pexels-kampus-production-8428053_ banker at laptop choosing a nicheI was honored to be invited to speak during the Jan. 7 Barlow Research Associates First Friday  banking webcast, “Middle Market Banking: Industries to Watch.” The conversation included Donna Arce and Joel Mueller from Barlow, a leader in providing research about how businesses interact with banks in the U.S.

Clients want bankers with industry knowledge

To kick off our conversation, Donna shared a telling Barlow Research survey result about the gap between the importance of a banking account officer being knowledgeable about their client’s industry and account officers’ real-world performance on that front.

From 2013 to 3Q2021, the gap between importance and performance (as rated by middle-market clients) has remained fairly consistent — around 14 to 15 percent. About 72 percent of clients say it is a top priority for their primary bank’s account officer to know their industry, but only about 57 percent say the actual performance of their account officer from their primary bank is superior or above average based on this criterion.

Medium-sized banks (assets of $1 billion to $50 billion) have made the most headway in terms of industry knowledge. Barlow found that the percentage of middle-market banking clients using a medium bank as their primary bank who say their account officer has knowledge about their company’s industry has steadily increased from 58 percent in 2013 to 65 percent in 2021.

Compare those figures to middle-market clients who use a small bank (assets of less than $1 billion) as their primary bank, 72 percent of whom said in 2013 that their account officer’s industry expertise was superior/above average, dipping to 63 percent in 2021. Large banks (assets over $50 billion) have consistently hovered at just over 50 percent of middle-market clients rating their account officer’s knowledge of their industry as above average. 

If you are a bank (or a banker, for that matter), these survey results are important. They translate into customer satisfaction and loyalty to your bank, as well as relationship-building/deepening. In fact, Barlow found that among clients who say their primary bank account officer is knowledgeable about their industry, just 2 percent said they had plans to change their primary bank. Compare that to those clients who said their account officer is average or underperforms on being knowledgeable about their industry — 12 percent of whom say they plan to change banks.

The right industry niches for your bank

How does a bank gain industry expertise? One effective method is developing niche industries where your bank can gain expertise, credit underwriting efficiency, and marketing traction. 

Among the nation’s top 10 banks, there are some industries that most banks focus upon: commercial real estate, healthcare, and higher ed, for example. But there are a handful of banks that are putting in the work to develop very unique niche expertise: senior care, gaming, and mining, for instance.

By strategically choosing specific niches, these banks are putting in the time, resources, and effort to give the middle-market clients in Barlow’s research exactly what they are saying they want: a banker who understands the ins and outs of their unique industry.

Banks that are interested in pursuing a niche of course need to consider which industries have a need for their products/services, and which industries the bank has an appetite for within their credit portfolio. They also should look at their bank’s geographic footprint and ascertain how many potential clients there are in that niche that fall within the bank’s footprint.

But there are other considerations when choosing a niche for your bank as well. For instance, it’s wise to look at how much competition there is for the banking business of a certain niche. And finally, banks should consider the outlook for growth and risk within a potential niche. Is it an industry that is expanding or contracting in the next  three to five years, and specifically within your bank’s footprint?

Asking better questions yields better results

Bear in mind: You don’t have to work for a bank with a niche focus in order to learn from and take advantage of these middle-market client insights from Barlow.

Any banker calling on businesses can and should take the initiative to prepare for meetings by doing research and getting smart about the client’s or prospect’s industry. Clients are telling us again and again that that is what they want and need from their banker.

When you do your homework using Industry Intelligence, like you’ll find on Vertical IQ, you are able to ask good questions that get the client talking. Business owners love to talk about their company!

But there’s a key caveat: The questions you ask may not necessarily be about the client’s banking needs. Instead, your questions should be designed both to showcase your industry knowledge and draw out information from the client about their unique business: the industry-specific challenges they face, opportunities and trends they could take advantage of, how they compare to their competition, and more.

Armed with these insights, you’ll be able to provide the client with tailored advice and guidance on how to use the products and services your bank offers to finance their growth, mitigate risks, improve efficiency, and more. In short: You can become an indispensable trusted advisor who knows how to help their business thrive.

Bankers should choose their own niches too

As an individual banker, you also can bring the niche expertise concept down to the micro-level by choosing a handful of industries to focus your calling efforts on. But what’s the best way to identify the best four or five niches for you?

As I explain in depth in the Barlow webinar, there are some key indicators to consider as you select niches. Change in year-over-year employment within a sector can be a good indicator of the growth or contraction of the industries within that sector, for example.

There are other various headwinds and tailwinds that can impact a niche’s desirability as well. Some factors you might consider as you select a niche:

  • How is the niche being impacted by higher consumer spending or changes in government spending as a result of the recent $1.2 trillion infrastructure bill?
  • How have recent supply chain issues affected the niche, and what is their outlook for recovering from those challenges?
  • Is the industry being hard-hit by issues like labor shortages and high inflation?
  • Are concerns around COVID-19 impacting the industry? Are there concerns about further shutdowns, for example? Or conversely, has the industry seen an increase in demand as a result of COVID?

(Be sure to check out the full Barlow webcast recording to see more details on how these factors can work to the advantage or disadvantage of specific industries. I also share some specific tips on what banks can do to tap into and showcase their industry expertise!)

Finally, I encourage people to select niches that they personally find interesting. If you think mattress manufacturers are a snooze in more ways than one, that’s not the right industry for you to focus on. You’re going to be putting in a fair amount of time to become an expert on an industry, so it might as well be something you find intriguing to learn about!

>> Click here to purchase and view the full Barlow webcast recording. (Note: This webcast is free of charge to members of any of Barlow Research’s Syndicated Research Programs [Small Business, Middle Market and/or Digital Business Banking].)

Photo credit:  Kampus Productions from Pexels

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