4 Goal Setting Methods to Identify Untapped Opportunities

If you operate a financial services organization, you want your individual branches to perform at their best. Historically, banks and credit unions have used a variety of methods to determine performance targets for each branch location. Each of those goal setting methods have some advantage but they lack providing a complete picture of opportunity. By using industry leading dataset and analytical techniques, financial services companies can overcome those limitations through an approach called “opportunity-based goal setting.” Simply put, that means evaluating each branch’s unique market dynamics, competitive environment, and facility characteristics in order to set attainable sales targets for each branch in the network.

Before exploring some best practices in creating an opportunity-based approach, let’s review some of the legacy methods for developing branch performance targets:

• Uniform Goal-Setting:  Every branch gets the same percentage increase goal.  For example, if the Finance/Product teams need Home Equity Revenue to increase 10% in the coming year: each branch would receive a 10% increase in their Home Equity target.
  • Rewards: Branches in growing, dynamic markets as more opportunity is readily available
  • Challenges: Branches in stable, declining markets as fewer opportunities exist to increase a branch’s current performance.
• Historical Goal-Setting is driven by a simple uplift based on last year’s branch performance. Branches might simply be given targets to exceed the previous year’s numbers by 10%.
  • Rewards: Low performing branches as they will be asked to not increase their performance.
  • Challenges: High performers. as it will be asking them to continue to perform at a high level.
• “Total wallet” Goal-Setting allocates performance targets based on the market opportunity in each geographic area. This approach comes closer to being an equitable approach by incorporating market-based data, but it still falls short because it doesn’t take into account the competitive environment for each branch.
• Rewards: Branches in less competitive markets, this set an artificially low bar
• Challenges: Branches in highly competitive markets are significantly challenged

Each of these approaches has its own particular strengths and weaknesses. At Precisely, we have found there is a better approach, which we call “opportunity-based” goal setting. It is driven by a more sophisticated understanding of each branch’s unique situation: its location and facility characteristics, potential customers, and competitive environment.

Keys to Understand Opportunity

The opportunity-based model is data-driven. It’s built on a more sophisticated view of the factors that contribute to potential branch performance. In the opportunity-based model, we focus on several key methods for coming to a better understanding of market potential.

Define the Trade Area

First, it’s important to clearly define the playing field on which each branch competes. This is typically the area from which the branch encompasses 65% to 70% of its customers. We typically begin the process of defining the trade area by using customer data as a foundation, looking at households and household balances in each block group surrounding the branch. It’s important to note that a trade area should be created for both consumer households and small businesses will typically be defined differently. New branches and commuter branches are typically excluded from the traditional definition of the trade area. In the former case, we have limited data with which to operate. In the latter case, the catchment area is simply defined very differently than for most other branches.

Understand the Market

Trade area demographics: Next, we analyze the demographics of the defined trade area, both from a consumer and a commercial point of view. Consumer data starts with household turnover, then incorporates over 100 key variables such as age, income, home value. Business data is used to understand the revenue size and the industry types.

Product demand: Equipped with data about the trade area demographics, we can proceed with an exploration of potential product demand within the targeted geography. In this case, we are combining demographic and behavioral data using over 200 individual data points for each individual or business in the area, along with the purchasing and usage behavior for millions of actual banking and credit union households. This gives us a clear total wallet view of accounts and balances within the individual branch’s trade area.

Furthermore, behavioral segmentation can be especially valuable at this stage in the process, distinguishing digital-only customers from those who prefer to transact business in person at a branch, for example, or customers who bank near their place of work vs. those who prefer to bank closer to their homes.

Measure the Competitive Environment

Finally, we develop an understanding of the competitive environment facing each branch, looking the network strength and branches within each trade area as provided by FDIC and NCUA sources. Additionally, a competitive strength index can be developed using a decay function applied to all trade area and market-based competitors. This provides the relative network strength of all market participants at a block group level and thus, provides a complete view of competitive intensity throughout the trade area while also allowing the model to account for competition outside the trade area.

Incorporate Unique Branch Attributes

Each branch based on its branch attributes presents a unique experience for its customers. Attributes such as the size of the location, availability of drive-up windows and ATMs, parking, and co-location with retail amenities can greatly impact the branch’s ability to achieve a new level of performance

This supplies a strong foundation on which to develop meaningful opportunity-based performance targets.

To learn more about setting powerful branch performance goals and driving better results, watch Precisely’s webinar, The Keys to a Performant Branch Network: Identifying and Meeting Opportunity.