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A High Stakes Game With fewer banks controlling the purse strings, how do distributors capture the attention of the moneymen? BY SUSAN KEEN FORM, Dec. 1996 Small and medium-sized banks may feel like they're caught up in a real life game of Monopoly, watching as a few players gobble up properties. Announcements about mergers flood newspapers throughout the United States. John Martin, who has specialized in selling business printing to the financial market for 21 years, grimaces at such news. Last year, the first bank Martin called on while he was a sales rep with Burroughs was bought out. "It pained me," says Martin, president of Optimum System Products Inc., a distributorship in Worthington, Ohio. But he doesn't passively watch his business deteriorate as large banks roll the dice and control the playing board. He arms the banks he serves, most with up to 100 branches, with tools to compete against larger banks. Optimum developed an alliance with a graphic design firm to help financial institutions market themselves. The distributorship put together a focus group comprised of nine bankers to learn about their marketing needs. As a result, Optimum is offering banks, savings and loans, and credit unions a complete merchandising program. The distributorship offers 4-color posters, statement stuffers, brochures, counter cards and other products to promote bank services, including auto loans and mortgages. Since many financial institutions require only small runs, such as 20 posters or counter cards, the products are being produced on an Indigo digital press. Optimum currently is rolling out the program to five banks. "Banks need to generate interest and reinforce any radio, TV or direct mail advertisements," says Martin. "The merchandising program puts them on professional footing with larger national banks." Ulises Manzano helps one of his bank customers maintain a competitive edge. The 25-branch bank succeeds, in part, because it caters to the Latino market in south Florida. Manzano, a partner of Innovative Products & Services in Miami, provides the bank 80 percent of its business printing, including MICR encoded processing documents and checks. The bank has one branch that serves international clients primarily in Latin America. Manzano says this branch handles million dollar accounts. "It's a higher echelon market," he says. Manzano provides products that help the branch maintain its elite image. For instance, he supplied 100 leather pocket planners with calendars. The bank's name was imprinted in gold foil on the front of the planners, which were given to some of the bank's best clients. This bank, dedicated to a niche market, has remained independent so far. But Manzano knows the market is risky. "This is an opportunistic situation for larger banks that want to target the Latin market," he says. "I'm in a potentially volatile situation." The volatile nature of the financial industry has left some distributors wondering how they can remain competitive-or even if they should focus much attention on the industry. But others have found strategies for success by catering to small banks, becoming a one-stop shop or positioning themselves as a technology provider. The Neighborhood Bank "In cities, smaller banks are being bought by major banks," says Glenn Mueller, CFC, president of Financial and Office Systems Inc., an Atlanta distributorship. "But community banks in smaller towns aren't as affected, and new banks are opening up." Eighty percent of Mueller's business is with financial institutions nationwide, most located east of the Rocky Mountains. Many of his best clients are banks in small towns. Distributors can capitalize on smaller banks' sense of community. "Small banks have close ties to the community," says Mueller. "The people at the bank know their customers-they live with them and know their businesses." Mueller says ad specialties are a particularly hot item. "Anytime a small bank tries to reach out to the community, they give away items," he says. Mueller sells custom piggy banks to a community bank that adopts local schools as a goodwill project. The bank helps fund certain projects, such as the purchase of computers. It also holds Bank Day at the schools. Students are given piggy banks with the bank's name on them. Once a week bank tellers go to the school, collect money the students have saved and mark the students' passbooks with the deposit amount. David Niergarth also helps banks promote community spirit. One of his clients ordered 6,000 drive-up envelopes with a latex seal. The envelopes were imprinted in blue and yellow with the local high school's football schedule and its mascot. However, Niergarth, CEO of Bankers Products & Printing, a distributorship in Athens, Texas, experienced a common problem on this order: the bank ran out of the envelopes a few weeks into the school year. "In smaller banks, buying is often given to someone as an extra task and they really can't be bothered with it until they run out of forms," says Niergarth. Within a couple days of the request for more envelopes, Niergarth supplied the bank with 1,000 envelopes without a latex seal. Then he delivered 10,000 envelopes with the seal, which take longer to produce, about a week later. You Need It, We Sell It What should you sell to banks? If you offer to supply clients anything they need, the list for financial customers will be extensive. "Banks have a broad range of needs," says Manzano. "They need forms, ad specialties and services, such as warehousing." Mueller offers it all. "We sell anything and everything a bank needs to operate," he says. Glenn Anderson sells to eight small and medium-sized banks. For these smaller clients, he handles purchasing, inventory and distribution of most products so they don't need an internal employee devoted to those tasks. He supplies everything from paper to paper clips. "I even provide coffee and office supplies," says Anderson, president of Inform Business Systems Inc., Millbury, Mass. "You don't make much money on coffee, but it's part of the total service package." Martin, too, adheres to the "sell anything" motto. "If it's a supply item, we do it," he says. "It could be anything from Wite-Out to Dum-Dum suckers to compliance forms." One bank ordered doughnut boxes with its name and logo on them. The bank gives doughnuts in the custom boxes to real estate firms. In turn, it hopes the real estate agents recommend their clients go to the bank for a home loan. Another bank buys dog biscuits from Optimum, "pounds and pounds of them," says Martin, to give to customers with dogs, just as the bank gives lollipops to children. "The world is changing," says Martin. "When we say we sell everything consumable, we mean it." Even in a changing world, the financial industry remains a large consumer of traditional products. "There's still a lot of paper-intensive business in banks," says Anderson. Among other products, he sells cash-in and cash-out tickets, money orders and teller checks. He also still provides banks with passbooks for marking deposits and withdrawals. "A lot of banks in New England still use passbooks," says Anderson. "You just can't take them away from banking customers." Techno Banking Paper may play an important role in banks, but technology is making inroads. Some bank transactions are now commonly handled electronically. Martin says 90 percent of his financial clients use compliance software, including loan documentation software, packages of preprogrammed forms that bankers fill out on-screen when customers apply for loans. When bankers enter information such as the customer's address, Social Security Number and loan financing terms, this information automatically transfers to other necessary forms in the package. Bankers save time since they don't duplicate information by hand on several forms. Also, as terms for loan agreements change, which they frequently do, banks can easily update the data in their computer systems. Previously, they had to reprint forms to replace obsolete ones. Loan documentation and other compliance software may be a boon to bankers, but it can be the bane of distributors. Optimum System Products still sells forms and printed pieces that the software packages can't generate, such as truth in savings brochures, but many traditional forms have gone by the wayside. Banks print copies of the forms from the computer as needed. "A lot of it is copy paper business now," says Martin. Before you dismiss all technology solutions as damaging to distributors, consider one with arguably the greatest impact on the financial market-imaging. Mueller says a significant portion of his banking clients are studying or implementing imaging technology. "It's not [a question of] if they're going to use imaging, it's when," he says. Imaging technology uses hardware and software to capture documents electronically, store them in a digital format and provide electronic routing and retrieval. It benefits paper-heavy markets, such as the financial industry, because documents can be stored electronically, thus saving space. Also, banks can retrieve crucial information in a fraction of the time needed to find hard copy. Financial institutions use imaging systems for easy filing and retrieval of loan documents and other data. Some banks also mail checking account statements to customers featuring images of checks rather than the checks themselves. Some people mistakenly think imaging systems will replace paper documents within a bank. Many imaging systems, however, incorporate forms filled out by bank customers, which are then scanned and stored electronically. "The paper actually becomes more important in an imaging environment," says Martin, who has helped banks redesign paper documents so they are "image-friendly." Designing image-friendly forms is critical to maximize recognition by system software and minimize storage space. Redesign also can make digitized versions of documents easier to read on-screen. "Using imaging technology forces a banker to use a vendor who has knowledge of paper, imaging software and equipment," says Martin. "Vendors have to be attuned to the imaging market." Staying attuned pays off. "Imaging technology is a recent development that's caused new opportunities as well as threats," says Martin. "We've stayed on top of it for the last few years, so it's been more of an opportunity than a threat." Optimum System Products helped one bank achieve a 92 percent read rate (ability of the system to decipher information accurately) with image-friendly forms the distributorship designed. This bank in turn recommended Optimum to another bank that had a low 30 percent read rate. To view imaging as an opportunity, distributors need to shift their product focus. The technology isn't completely alien to what's sold now. "Instead of getting checks back in the mail, customers get an 8 1/2 x 11-inch sheet with images of their checks. Instead of storing information in filing cabinets, banks now store it on CDs," says Mueller. So he provides consumables banks need to operate an effective imaging system-image-friendly forms, CDs for electronic storage and envelopes for mailing account statements with images of checks. Mueller says knowledgeable distributors can make money on imaging technology. "When banks make the huge investment in equipment, forms seem secondary," he says. Most of his customers don't squabble about the cost of replacing old forms with image-friendly ones if they're sure the new ones will work with their imaging systems. Distributors can make a good impression on clients, says Mueller, if they provide forms and other consumables to make financial institutions' imaging systems run smoothly. Balancing the Account While no market is perfect, the financial industry has experienced shake-ups that cause even the strong-hearted to quake, including the savings and loan debacle and bank restructuring, not to mention a torrent of mergers and acquisitions. Distributors across the country echo Manzano of Innovative Products & Services: "In South Florida, there used to be a bunch of local banks. But big banks have swallowed up smaller local banks." But the market seems to be calming. "Banks are a little more stable today than a few years back," says Manzano. And there are benefits to serving this industry. "Banks tend to be loyal customers if you can eliminate their problems," says Mueller. "And banks pay their bills. That eliminates two steps in the sales process: qualifying the customer and collecting." There is no secret to success, but basic, solid business principles have served many distributors well in the topsy-turvy financial market. "I look for ideas to help banks reduce the cost of doing business or enhance their operations," says Manzano. At Optimum System Products, all employees-from sales and customer service reps to print shop employees and top management-are dedicated to serving financial customers. "I like to be a specialist and have a team of people with specialized knowledge," says Martin. He has a master's degree in finance and often brings in professionals, such as imaging experts, to train his staff. "The whole team is on the same page," says Martin. "Everyone is tuned into getting a financial institution what they want, when they need it." With such focus and determination, players are sure to succeed in the banking game. Susan Keen is assistant managing editor of FORM Magazine. Banking Basics For more information on imaging technology within financial institutions, order DMIA's White Paper "The Technology Puzzle: Forms Automation and Imaging" (Item Code WPFAI). It costs $49.95 for members, $69.95 for co-op association members and $89.95 for non-members. For information on bank check specifications, check processing, image processing, check security features and more, order the Product Knowledge Series book Checks and Other MICR Encoded Documents (Item Code PKMICR). The 100-page book costs $36.95 for members, $42.95 for co-op association members and $49.95 for non-members. To order, call DMIA's sales service specialist at (703) 836-6232, ext. 148. Distributors Bank on the Team Approach More and more financial institutions are merging. They are becoming bigger and more influential. Can distributors serve these powerhouses? Maybe not alone. So two distributors decided that if mergers turn banks into mighty entities, the team approach might do the same for them. John Martin and Pat McMahon pulled together to sell to financial institutions in eastern Pennsylvania. Martin is president of Optimum System Products Inc. in Worthington, Ohio, and McMahon is president of Forms Plus Inc. in Scranton, Pa. The distributors initially forged a relationship at Kramer-Smilko users' group meetings. When Martin approached the Pennsylvania Bankers Association to market to the state's banks, he solicited help from Forms Plus. "Rather than compete with Forms Plus," says Martin, "we decided to do a joint project." Last January, Martin and McMahon developed a limited liability corporation called Optimum Systems Plus, a combination of both distributorships' names, to serve banks east of State College, Pa. The distributors are equal partners in the venture and split profits evenly. So far, Optimum Systems Plus has one employee, a former Standard Register sales representative, who targets banks in the Philadelphia and Reading, Pa., markets. Another ex-Standard Register employee serves western Pennsylvania and is employed by Optimum System Products. Other employees from Optimum System Products and Forms Plus also work part-time on accounts for Optimum Systems Plus. The company shares office space with Forms Plus, although it has its own phone numbers. Through its relationship with the Pennsylvania Bankers Association, Optimum Systems Plus has the potential to serve 180 banks. To date, it has contracts with three banks to provide business printing, office supplies and banking supplies. The company oversees purchasing, receiving, storage and fulfillment for the banks. Joint ventures require symbiosis between partners. Martin says his firm had experience in the financial market and Forms Plus had expertise in forms management and warehousing, so the combination made sense. Both companies also used the same software, making the relationship logistically easier. And both distributorships have benefited. "It allowed Optimum System Products to get into a new market area with little capital," says McMahon. "It allowed us to take hold of a new vertical market." Forms Plus also began selling office supplies, a product line sold by Optimum Systems Plus. Martin travels to eastern Pennsylvania every few months to meet with customers and with McMahon. So far, this innovative business arrangement is working well. "We have a trust built up," says McMahon. "I know what John is capable of, and he knows what I'm capable of." How Imaging Is Changing the Industry Imaging is changing the financial industry. More banks are adopting the technology that allows them to capture documents electronically and store them in a digital format. And it's not just large national banks that are in on the trend. "Small to medium-sized banks are the first to adopt imaging. They can usually make the change more quickly and inexpensively than larger banks," says Glenn Mueller, CFC, president of Financial and Office Systems Inc., an Atlanta distributorship. Financial institutions account for 80 percent of Mueller's business. If one of your financial clients purchases imaging equipment, you will need to redesign several documents so they can be read accurately by scanning equipment. Such image-friendly documents often use drop-out printing so items that don't need to be digitized drop out or are not read by the imaging system. Other considerations include paper selection, document size, space between critical fields, avoidance of superfluous information and proper field identification. Here are just some of the documents that may need to be image-friendly: Account Close Out Tickets ATM Deposit Tickets ATM Envelopes Cash In/Out Debit and Credit Tickets Commercial Loan Statements Counter Deposit Tickets Credit Slips for Safe Deposit Box Rental DDA Transaction Tickets General Ledger Debits/Credits Insufficient Funds Slips IRA Transaction Tickets Loan Payment Coupons Loan Transaction Tickets Savings Deposit/Withdrawal Tickets Vault Cash In/Out Slips Back to Vertical Markets—Banking/Financial