Actionable Insights From APT's Retail Practice

One Size Does Not Fit All

June 25th, 2012 | Posted by Will Weidman in Uncategorized - (Comments Off on One Size Does Not Fit All)

American Banker recently featured an article on how banks too often take a “one-size-fits-all” approach and do not tailor strategies for specific branches.  They give an example where “a bank might opt to put wealth managers in all their branches when a better approach would be to staff up only those branches in more affluent neighborhoods.”

We also observe that banks do not differentiate strategies across branches and markets as much as they could.  Some banks have extended hours for all branches, but typically only certain types of branches see any benefit from longer hours.  The cadence and scope of remodels should vary across branches, but many times banks spend the same for each branch and remodel all branches on the same cadence.  Not every branch will warrant investment in new ATMs that can handle multiple deposits at once and provide video conferencing.

Our perspective differs from this article in that APT does not believe market research is enough to figure out the right approach by branch for every strategy.  Understanding the demographic, economics, and competitive environment and surveying customers on their preferences does not tell you the exact impact of adding a wealth manager on balances, account generation, and ultimately branch profitability.

Instead, banks should be executing business experiments to test new strategies and understand the exact impact of those strategies.  From there, determine where the program actually worked well and was profitable.  Did the wealth managers only work in more affluent neighborhoods?  How affluent did the area need to be?  Did that story change when there was a competitor across the street who historically has been strong with wealth management?

The world’s leading organizations are constantly leveraging big data to get smarter and develop more targeted strategies.  A key component is to test out new ideas and learn from those trials to inform the optimal approach by branch and by customer.

Five Key Considerations When Taking Restaurants Private

June 19th, 2012 | Posted by CCorman in Restaurants - (Comments Off on Five Key Considerations When Taking Restaurants Private)

A slew of recent restaurant acquisitions is spurring investors to ask two questions: who’s next and what are they worth? As private equity firms consider investing in the remaining publicly-traded restaurant companies, they must consider how different business actions have the opportunity to generate increased free cash flow. For restaurants, future free cash flow hinges on the ability to increase traffic and check size through five key areas: 1) network growth and revitalization, 2) rationalizing media activity, 3) managing the menu, 4) effectively setting prices, and 5) increasing labor and operational efficiency. (more…)

Eating Groupon's Lunch

June 19th, 2012 | Posted by retailblogadmin in Uncategorized - (Comments Off on Eating Groupon's Lunch)

Over the past few months, we’ve seen several companies put effort into unlocking the vast insights of transactional data. Using this type of data, American Express has launched targeted, merchant-funded offers, and Bank of America is piloting a program to provide tailored deals inside online account statements. Both Google and PayPal are exploring ways to use this data to open new advertising channels. Furthermore, PayPal has also begun offering Point of Sale terminals to major US retailers such as Home Depot, in an effort to improve loyalty and expand the breadth of their transaction log data.

The transaction log – commonly referred to as “t-log” – details every transaction conducted by a card, account, or customer. For many, using this data isn’t a new concept. Retailers have had the ability to look at their sales data for several decades and have aggregated it to understand the general behavior of their customers. The richness and size of t-log data has the potential for companies to increase loyalty, expand customer relationships, and increase profits.

There are a couple of recent trends that have brought t-log back into the spotlight. Retailer and financial services companies now sit on aggregated t-log’s for millions of customers. With the rise of computing power, it is extremely valuable to be able to leverage this detailed data in near real-time. (more…)

Who Wants More Fees?

June 8th, 2012 | Posted by Will Weidman in Financial Services | Uncategorized - (Comments Off on Who Wants More Fees?)

It turns out the answer may not be “no one.”

Banks are still struggling to replace fee revenue, and customers have reacted negatively to new fees on existing products.  Just look at what happened when Bank of America tried adding a $5 debit card fee. 

The only major product that has increased fees has been checking accounts, and most banks now charge $7-$10 per month or more.  However, many customers are exempt from these fees because they have a direct deposit set up or they maintain a certain minimum balance.  Banks continue to raise requirements for free checking.  According to the Huffington Post, SunTrust recently raised the minimum required balance from $500 to $1,500. But a large percentage of customers still qualify for free checking, and checking account fees alone will not be enough to plug the revenue gap.

So if banks cannot add fees to existing products and cannot raise enough revenue from checking account fees, then what will they do?  (more…)

Impulse Buy: New Study Confirms Consumers Make Purchasing Decisions In-Store

June 6th, 2012 | Posted by CCorman in Uncategorized - (Comments Off on Impulse Buy: New Study Confirms Consumers Make Purchasing Decisions In-Store)

Data from the 2012 Shopper Engagement Study showed that three out of four shoppers wait until they get to the store to make a purchase decision. Given the investments in product-specific advertisements outside of the store by consumer goods marketers, this may be a surprising statistic to some. However, for your pricing and merchandising teams, this means a big group of persuadable consumers. From POP displays, to the color and messaging of packaging, to relative pricing of different same-brand SKUs on a shelf, there are countless avenues to try to convince consumers to choose your product over the competitor’s.

But as numerous studies (and probably personal experience) has demonstrated, consumer behavior is not only unpredictable, decisions are often illogical. One familiar example of the irrational consumer is the idea that having a lot of choices actually results in less sales because the consumer gets overwhelmed (this is one of the many reasons for Trader Joes enormous success). Daniel Ariely’s book, Predictably Irrational is, as the title suggests, full of examples like this. Based on these irrational truths, it is clear that the only real way to confirm or disprove your intuition is to try out your ideas in the real world before rolling out to your whole distribution channel.