ABA Marketing Conference

1. ABA Marketing Conference SHARPEN YOUR SMALL BUSINESS FOCUS PRACTICAL TOOLS TO DIFFERENTIATE YOUR BANK Susan Brown-Monforte, Senior Vice President Marketing Group Manager, California Bank & Trust ($10B), San Diego, CA Buck Bierly, President MZ BIERLY CONSULTING, INC. Malvern, PA

2. A Definition or Two • Defining Small Business* • Small Business: Businesses with less than $10,000,000 in Sales • Business Banking: $10,000,000 to $25,000,000 in Sales • Defining Sustainability • Sustainable Top Line Revenue Growth in Segment • Sustainable Profitability in Segment • Sustainable Asset Quality in Segment • Wallet Share • Capture 65% of the Relationship (“Relationship” includes both the Business and Consumer Opportunities) • Relationship Manager (RM) • Branch Manager • Business Banker (< $10,000,000 segment) • Small Business Representative * Not Effective for the < $750,000 Business

3. Building SUSTAINABLE GROWTHin a Crowded Market • If the economy remains in a slow recovery, loan demand will remain “tepid” as Business Owners use “retained earnings” for capital expenditures and look for “efficiencies” in their operational processes • The industry’s continued “reduced dependence” on investor real estate lending will create increased competition for well run operating businesses • “Re-pricing” loans will become a constant as Banks use pricing to build market share or to survive • Liquidity continues to be important; low cost deposits remain key • Revenue replacement is still a critical issue, replacing lost fee business • The acquisition [and then expansion] of new clients remains a focus • Successful “Business Development” Processes will focus on “differentiation” in the market. (Bank and RM differentiation!)

4. A Changing Environment. . . with Opportunities • Banks require increased discipline on resources and segmentation to drive profit growth: • 85-90% of profits driven by 10% of clients • “High Value” companies (high profit accounts) require high touch, distinctive service • “Low Value” companies require good cost effective service that instills loyalty but does not over-serve • Advice remains a critical need, a notable opportunity remains for banks to successfully differentiate and win/retain business acting as a partner. • Only half of banks provided “advice” and that the advice currently provided is typically a thinly veiled product sell. Data from Greenwich Associates, June 2012

5. A Changing Environment. . . with Opportunities • Strategic options are on the minds of business owners. • More than 30% of small firms are considering a merger, acquisition, or sale of the business in the next 24 to 36 months. • RMs must initiate dialogues with business owners early to identify M&A financing, and wealth management opportunities. • About 16% of firms are actively seeking a new Treasury provider. • Flawless execution on delivery and demonstrating value are critical Data from Greenwich Associates, June 2012

6. Building Relationships, Growing Recurring Revenue Professional Practice: 10-years, $800,000 in sales 65% of the “Relationship”

7. Building Relationships, Growing Recurring Revenue 60% of the “Relationship” Business Services: 15-years, $3,500,000 in sales

8. Building Relationships, Growing Recurring Revenue 60% of the “Relationship” Professional Practice: 18-years, $8,500,000 in sales

9. What is the Brand you are Building? The Focus prior to the Recession • “Excellent customer service. . .” • “Highly responsive to opportunities and requests” • “Faster turnaround than our competitors” • “Give you what you ask for. . .” Today, these are some aspect of a “brand” that your competitors are already focused on. These are now the price of entry, not a “differentiator”

10. Adding Value is not a Concept In a highly competitive (or re-pricing) environment... • What value is your RM adding? • As a “Line of Business”, does the Sales Team have a “Plan” for Adding Value? Every thing has changed, in Today’s Environment. . . Sales Team Leaders and RMs need clear direction and on-going guidance

11. Business Owners and “Value Added” Skills This study correlates skills with “Customer Satisfaction” and with the likelihood a Business Owner would refer you to other Business Owners. Data from the Corporate Executive Board

12. Business Owners and “Value Added” Skills Business Acumen Data from the Corporate Executive Board

13. Business Owners and “Business Acumen” The Questions that drive results and satisfaction. Data from the Corporate Executive Board

14. Business Owners and “Business Acumen” Business Acumen The Key Questions that drive satisfaction. Data from the Corporate Executive Board

15. Business Owners and “Business Acumen” Relationship Development Strategies that drive satisfaction. Business Acumen Data from the Corporate Executive Board

16. Business Owners, Business Acumen andUncovering Financial Opportunities Business Acumen Leads to Financial Opportunities More Effectively Data from the Corporate Executive Board

17. Business Owners, Business Acumen andUncovering Financial Opportunities Business Acumen Leads to Financial Opportunities More Effectively Data from the Corporate Executive Board

18. Adding Value: Business Acumen vs. Product Acumen • Business Acumen* is bringing Business Issue Insightsand Unsolicited Financial Ideas to the table. It is a significant “differentiator” in a competitive marketplace and is highly effective in proactive situations • Product Acumen is important in reactive situations. It is less of a differentiator in proactive situations * Business Acumen is Conversational Competence in Business Issues; it is not the same as a “Business or Industry Expert”. Business Acumen, as we are discussing it, is Conversational Competence around “Industry and Business Issues”.

19. Levels of Relationship and Relationship Development Not all Decision Makers want the same level of relationship with an RM. Not all RM can build all levels of relationship with a Decision Maker. Business Acumen Product Acumen

20. Levels of Relationship and Relationship Development Level 3:Providing a High Level of Support What gets you to Level 3 is the Client’s understanding that you are providing more “financial ideas” than your competitors are providing. Identifying opportunities to support the short-term, mid-term and long-term business objectives of a decision maker is a well established method for building Level 3 relationships. Putting together a team of Business Partners, presenting an overview of a Client or Prospect’s current and future plans and looking for ways to help them get to where they want to go. . . before they request your ideas gets you closer to this level. Many banks are capable of doing this but few do it consistently.

21. Levels of Relationship and Relationship Development Level 4: Focusing on Business Issues The Level 4Relationship is focused on business Issues.Clients know that you provide better service and support than competitors; what they see now is that you understand their industry, trends within their industry, and “business issues” those trends are creating for their businesses. AtLevel 4, you generate ideas for addressing more than explicit financial needs; you focus on topics like efficiency, productivity and market strategies. At Level 4you provide [1] industry and business insights that help Business Owners see mid-term/long-term issues more clearly, [2] on-going education, [3] “benchmarking” of business/financial operations.

22. Changing the Conversation toward Business Acumen Consider these Questions. . . • Where are you banking? • What products are you using? • How are they priced and structured? • What 2 things do you wish your bank was doing but they’re not? • Can I have a copy of your statements to put together an offer of how we would handle your banking relationship? 2 Where are the Business Issues here? These questions focus on products; comparing your products with a competitor’s. These questions demonstrate product acumen!!

23. Changing the Conversation toward Business Acumen Use this Question Set to Demonstrate Business Acumen and Building Relationship Momentum. 2 These questions align with a Business Owner’s Business Strategy, Business Plan, Business Objectives, Business Operations. These questions demonstrate business acumen!!

24. Changing the Conversation toward Business Acumen 2. Industry trends affecting the business today. 1. Keys to success affect current and future decisions. 3. Industry trends, business changes in next 3 years. 4. Currentand future changes force changes in current and future business operations. 5. Current and future changes in business operations force changes in current and future financial operations. 6. Changing financial operations create changes in the financial needs and then an evaluation of the solutions currently in place.

25. Relationship Development Process Overview

26. Relationship Development Process Overview Market Management Process Three Sources of Business. . . Three Steps: Identify, Plan, Execute Relationship Development Process Face-to-Face Meeting Process

27. Sustainable Performance is Driven by Leadership High Performing Sales Leaders . . . • Provide “Targets” to Team Members and • Keep a focus on the quality of the calls made on those Targeted Businesses

28. The Market Management Process The Market Management Process “proactively” focuses on 3 sources of leads. . . Customers, Prospects and COIs . Sustainable growth in top-line revenue (and asset quality) is driven by developing leads with “targeted” relationships within these lead sources. Typically. . . • Retention Relationships (Key Customers) • Expansion Relationships (High Potential Customers) • Acquisition Relationships (Key Prospects) • Current and Prospective COIs

29. Identify the Right Targets Define the industries you want more business from.

30. Identify the Right Targets Define the businesses you want more business from.

31. Defining the Conversation with the Business Owner Use this Question Set to Demonstrate Business Acumen and Building Relationship Momentum. 2 These questions align with a Business Owner’s Business Strategy, Business Plan, Business Objectives, Business Operations. These questions demonstrate business acumen!!

32. A Model for a Marketing and Sales Partnership So, this what sales teams need. . . This is where the Marketing Partnership is both Key and Necessary for Sustainability

33. A Model for a Marketing and Sales Partnership PRACTICAL TOOLS TO DIFFERENTIATE YOUR BANK Susan Brown-Monforte, Senior Vice President Marketing Group Manager, California Bank & Trust ($10B), San Diego, CA

34. Segmentation Segmentation 101 What is it? Segmentation is the process of defining and subdividing a large homogenous market into clearly identifiable segments based on similar needs, behaviors, or characteristics. How do you build it? It depends on the business objective a company is trying to answer. The initial discovery process determines the approach used and it centers on answering two main questions: • How will you take action? • How will you measure success? How does it add value? Segmentation is a tool companies use to solve specific business problems. For example: • “If I develop a new product…What will the demand for the product be? Who is most likely to buy it? Where do I find them? And how do I speak to them?” • “Where should I place my TV and Online ads in order to best reach my intended audience?”

35. CB&T Business Segmentation Exercise Why It Was Important • Gain better understanding of customer base • Identify and align opportunities for growth within organization – expansion and acquisition • Calculate opportunity for any geography, trade area or market • Transition from a product focus to a segment focus • Support relationship emphasis versus transaction emphasis • Optimize sales and marketing efforts • Help inform other decisions

36. CB&T Business Segmentation Exercise The Process • C-Suite Sponsorship • Selecting the Right Partner • Understand the Goals & Objectives • Receive Data & Audit it • Match the CB&T data to our Universe of Businesses • Append everything we know about each Business • Create ‘Buckets’ & segments (with known, measureable, & implementable metrics) • Add the Descriptors (operational metrics) • Apply the segmentation to CB&T’s ‘universe’ • Deliver results and continue with implementation plan

37. CB&T Business Segmentation Exercise • Segments were defined with known, measureable, & implementable metrics • Type of business (SIC code) • Size of the business (small, medium, large, etc) • Segments were described by CB&T operational metrics • SVA (Shareholder Value Added) • Market Penetration • GAP (Market Opportunity) • Products • Checking • Business Loan • Internet / VRU • Money Market • Debit / ATM • Installment Loan • Savings / CD • Cash Management • International • Merchant Services Drivers Descriptors

38. CB&T Business Segmentation Exercise The CB&T Buckets Buckets were determined by logical, meaningful and manageable breakpoints in the data. Employee Size is the key metric for defining buckets because it is a reliable and well populated metric on both customer and prospect files.

39. Making the Results Actionable Market Opportunity Prioritization

40. Making the Results Actionable Market Opportunity Prioritization Modeled Demand (SVA) By County

41. Making the Results Actionable • Segment Opportunity Prioritization • Methodology to prioritize segments • Combine size buckets to create three 0 – 9, 10 – 49, 50+ • Balance three critical elements: • Number Businesses in CA for a segment (The Market Size) • Penetration in CA (How well CB&T traditionally does with a segment) • SVA per business (The anticipated benefit to CB&T when acquired) Priority Score (Weighted Value) = 50% of A, 15% of B & 35% of C • Identify high risk segments with Business Partners • Result – 28 unique segments identified as priorities

42. Making the Results Actionable Development of “Segment-In-A-Box” • Everything a banker needs to know about a segment/industry in one complete package • Designed to help bankers be more effective in the sales process and demonstrate industry expertise • Aligned with relationship sales process and • brand positioning • Applicable to both customers and prospects

43. Making the Results Actionable Segment-In-A-Box includes • Segment Information: • Segment Profile • Industry Profile (by First Research) • List of Associations (by geography) • List of Primary Trade Publications • Business Journal Editorial Calendars for major market business journals

44. Making the Results Actionable Segment-In-A-Box includes • Marketing Materials: • Customizable Sales Letter Template • Segment Specific Pitch Book Slides • Segment Specific Flyers • Segment Specific Brochures • List of Additional Sales Collateral to use on sales calls

45. Making the Results Actionable • Segment-In-A-Box also includes • Sales Tools • Market Plan / Call Planner • Call Prep Questions (by First Research) • Telemarketing Scripts • Prospect list for each segment (loaded in Salesforce.com) • Customer lists • Packaged product offerings

46. Measuring Success • Metrics are always important, • but the story they tell is what is critical!

47. Measuring Success Measurement #1 Success Stories • Survey used to gather success stories from the field • Gift card drawing used to encourage participation • Success Stories published bank-wide and posted on Intranet

48. Measuring Success Measurement #2 Tracking Segment Penetration Over Time • Compared to 2008 (and relative to changes within the state of CA), CB&T’s concentration in 2011 has increased in key segments • Compared to 2008 (and relative to changes within the state of CA), CB&T’s concentration in other key segments has not experience as much of a decline

49. Measuring Success • Measurement #3 – • CRM Reporting • Track use of segment specific prospect leads • Monitor usage of segment specific materials • Track segment specific campaigns • Monitor pipeline for segment specific deal activity

50. Key Learning's • C-Suite Sponsorship and Region Management buy-in • Sales management and sales process must be aligned with marketing and segmentation strategies • Clean customer data provides the foundation for insights derived and it instills confidence in the results • Data inputs used in the analysis are dependent on the business objectives you are trying to achieve • It’s crucial to understand the data in the results to determine which factors impact performance metrics over time • Requires a long-term perspective and investment