Delivering Value recently spoke with Rick Osewalt, Harland Clarke’s vice president of marketing for business solutions, about how financial institutions can find and acquire small business clients.
Citing statistics from Warrillow & Co., an advisory service for enterprise companies targeting the small and midsize business (SMB) market, Osewalt makes a strong case for financial institutions to reach out to entrepreneurs. “The worst thing you can do is ignore the small business market,” he says.
DV: Why seek out small business customers now, when the economy is in a downturn?
RO: Because the entrepeneur segment of the market remains highly optimistic. According Warrillow & Co., nearly half (40.9 percent) of entrepreneurs are optimistic about their own sales, whereas only 27.5 percent feel optimistic about the economy in general. They are excited about their own new ideas, and their passion and drive to succeed will help them thrive in a down economy.
DV: How can banks and credit unions find these successful entrepreneurs?
RO: Find out what they’re reading and watching, and consider using those media outlets to promote your institution. Warrillow’s Market Insights found that more than a third of optimistic entrepreneurs (35 percent) read their industry’s trade publications; nearly three in four (74 percent) read their hometown newspaper; and 19 percent read The Wall Street Journal. Also, more than half (56 percent) listen to morning drive radio, and the majority prefer news/talk formats. And the website they visited most during a normal business day was msnbc.com.
DV: What is the biggest challenge to acquiring small business accounts?
RO: They often like to work with other small “mom and- pop” businesses in their local area, where they feel they can get personal service. You need to think of your branch as part of that local business services network.
DV: How should a financial institution decide which businesses to target?
RO: Nearly half (43 percent) of entrepreneurs are in service industries such as consulting, health care, law, graphic design, computers and so on. Only 18 percent are in retail and fewer still are in construction or the so-called FIRE industries (finance, insurance and real estate). Much depends on your branch location — is it in an urban, suburban or industrial area? Spend your marketing dollars on the types of businesses that are prominent in your community.
DV: What are some other characteristics that financial institutions should know about entrepreneurs?
RO: During an economic downturn like we have now, entrepreneurs will switch vendors, if they need to, and they’re looking to adopt products and services that improve productivity. They want to have more control over what happens and they’re very attuned to efficiency. So this is an opportunity for banks and credit unions to promote self-service features, such as online banking and remote deposit capture, which enhance productivity.
DV: What about using online networking sites as a way to reach entrepreneurs?
RO: Warrillow found that more than two-thirds of fastgrowth entrepreneurs are registered on LinkedIn, the online business networking site. Social networking sites such as Facebook and Twitter are growing rapidly, too. Financial institutions might consider exploring these sites as yet another way to reach small businesses.
DV: What types of promotions or marketing activities might appeal to entrepreneurs?
RO: Campaigns that offer free tickets for local sporting events are always popular. Other marketing promotions could include free seminars or workshops for small businesses on topics such as cash flow management. Newsletters focused on the financial needs of entrepreneurs are another possibility. The bottom line is to decide what would work best for your financial institution. What is your budget? How much of a marketing commitment are you willing to make?
DV: Give us an example of how Harland Clarke can help a local branch with its small business accounts.
RO: A perfect example would be computerized checks and laser checks, which are popular with small businesses. Both are higher-ticket items. We’re not talking about a $20 box of personal checks; these are orders that can cost hundreds of dollars. Entrepreneurs usually have questions about the software compatibility of their checks, and the solutions can be complicated. Often the branch employee isn’t as knowledgeable about these products as we are. We can get on the phone with entrepreneurs and talk them through the sale, which is better than having them leave and take their order to a non-endorsed check printer.
DV: What sort of problems might arise if entrepreneurs don’t use a financial institution for check products?
RO: There can be quality control issues, which can be expensive. For instance, if they go to an unapproved check vendor, they run the risk of having a bad MICR line or poor imagability, which in turn causes rejects that cost the financial institution money. And they then may have to charge the small business. Security and fraud can also be issues if the account holder orders from another printer that doesn’t have security measures in place during the printing of the order.
DV: Does Harland Clarke provide other services for small business account holders?
RO: We like to serve as a partner to banks and credit unions in supplying entrepreneurs with one-stop shopping for everything they need, whether it’s check accessories such as security bags, stamps and binders, business forms, stationery or promotional products. Why should they use another vendor when they can order through a trusted supplier and save valuable time working through their branch?
DV: Why would a branch want to compete with its local office supplies store?
RO: Because everyone wins. The small businesses win because they get the right products without having to shop around. The financial institution wins because it improves fee income, and it gets satisfied account holders who now view the branch as more service oriented.
DV: What’s the most important piece of advice you can offer financial institutions that want to reach out to small businesses?
RO: Have a plan. Understand exactly who you are trying to target. Are you going to concentrate on established businesses, or on the SOHO entrepreneurial start-ups? Which industries will you target? Once you understand where you want to focus, get to know that segment as well as you can. Research it and understand its population. Know why they buy what they buy. Then target your promotions to that segment. To paraphrase an old saying, “If you don’t know what port you’re steering for, no wind is the right wind.”