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www.ifua.hu

Szegedi Zoltán

Bucharest, 23. September 2009

© IFUA Horváth & Partners Kft.Retail/ sales optimization

2

Agenda

How to optimize our product portfolio? What are our products we earn money with?

Optimizing sales processes with LEAN methods

How to measure sales performance?

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Long-time strategic objective is to maximize client lifetime and profit

Profit

Time (t)

With focused acquisition and continuous sales activities (cross/upsales) the main objective is

1. Diminish the acquisition cost/time2. Increase/maximize client potential3. Increase/maximize client lifetime

Acquisition

Clientpotentiall

Clientlifetime

Extended customer value

Usual customer value

Acquisition Cross-/up-sales

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Which client is valuable for me?

Product portfolio of client

Loan 1 …

Break-even

Money transfer Asset gatheringLoan N Trade financeA/C

Revenue

Costs

Correction

Client profitability

Revenue on client

Costs of client

Corrections

Break-even

Break-even

Break-even

Break-even

Break-even

0_Pr_1

N

iibreakevenoductityprofitabilClient

Clients with high number of transactions are more valuable …

But maybe they generate the significant part of costs…Big clients with high balances are valuable too….

Small number of products can have negative effect on profitability.

Clients with high number of products are valuable…

High number of products can slightly increase transaction costs.

Clients with premium service (eg. private banking) are more valuable.

Because of pricing, discounts and high personal cost, the customer is not surely profitable

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EXAMPLE: Customer lifetime value gives an overview about the profitability on customer level

Ügyfél szintű profitabilitási vizsgálat(Ügyfélérték)

-60 000

-40 000

-20 000

0

20 000

40 000

60 000

Ft

Termékköltség Bevétel Kumulált Profit

Profitability on customer level

Customer history

2008.02.01: Current Account opening + Bank card

2008.02.15: Bank Card delivery

2008.06.01: Personal Loan Application

2008.08.15: Loan Disbursement

2008.11.15: Credit Card Application

2009.01.15: Personal loan repayment

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With the help of Activity Based Costing costs can be assigned to products more precisely

Process 1

Process 2

Process 3

Process 4

Process 5

Process 6

Process 7

Product 1

Product 2

Product 3

Product 4

Product 5

Product 6

Product 7

Product 8

Resource 1

Resource 2

Resource 3

Resource 4

E1 Costs

E2 Costs

E3 Costs

E4 Costs

E1 CostE2 CostE1 CostE2 Cost

E3 Cost

E2 Cost

E2 Cost

E4 Cost

E2 CostE4 Cost

F1 CostF2 Cost

F1 CostF2 Cost

F3Cost

F4 Cost

F4 CostF5 CostF6 Cost

F6 Cost

F6 Cost

F7 Cost

Resource/ Cost Center Process Product

CC2

CC3

CC1

CC5

CC6

CC4

Bank Cost = Resource Costs = Process costs = Product costs

BANK

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Agenda

How to optimize our product portfolio? What are our products we earn money with?

Optimizing sales processes with LEAN methods

How to measure sales performance?

8

Large-scale Top-Down transformations defined by

strategy are present in every organization, but only the best ones are capable of securing

continuous development instead of stepping back.

Continuous development between the large-scale Top-Down transformations is the key for a long-term improvement

Examples for Bottom-Up transformations:

Lean management 6 sigma TQM Business Process

Management Process Based Costing

Ideal improvement

Result of continuous operation

Results of large-scale Top-Down transformations initiated by management

Time

Impr

ovem

ent

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Basics of lean philosophy

Goals

Focusing on customer values

Perfect value adding processes without wastage

Flawless services

„Goals can be achieved by tools, but principles make them persistent.”

Lean philosophy

1. Customer value

approach

2. Focusing on value stream

3. Providing flowing

processes

4. Management by pull (customer needs) instead of

push values

5. Pursuit of perfectionism

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EXAMPLE: 2. Identifying value stream: Sketching up present processes creates a common language for planning future processes

Credit granting process

Before

After

TimeValue addingLoss

Savings

FTE:

CT:

Dok.:

Proposal arrival

Checking, collecting data Check II Approval

Sales manager

Contract Disbursment

FTE:

CT:

Dok.:

FTE:

CT:

Dok.:

FTE:

CT:

Dok.:

FTE:

CT:

Dok.:

FTE:

CT:

Dok.:

1 min 4 min 1 min 3 min 5 min 3 min

1 day 1 day 1 min 3 days 3 days

Customer

Process time: 17 minutes

Lead Time:8 days

We earn money here. These are our value-adding activities.

Only expenditures arise here.Our no-value-adding processes (moving, waiting, correcting mistakes, searching etc.) There is an opportunity here to improve processes!

The reduction of no-value-adding process steps significantly

decreases the total process time.

Lean gondolkodás

Vevőérték alapú megközelítése

Értékáram azonosítása

Processokon belüli áramlás

Puch helyett pull (vevői igény) alapú irányítás

Törekvés a tökéletességre

FTE: full-time equivalent

CT: cycle time

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EXAMPLE: 2. Identifying value stream: through monitoring, analyzing and eliminating wastages, lead times and costs can be reduced

Seven MUDAs

Over-production (more information than required)

Waiting(idle time, when information is not available, bad timing)

Stocks(unprocessed information,

unfinished projects)

Mistakes(data-input mistakes,

missing information)

Transport(bringing files to others, obtaining

signatures)

Redundant procedures(repeating manual data input, multiple

data input)

Redundant movements(everybody follows his/her own practices

instead of standards)

Lean gondolkodás

Vevőérték alapú megközelítése

Értékáram azonosítása

Processokon belüli áramlás

Puch helyett pull (vevői igény) alapú irányítás

Törekvés a tökéletességre

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EXAMPLE: 5. Pursuit of perfectionism: avoid mistakes in processesError prevention methods:

Stoppage (filling out forms can not be continued until there are unfilled lines or errors)

Regulating(checklists, different colors, documents, patterns, questionnaires

Warnings (attention-getting messages)

The real protection against failure is when we identify possible points of failure,

eliminate route causes in order to avoid possible errors leading to defects in the

system.

Lean gondolkodás

Vevőérték alapú megközelítése

Értékáram azonosítása

Processokon belüli áramlás

Puch helyett pull (vevői igény) alapú irányítás

Törekvés a tökéletességre

Newly designed American Express credit cards have their magnetic stripes colored white, in order to be modern, aiming younger generation. However, users frequently signed their cards on the white magnetic stripe, making it completely useless.

A bad example… …and a good one

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Agenda

How to optimize our product portfolio? What are our products we earn money with?

Optimizing sales processes with LEAN methods

How to measure sales performance?

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There are some options to use at the branch network as an incentive system

Branch network incentive systems

Automatic

Non automatic

Division/ Bank result

Product number, volume

Indicator system

Individual performance evaluation

Laugh and cry for company

Growth

Profitability

1

2

3

4

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Growth versus profitability

Easy to understand

Easy to monitor, measure

Easy to develop or to make changes

Easy to add new products

Product number, volume

Transparent calculation

Covers a wider range of branch activities

Connects individual and organizational performance

Indicator system

Other employee performances can not be embedded

Does nor cover all job profiles

Requires great change in the approach

Simple, keeps the organization rolling

Complex system, requires precise framing

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Product number or volume based incentive systems are relatively easy to communicate

Product 1

Product 2

Product 3

Product 4

Product 5

Score

Incentive product catalog

1 point = X EUR

Typical products are:

Loans

Investment products

Accounts

E-services4

10

2

15

10

Employee performance

110Earned Points

90Plan

122%

Target achievement period X

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Performance is measured by various aspects in the indicator based incentive system

Quality pillar

Indicator

Individual performance and

development pillar

Weight

…% Indicator 1

Weight

…%

Branch pillar

Indicator

Indicator 2

To which extent does the employee fulfill his/her individual goals?

How characteristic are quality aspects in the employee’s

work?

How successful is the branch?

Indicator Weight

…% Indicator 3

Weight

…%

Indicator

Indicator 4

Indicator Weight

…% Indicator 5

Weight

…%

Indicator

Indicator 6