Current environment driving transformation
Improving economic
growth1 Unique industry cost
2
Increased bank and non-
bank competitive
environment3
Customer demand for
easy, simple, fast
transactions4
Technology
evolution/consumer
adoption continuously
impacting pace of change
5
Shift to electronic
channels for routine
transactions; advice/info
– people for more
complex interactions
6
Mobile have greater
impact on customer
expectations than web
banking
7 Revenue growth
challenged8 Regulatory compliance
cost easing9

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CEO concerns
Market
demographic
change and
generational
structure
Social and
behavioral
change
Interconnectivity
of markets
Increasingly
competitive
environment
Regulatory
environment
Bank culture and
organization

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• Reassess the branch network
• Customer/member retention
• Digital engagement at pace of market
• Tie investment decisions to customer experience
• Engage key/new target markets
• Superior depth of knowledge about local markets
• Branch presence in community
• Loans and deposit products that match the market
• Active community involvement
• Personal service
Community bank model and global trends

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Local market knowledge and data
MARKET DATA
• Demographics/
segmentation
• Growth and
development
• Income/net worth
• Potential for financial
products
• Competitive
environment
INTERNAL DATA
• Household/business
• Transactions
• Sales and service
• Financial
• Staff knowledge
• Operational data
• Account churn
GROWTH
OPPORTUNITIES
Organic
• Consumer
• Business
• Wealth
New
• Consumer
• Business
• Wealth
Channel priorities
• Location-based
• Digital/self-service
RESEARCH
• Product needs
• Channel use/preferences
• Generational
characteristics
• Customer loyalty/
satisfaction
• Staff observation and
customer interviews

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Effective use of data
Business objectives what needs to be measured (growth, efficiency, cost reduction, etc.)1
Data acquisition and organization2
Simple analysis and reporting3
Examination of analysis against business objectives4
Integration of analysis and reporting – organizational benefits5
Actions6
Monitor results Marketing, Operational, Financial models7
Adjust models, goals, etc.8

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Leveraging in-bank customer data
High
deposits
Low/no
loans
High
deposits
High loans
Low/no
deposits
Low/no
loans
Low/no
deposits
High loans
Loans
Deposits
Stratification of
customers
Generational
structure
Potential for products
and services
Channel use and
direction
Customer loyalty and
experience
Organic growth
opportunities
New customer
prospects/targeting
Marketing and
communication

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Valuable customer and transaction data
HOUSEHOLD FILE
• Consumer
• Business
• Depth/breadth of relationship
• Profitability
• Generation/life-cycle
• Product and service voids
• Organic growth opportunity
TRANSACTION FILE
• Consumer
• Business
• Attended vs direct channel use
• Geographic range of usage – facilities used
• Transactional and sales trade area
• Communication plan
• Generation view of channel use
• Migration to digital, self-service

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Usage and preference segmentation
Branch
Drive-
through
ATM
PC/We
b
Mobile
Phone
Card
Call
Center
IVR/
Phone
Successful
beginners
Younger mass
market
Younger affluent
Middle family
Middle core
Affluent
Mass market
Younger lower
Older upscale
Middle lower
Older lower/mass
market
Limited interest /
Somewhat preferred
Most preferred

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Understanding Channel Behavior
Channel
Profiting
Customer/
Member Channel
Behavior
Market Channel
Behavior
Continuous measuring
of customer channel
use across rolling
monthly activity.
Quantifies usage and
importance of each
channel – resource
allocation
• Allocation of
marketing and
communications
resources
• Generational
perspective on
channel evolution
• Next phase of digital
and technology
services and
functions
• Branch
transformation
• Branch technology
strategy
• Network
optimization
DEFINITION USAGE IMPLICATIONS
Research and
understanding the
broader use of financial
deliver channels for all
transaction, sales and
services.
In concert with channel
profiting research
trades customer
channel use evolution
Market based research
that measures market,
generations, segment,
channel use.
Broad based.
Contrast customer base
with broader market,
quantify market
channel use & evolution

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Channel optimization – redefine convenience
Changing client
behavior - use of
channels while
increasing total
interactions
1
Branches important
to clients –
sales/relationships
2
Realignment of
physical
branches/network
3
Invest in digital
channels
• Mobile payments
• Online targeting and sales
• Account opening tools
• Rewards programs
• Financial analytics
• Alerts and notifications
• Enhanced security and
interface
4

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Measures of branch market areas
Growth, future
potential
(5 year horizon)
Potential to
expense ratios
Expense to
penetration
Market position –
penetration and
products shares
Staffing and time
spent on sales,
service, transactions
Organic
growth
New customer
acquisition

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Location-based banking
• Location-based density
• Penetration of households and businesses
• Cross-sell/relationships depth
• Customer intensity
• Growth and efficiency

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Branch Office
DOMICILED TRANSACTIONS SALES SERVICE
25 percent usage
Households
Accounts per households
Deposits
Loans
Revenue
Profitability
Channel use:
• Branch
• ATM
• POS
• Mobile
• Web
• Call Center
55 percent usage
Households
Accounts per households
Deposits
Loans
Revenue
Profitability
Channel use:
• Branch
• ATM
• POS
• Mobile
• Web
• Call Center
65 percent usage
Households
Accounts per households
Deposits
Loans
Revenue
Profitability
Channel use:
• Branch
• ATM
• POS
• Mobile
• Web
• Call Center
45 percent usage
Households
Accounts per households
Deposits
Loans
Revenue
Profitability
Channel use:
• Branch
• ATM
• POS
• Mobile
• Web
• Call Center
BRANCH ROLE
AND FUNCTION
• staffing
• product goals
• size and configuration
• components and channels
• technology

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Market Potential for Deposits and Investments

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Tiers of Potential per Market
Tier I Tier II Tier III Tier IV Tier V
Demographics/Growth
Financial Potential
• deposits
• loans
• investments
• mortgages
Projected Potential
Delivery Priorities
• branch
• ATM
• mobile
• web
• call center
Goals & Objectives
Tier I Tier II Tier III Tier IV Tier V
CONSUMER BUSINESS

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Geographic Distribution of Self-service self-reliance channel use

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Data, markets, and small business
Small business
segment large
and growing
1
Small business
more profitable
than most
consumer
relationships
2
Deposits are
concentrated,
branch-based
relationships low
costs of funds
and attractive
margins
3
Business-owners
and executives
are highly sought
after
retail/wealth
management
customers –
broader range of
services and
value-add fees
4
Challenge –
identify, target,
capture
5

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Business deposits
ABC
Bank
branch
Businessesby neighborhood
Deposits or cash equivalents for the entire firm
are presented here at the neighborhood level
for businesses $500K to $25MM within 3 miles
of an ABC Bank branch. Cash equivalents are all
cash and liquid investments which can be
converted to cash within a 90-day period.

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Business owners at home

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Analytics applications
Customer File MCIF starting point
STARTING
POINT
Product database data in order
Product groups key segment/targets
Routings differentiated actions
Replenishment predictive actions
Customization institutional action
Yield Management real-time opportunity
MOST
SOPHISTICATED

23. Thank You