The number of “touch points” we provide to our customers today is going up dramatically while their nature and characteristics are changing rapidly. Today’s most successful companies recognize that their network is an invaluable asset of their business, understanding that optimizing its performance is a crucial element to thriving in a competitive marketplace. No matter the services or products we offer, our branches, either traditional ones or more “digital flavored”, are those that create the first impression to our customers about our brand and our offering in general. So, the challenge is to create the network of “touch points” of the future, today and make sure that it can bring sustainable growth to the business. But how can this be done?
In order to develop a network or optimize an existing one, the first thing that must be done is a branch rationalization analysis; namely, a simultaneously analysis of the characteristics of our target market and an analysis and evaluation of the current performance of our branches on strong objective basis. Knowing our target markets is crucial. Through the analysis of the mix of residential, commercial and industrial uses, the demographics and the market saturation of competitors in the geographic area of our interest, we will be able to identify not only the best locations for our branches, but also the features that our branches must present in order to attract the “audience” we aim at. Furthermore, if we decide to “dig” deeper while conducting our market analysis and analyze additional data such as customer drive time, average age, households sizes, income, ethnicity, occupation, educational level, etc, we will manage to reach a more complete understanding of the local “tapestry” segments. Consequently, we will be in a position to predict our branches penetration in that market with greater confidence.
Beyond the target markets, the branches themselves must be also studied in order to identify those that seem not hitting the required profit contribution levels or are outdated and inefficient for any number of reasons. Some reasons a branch may underperform ae relates to location – related factors such as poor visibility, poor location (wrong side of the street, vehicular access, etc), problematic distribution channels (distribution channels aren’t complementary for that location), inappropriate pricing strategy (product and service pricing isn’t competitive in that market). Of course, a branch may underperform due to non-location related factors, such as poor customer service and/or branch organization and management, which are to be analyzed in our next edition.
After concluding the branch rationalization analysis, we must feel confident enough, so as to estimate the market demand we aim at addressing, but also forecast our market penetration per branch and, ultimately, for the whole network. Our estimations won’t be “lucky guesses” given that we fully exploit the results of the above mentioned branch rationalization analysis, but also internal sources of information (performance track record of the branch, brand effect in the market, financials, instinct of the management, etc) and a widely accepted analysis of the competition.
To make the long story short, whether we are repositioning a branch or evaluating the opening of a new one, or even the closure of an existing one, there are several factors to be taken into account in order to provide a situation-specific and meaningful analysis. And how we will be able to understand whether our efforts were successful? What makes a branch rationalization analysis a good one, is the resulting ability to identify specific key drivers, evaluate current performance and improve the overall network effectiveness.