PRAGMATICA Management Consulting

Retail Banking

Improvement of the competitive

position in Small Business and
Trade segments

January 2011

Paseo de la Habana, 152

PRAGMATICA Management Consulting 28036-MADRID- Spain page1
 Index

Introduction, focus, and objectives of the work

Proposed methodology

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 Introduction, focus, and objectives of the work

Proposed methodology

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 Introduction

A substantial change in the environment of financial entities has been

occurring in recent years
–Price war, that has affected "very comfortable" traditional segments for the entities in
a very significant way
–Drop in profitability & risk of the mortgage portfolio

–Growing facility to change entity ("the client does move to other bank")

–Increase in the clients' financial understanding, "culture"

–“Global environment": Disappearance of some actions, narrowing of margins...

–e-access: electronic access & operations available

For this reason, financial entities should adapt their strategies to

guarantee future competitiveness
– Orienting themselves toward market segments that can still provide them growth and
profitability

The small business and trade segments, traditionally "reserved" for

entities of a national scope, represent a good opportunity
–They are the main drivers of economic growth
–They are much more profitable than big corps
–They need to adapt themselves to a more competitive environment

–They provide more business volume per captured than for individuals

–The possibilities of profitability are broader than individuals: Wider range of and more

sophisticated products
–Induced business attractiveness

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 Focus
We define the competitive position/market share of an entity as
the combination of 3 factors

Competitive position/market share

Penetration X Product share X Share of wallet

Number of clients of the Degree of What part of the business

entity over the total
number of potential
clients in the area
loyalty/entailment of the of each client is for the
entities' current clients entity?: 1st., 2nd., 3rd
over the base of a relationship...
(minimally) previously
defined profile called
"basic range"

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 Focus
The commercial activity is the basic axis over which the
improvement of the competitive position turns

Recruitmen Loyalty Relationshi

Commercial activity
t (Crosselling p

tive
(Sale) ) (Balances)

stra
Ilu

relationship

Penetration Better product Relationship level

increase share increase

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 Focus
As an initial step, it is important to bring the entity's strengths
closer to the success factors of the objective segments

ive
trat
% of importance in client selection

Commiss
s
Ilu

ions Success
factors

Bank
rate

Small Secondar
business
y criteria
specializ
Physical ation
proximity

Marginal
Networ
Deposit criteria
k
rate
width

Worse than the leader Better than the leader

Greater or
lesser need
of
improvemen
t
Paseo de la Castellana 50, Planta 3 · 28046 Madrid
Tel: (34) 915 647 209 · Fax: (34) 915 629 869 Centro Luxor · Rua da Misericórdia, 76 · 1200 Lisboa
Barcelona · Bologna · Bruxelles · Lisboa · Madrid
Tel: (3511) 321 02 90 · Fax: (3511) 321 02 99

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 Focus
As well as to adequately plan the commercial activity

e
"Adoption cycle"

tiv
stra
Ilu

Lack commercial
activity

working relationship
one time

Both cases lack commercial activity. However, the commercial strategy

to be followed has to be different in each entity:
– Entity A: Taking advantage of its positive image, it should first and foremost stress
on the recidivist commercial visit

– Entity B: Should stress on the adaptation of its offer to the market needs

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 Focus
All of this will allow the adaptation of the entity's offer to the
market needs

e tiv
% of product use with the leading entity and % that work with the analyzed entity
stra
Ilu

Leasin Insuranc
Factorin
Overdraft g g e
Credit line
Liquid assetInvestment Credit card Overseas
fund Trade allowance
Secured mortgage
points
Time/term
Checking account deposits Personal secured Tax management
machine. Company credit
loan operating
loan Social insurance
Payroll management Direct debiting payments cards
Direct debiting receipts
management

Interest earning checking account

Liability Asset products Compensation

products transfers

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 Focus
... to increase the client's level of entailment

Number of
Client type clients % of clients

Only a contract in view

Low loyalty
- Contract in view plus 1 or 2 services or
- 2 contracts plus 0 or 1 service

"Basic range"
- Contract in view, plus
Minimum profile
- 1 asset contract (credit policy, discount...) plus
demanded
- 2 services (card and payments by direct debit)

Medium loyalty
- 1 contact in view plus 3 services or Medium/high
- 2 contracts plus 3 services or entailment
- 3 contracts plus 0, 1 or 2 services level

High loyalty
- As a minimum, 3 or more contracts or 3 or more services

Total 100%

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 Focus
... and their relationship with the entity

Position of the entity (with its clients) by business volume

23 %

20 %

57 %

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 Objectives of the work

Identify the main characteristics of the environment in that

which the entity operates

Analysis Analyze the recent evolution and current situation of the

entity

Carry out a commercial investigation in the Small Business

and Trade segments, as much with clients as with non-clients

Diagnose the entity's competitive position in the Small

Diagnosis
Business and Trade segments

Design a combined Action Plan that allows the obtaining of a

Action plan significant improvement of the position in the two client
segments

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 Introduction, focus, and objectives of the work

Proposed methodology

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 Proposed methodology

Work launch

Analysis of the entity's Commercial

Environmental
client portfolio and investigation (clients
analysis
sales process and non-clients)

Diagnosis and main

courses of action

Design and
implementation of the
Action Plan

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 Work launch

Objective Resources

- Preparatory meetings
To increase the efficiency of the work by the
collaboration of the entity with Consulting team
- Mixed work groups

Expected results

Clear understanding of the work to be carried out by part of first level management
Obtaining of the necessary collaboration of key personnel (area managers, regional managers,
office managers...)
Improved efficiency in all the collaboration phases
"Complicity" with the results to be obtained and the activities needed to be carried out by part of
entity management; from the first moment

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 Environmental analysis

Objective Resources

- Interviews with key managers

To identify the fundamental characteristics of the - Analysis of macroeconomic information

environment in that which the entity operates and
the habits and financial needs of the Small
Businesses and Trades
- Analysis of the main competitor's information
- Analysis of information about Small Businesses and
Trades

Expected results

Evolution of the relevant macroeconomic magnitudes and the situation by economic sub-sectors
Fundamental characteristics of the banking environment
Apparent strategy of the main competitors and the differentiating aspects of their strategy towards
the analyzed segments
Recent evolution and current situation of the entity and its vision of the "business" with Small
Businesses and Trades
Drawing up of a numerical census of Small Businesses and Trades: Type, location, and main
importance
Importance that Small Business and Trade has in general economy and in particular, the banking
business

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 Analysis of the entity's portfolio and sales process

Objective Resources

- Analysis of the evolution of the client portfolio

- Analysis of a client sample

To determine the entity's current situation regarding
its clients and degree of penetration and coverage in - Analysis of the information from Banking regulator,
each analyzed segment Banking associations in the area, etc.

- Interviews with key managers

Expected results

Number of clients by type, recent year evolution, average age, new client capturing and loss of
clients
Identification of client habits (for a sample): Types of products used and their level of use
Penetration and coverage of the entity in each segment (credits and deposits)
Possible differences by areas and offices
Revision of the entity's current sales process with Small Business and Trade
–Participants, roles, and organization
–Assigned time and resources
–Activities to capture new clients and product sale to clients
–Available systems and commercial information

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 Commercial investigation

Objective Resources

- Interview the entity's Small Business clients and

non-clients
To identify the habits and financial needs of Small
Business and Trade in the area of analysis - Survey the entity's Trade clients and non-clients

- Questionnaires adapted to Small Business and

Trade

- Available census' and statistic bases

Expected results

Financial products and suppliers used by Small Business and Trade in the analyzed areas
Criteria to purchase Small Businesses and Trades
Small Businesses and Trades' main financial needs
Entailment level of Small Business and Trade with the entity
"Wallet share" of the entity in Small Business and Trade
Aspects highlighted by Small Businesses and Trades in their relationship with the entity
–Relationship quality (with the area manager, officer manager...)
–Degree of satisfaction with the attention received
–Commercial visits received
–Adaptation of the entity's offer to their needs

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 Competitive diagnosis of the entity in the analyzed segments
and main courses of action

Objective Resources

- Macroeconomics and banking environment

To determine the current competitive position of the
entity in the Small Business and Trade segments and - Current situation of the entity in the Small Business
to establish the first courses of action to improve it and Trade
segments: Sales process, offer, client portfolio

- Carried out commercial investigation

Expected results

Adaptation of the entity to the market

–Regarding product offer
–Regarding commercial action
–Regarding internal operating
Competitive situation of the entity and quantification of the improvement potential in Small
Business and Trade
–Strong points and weak points in the Small Business and Trade segments
–Comparison with their main competitors
–Degree of response to the financial needs of Small Business and Trade
First courses of action to improve the competitive position in the analyzed segments
–Possible need of changes in the products, marketing mix actions and/or offer
–Possible need of modifications in the sales process
–Potential omissions in the territorial implementation
–Need of organizational changes...

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 Design and implementation of the Action Plan

Objective Resources

- Interview the entity's Small Business clients and

non-clients
To establish an Action Plan that gathers the entity's
short and mid-term objectives in the Small Business - Survey the entity's Trade clients and non-trade
and Trade segments clients

- Questionnaires adapted to Small Business and

Trade

Expected- results
Available census' and statistic bases

Short and mid-term objectives of the entity in the Small Business and Trade segments in the
analyzed areas
–By segment and, if applicable, clientele sub-sector
–Area and office implications
Action Plan for the securing of said objectives
–Actions needed by department
–Designation of management
–Economic calendar
–Material and human resources and needed investment
Economic-financial quantification of the Action Plan
–Projection of main importance
–Sensitivity definition and analysis

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