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A recent survey of corporate treasury managers identified an interesting paradox. Respondents reported that they are looking at consolidating their bank relationships in conjunction with increasing the number and diversity of their funding sources to guard against a liquidity crunch.
According to the 2002 Global Treasury Management survey conducted by consulting firm Treasury Strategies, 73% of the multinational respondents would like to
consolidate their bank relationships and 59% want to increase their number of funding sources. According to the survey, 66% of all respondents indicated they plan to re-bid one or more of their cash management
services.
These results give rise to some important questions: How can your institution avoid being left behind due to companies’ desire for fewer bank providers? And how can
you leverage liquidity management concerns to retain corporate relationships?
For some guidance on what these results mean to corporate bank marketers, we turned to Constance Etter, a principal in the Financial Institutions practice at
Chicago-based Treasury Strategies. The firm advises corporations and financial institutions on all aspects of treasury and working capital management strategies, processes, products, delivery and tactics.
She offers the following suggestions:
Tip #1. Know your customers. Banks need to do a better job of segmenting their customers—distinguishing between the companies that use credit services and those which need only non-credit services. Once you have segmented your customers, an appropriate strategy can be developed.
Tip #2: Secure your credit relationships by providing liquidity services. After identifying customers who have credit needs, you should aggressively pursue not only their credit business but also their cash management and liquidity business. By being a full-service provider, you increase your profitability and lessen the need for a customer to look to other banks for services.
Banks also need to be more creative with the types of liquidity products they offer, Ms. Etter says. “In today’s market, the corporate CFO is looking at liquidity on a
continuum. Rather than only offer an overnight sweep investment, offer solutions that today’s CFO is looking for—for example, ways to ladder investment maturities to earn higher returns on cash without taking on
more risk.”
Tip #3: Take a “big picture” view of the bank-corporate relationship. “As banks merge, their businesses become more siloed,” Ms. Etter says. “This often results in a bank calling officer seeing a corporate relationship only in terms of his or her business line. Instead, banks need to take into account all of a corporate client’s needs—cash management, liquidity and credit—and offer a complete package of services.”
Tip #4: Make sure your incentives match your goals. Historically, bankers’ compensation has been based primarily on the size of their loan portfolio. That needs
to be restructured so that a banker is also rewarded for sourcing investments.
Tip #5: Provide world-class service. Once you have a customer’s business, you want to provide excellent service “so they won’t even think about leaving,” Ms. Etter says.
Tip #6: Remind clients of the value of the services you provide. Maintain ongoing communications with clients to remind them of the value of your services and
to let them know how much you appreciate their business. You can do this by augmenting their calling programs with paper-based or electronic client communications such as newsletters, consultative single-subject
reports and industry news updates posted to your Web site.
Such communications not only create an aura of expertise for the bank but also help you cross-sell additional products and services to clients who use only a limited
number of bank services.
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