Retail/ sales optimization

1. Retail/ sales optimization

2. Agenda • How to optimize our product portfolio? What are our products we earn money with? • Optimizing sales processes with LEAN methods • How to measure sales performance?

3. Client potentiall Client lifetime Acquisition Long-time strategic objective is to maximize client lifetime and profit Cross-/up-sales Acquisition Profit Time (t) Extended customer value Usual customer value • With focused acquisition and continuous sales activities (cross/upsales) the main objective is • 1. Diminish the acquisition cost/time 2. Increase/maximize client potential 3. Increase/maximize client lifetime

4. Product portfolio of client • Loan 1 … • Loan N • A/C • Money transfer • Asset gathering • Trade finance • Revenue on client • Revenue • Costs of client • Costs • Corrections • Correction • Client profitability • Break-even • Break-even • Break-even • Break-even • Break-even • Break-even Which client is valuable for me? • Clients with high number of transactions are more valuable …But maybe they generate the significant part of costs… • Big clients with high balances are valuable too….Small number of products can have negative effect on profitability. • Clients with high number of products are valuable…High number of products can slightly increase transaction costs. • Clients with premium service (eg. private banking) are more valuable.Because of pricing, discounts and high personal cost, the customer is not surely profitable

5. EXAMPLE: Customer lifetime value gives an overview about the profitability on customer level Profitability on customer level Customer history 2008.02.01: Current Account opening + Bank card 2008.02.15: Bank Card delivery 2008.06.01: Personal Loan Application 2008.08.15: Loan Disbursement 2008.11.15: Credit Card Application 2009.01.15: Personal loan repayment

6. With the help of Activity Based Costing costs can be assigned to products more precisely Product Resource/ Cost Center Process F1 Cost BANK F2 Cost Product 1 E1 Cost F1 Cost Resource 1 • Process 1 CC1 E2 Cost Product 2 F2 Cost E1 Costs E1 Cost • Process 2 CC2 E2 Cost F3Cost Product 3 Resource 2 CC3 E3 Cost E2 Costs • Process 3 F4 Cost Product 4 E2 Cost CC4 F4 Cost Resource 3 • Process 4 Product 5 F5 Cost E3 Costs CC5 F6 Cost E2 Cost • Process 5 Product 6 F6 Cost CC6 Resource 4 E4 Cost • Process 6 E4 Costs F6 Cost Product 7 E2 Cost • Process 7 E4 Cost F7 Cost Product 8 Bank Cost = Resource Costs = Process costs = Product costs

7. Agenda • How to optimize our product portfolio? What are our products we earn money with? • Optimizing sales processes with LEAN methods • How to measure sales performance?

8. Continuous development between the large-scale Top-Down transformations is the key for a long-term improvement • Examples for Bottom-Up transformations: • Lean management • 6 sigma • TQM • Business Process Management • Process Based Costing Large-scale Top-Down transformations defined by strategy are present in every organization, but only the best ones are capable of securing continuous development instead of stepping back. Result of continuous operation Improvement Ideal improvement Results of large-scale Top-Down transformations initiated by management Time

9. Basics of lean philosophy 1. Customer value approach Lean philosophy • Goals • Focusing on customer values • Perfect value adding processes without wastage • Flawless services 5. Pursuit of perfectionism 2. Focusing on value stream 4. Management by pull (customer needs) instead of push values 3. Providing flowing processes „Goals can be achieved by tools, but principles make them persistent.”

10. EXAMPLE: 2. Identifying value stream: Sketching up present processes creates a common language for planning future processes Sales manager Customer We earn money here. These are our value-adding activities. Vevőérték alapú megközelítése Credit granting process Lean gondolkodás Only expenditures arise here.Our no-value-adding processes (moving, waiting, correcting mistakes, searching etc.) There is an opportunity here to improve processes! Proposal arrival Checking, collecting data Check II Approval Contract Disbursment Törekvés a tökéletességre Értékáram azonosítása • FTE: • CT: • Dok.: • FTE: • CT: • Dok.: • FTE: • CT: • Dok.: • FTE: • CT: • Dok.: • FTE: • CT: • Dok.: • FTE: • CT: • Dok.: Process time: 17 minutes 1 min 4 min 1 min 3 min 5 min 3 min Lead Time:8 days 1 day 1 day 1 min 3 days 3 days • FTE: full-time equivalent • CT: cycle time Puch helyett pull (vevői igény) alapú irányítás Processokon belüli áramlás Value adding Loss Time The reduction of no-value-adding process steps significantly decreases the total process time. Before After Savings

11. EXAMPLE: 2. Identifying value stream: through monitoring, analyzing and eliminating wastages, lead times and costs can be reduced • Waiting(idle time, when information is not available, bad timing) • Over-production (more information than required) Vevőérték alapú megközelítése Lean gondolkodás • Stocks(unprocessed information, unfinished projects) Törekvés a tökéletességre Értékáram azonosítása • Mistakes(data-input mistakes, missing information) Seven MUDAs • Redundant procedures(repeating manual data input, multiple data input) Puch helyett pull (vevői igény) alapú irányítás Processokon belüli áramlás • Redundant movements(everybody follows his/her own practices instead of standards) • Transport(bringing files to others, obtaining signatures)

12. EXAMPLE: 5. Pursuit of perfectionism: avoid mistakes in processes Error prevention methods: Stoppage (filling out forms can not be continued until there are unfilled lines or errors) Regulating(checklists, different colors, documents, patterns, questionnaires Warnings (attention-getting messages) The real protection against failure is when we identify possible points of failure, eliminate route causes in order to avoid possible errors leading to defects in the system. Vevőérték alapú megközelítése Lean gondolkodás Törekvés a tökéletességre Értékáram azonosítása A bad example… …and a good one Puch helyett pull (vevői igény) alapú irányítás Processokon belüli áramlás Newly designed American Express credit cards have their magnetic stripes colored white, in order to be modern, aiming younger generation. However, users frequently signed their cards on the white magnetic stripe, making it completely useless.

13. Agenda • How to optimize our product portfolio? What are our products we earn money with? • Optimizing sales processes with LEAN methods • How to measure sales performance?

14. There are some options to use at the branch network as an incentive system 1 Division/ Bank result • Laugh and cry for company Automatic 2 Product number, volume • Growth 3 Indicator system • Profitability Branch network incentive systems 4 Individual performance evaluation Non automatic

15. Growth versus profitability • Indicator system • Product number, volume • Easy to understand • Easy to monitor, measure • Easy to develop or to make changes • Easy to add new products • Transparent calculation • Covers a wider range of branch activities • Connects individual and organizational performance • Other employee performances can not be embedded • Does nor cover all job profiles • Requires great change in the approach • Simple, keeps the organization rolling • Complex system, requires precise framing

16. Product number or volume based incentive systems are relatively easy to communicate • Typical products are: • Loans • Investment products • Accounts • E-services Incentive product catalog • Employee performance Score Product 1 4 Earned Points 110 Plan 90 Product 2 10 1 point = X EUR 2 Product 3 Target achievement period X Product 4 15 122% Product 5 10

17. Performance is measured by various aspects in the indicator based incentive system • Individual performance and development pillar • Quality pillar • Branch pillar • Indicator • Indicator • Indicator Weight Weight Weight …% Indicator 1 …% Indicator 3 …% Indicator 5 • Indicator • Indicator • Indicator Weight Weight Weight …% Indicator 2 …% Indicator 4 …% Indicator 6 To which extent does the employee fulfill his/her individual goals? How characteristic are quality aspects in the employee’s work? How successful is the branch?