Rate Hikes and Your Relationships

By Tom Hershberger

It’s coming. You know it’s coming. Loan demand increases, interest rates rise, and before you know it, competitors are entering your market with high-rate certificates of deposit and “limited time only” deposit product offers. It might already be happening in your trade area. Change is difficult and by nature, bankers go to familiar experiences for solutions.

Think about it. Over the last three decades, when banks needed funds the first solution was to introduce a special-rate deposit product targeted to households over 50 years of age. And, why not? The mature market segments had the liquid assets.

What will you offer?

The most recent recession flooded FDIC-insured institutions with funds that would otherwise have been invested in stocks, bonds and mutual funds. But that recession officially ended in 2009. As demand for funds increases, can we expect to return to conventional methods for attracting deposits? The core audience is now closer to retirement or settled in with a fixed income. And no one knows what the post-recession customer will be expecting from their bank. Probably high rate, long-term certificates of deposit, but that is only a guess based on prior performance. They might just as easily expect high rate savings or money market accounts to avoid making a longer-term commitment.

Where will the big money come from?

As a baby boomer, I often wonder why so much attention is being drawn to millennials when banks continue to talk about the need for loan and deposit growth. Who controls the deposits and is requesting the loans? For years the focus had been on attracting relationships with baby boomers. We were, after all, the largest generation. That distinction has now passed to the millennials and the focus has changed. But should it? When you examine Gen X and boomer households you find potential for highly profitable relationships. In fact, when you combine personal and business relationships, maturing households have significant potential for deeper, broader and larger relationships. Exactly what you need to fund that growing loan demand.

At a recent conference I attended, nearly every session included some connection to the millennials. Technology or emerging delivery channels were clearly a focus. The sheer number of millennials draws attention from every industry. But at what cost? Organizations can easily get caught up in current trends and talking points and in the process, lose sight of their existing competencies. Don’t take a single customer relationship for granted.

So, marketers, while you are learning to optimize your new media options to reach younger market segments, don’t miss the opportunity to be a trusted advisor for your established customers. It is pretty easy to abandon newspaper advertising based on the assumption that millennials don’t read the paper. With a little research you will probably find a reasonable portion of your customers are still picking up the local newspaper, either in print or electronically.

How will you manage your relationships?

The structure of relationship development doesn’t change just because we have new generations to serve. Stay focused on foundational activities you can repeat and scale for growth. Focus on retaining the deposit customers you have, expanding their service utilization and pursuing your targeted prospects based on market potential.

It has never been more important to retain your focus. Distractions abound. Work to perfect your sales and marketing practices. Set objectives based on organizational needs. Match those objectives with targeted audiences and deliver the appropriate products and services.

We might be seeing rapid changes in delivery channels and payment systems, but the fundamentals of relationship building have remained stable. Keep these five things in mind as you develop your brand, deliver your services, and work to create loyal customers.

  1. Spend time improving your service. Customers love a great service experience. If your brand promises to provide a differentiated customer experience, you have to deliver on that promise.
  2. Personalize your solutions. Don’t let your deposit accounts and loans become commodities. Make sure customers know what you are recommending and why you think it is great for them.
  3. Think like a customer. It’s easy to think about disclosures, operations and documentation, but customers have a different perspective. Young or old, they want to know what’s in it for them.
  4. Enable innovation. Reinforce a culture that encourages every employee to take ownership in outcomes. Frontline and support area employees can generate wonderful improvement ideas, and the good news is, the improvements are almost always targeted to better service for customers or other employees.
  5. Make consistency mandatory. Customer expectations are created through personal experiences or dialogues with others. Develop consistency in every delivery channel you intend to manage. Consistency creates comfort and comfort fuels feelings of safety and security.

If you have historically been successful attracting and retaining mature market segments, emphasize that strength while you are learning how to serve a younger segment with similar relationship expectations. If your marketing plan doesn’t include action plans to help drive a differentiated customer experience, your brand promises won’t be delivered consistently to your most valuable asset…the customer. Young, old or in-between, it’s all about customer relationships. Don’t let an increase in interest rates erode relationships you have spent years nurturing.


Tom Hershberger is president and CEO of Cross Financial Group, a consulting firm based in Lincoln, Neb., that specializes in sales and marketing support services for community banks. Tom is a faculty member at the Graduate School of Banking at the University of Wisconsin and the ABA Bank Marketing School. Telephone: (402) 441-3131. Email: [email protected]. Twitter.