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Riding the Waves of Change
Distributors desiring a future in the financial market need flexibility.
BY JONATHAN ROLLINSFORM, Dec. 1997
David Puntney is "pushing 22 years" selling to the financial industry. As president of Independent Forms Services Inc., a distributorship in Joliet, Ill., he has witnessed the wave of trends continually rushing in to lap at the feet of financial markets, only to recede as the next big surge starts to crest. Consolidation and technology, particularly imaging, continue to enjoy prime spots on the banking beachhead. But Puntney also notices the industry's increased appetite for product diversity and value-added services.
It is easy to become disoriented by the swells of acquisitions and torrents of new technology pouring over the financial market. But the ability to find out what the customer wants and then deliver it remains a beacon of safe haven for distributors. "You need to understand the customer and what their needs are," Puntney says. "Price is the old smoke screen that they throw out. You have to find out the real underlying reason why they haven't given you their account."
Whether you plan to gain the financial market's favor by offering technology solutions, value-added services or an array of products, flexibility is a necessity. Your bread and butter today may be reduced to a stale crust in tomorrow's competitive financial environment. "You're going to have to change and adapt," says Frank Franks, owner of Zionsville, Ind., distributorship Financial Forms & Systems LLC. "Or you're going to end up dying on the vine."
A Market of Mergers
It may be old news, but mergers and acquisitions continue to play on the minds of everyone selling to banks. "It can be a blessing or a pitfall, depending on which side of the transaction you're on," Puntney says. "Tomorrow, 10 or 15 percent of your annual sales could be gone." Puntney has watched most of his traditional competitors disappear, many because they were on the wrong end of acquisitions. Today, Independent Forms Services most often finds itself battling the direct-selling majors. Even with the market's constant challenges, distributors remain attracted to the market's promise. "There is a tremendous amount of profitability," Puntney says. "It is competitive, but there are a lot of items you can provide, and accounts can be substantial."Distributors lose dependable customers to consolidation, but mergers and acquisitions can be good news, too. One of Puntney's clients, an 18-branch bank holding company, has acquired an average of two branches a year for the last five years. With each addition, Independent Forms Services increases its volume. Plus, the company provides updated letterhead, drive-up envelopes and even ad specialty items such as pens that list the institution's new locations. Puntney works closely with financial institutions that are anticipating a merger so they don't end up with obsolete forms after the deal.
Other distributors try to shield themselves from consolidation as much as possible. Franks has carved out a niche within a niche by targeting community banks. "That market will be the last to be consolidated and merged," he says. "I see the large regional banks going away before the community banks." Puntney spies a pair of divergent trends. "It seems like [banking] is going in two different directions," he says. "There's a lot more big holding companies controlling many locations. In contrast, I see a lot of new little banks opening up. They're having tremendous growth in our market right now." These new, small banks are tailor-made for distributors, he says, because they need so much help getting established. Community banks offer chances to establish relationships on the ground floor, which is akin to gold for distributors targeting this market.
Dancing to the Tune of Technology
Some salespeople wring their hands with worry about where traditional products fit in the face of evolving technology. There's no time for that if you want to sell to financial institutions, says Mike DeNofa, vice president of sales for IOP Communications, a distributor in Red Bank, N.J. "There are new opportunities out there if you want to make them," he says. "You have to find your own. That's what's so much fun about selling."Imaging is at the top of the most talked about technology list. "I think that's probably the biggest trend that will be coming up over the next 10 years," Puntney says. "You're looking at big dollars [for banks to implement imaging], but eventually it will happen. There's a lot of them that are talking about it, but maybe only 10 percent of our customers have done something about it." Imaging technology captures documents electronically and stores them in a digital format, allowing users to save space and retrieve information much faster. The most common imaging application for financial institutions is check and document processing on high-speed reader/sorters. Banks can then mail account statements with images of checks instead of the checks themselves.
Some industry veterans view imaging as another sign of the paperless apocalypse. That isn't necessarily so, says Derek Byrne, senior account manager for RDM Corp., a supplier of imaging testing equipment and MICR testing equipment in Waterloo, Ontario. The shift toward imaging simply necessitates distributors explore yet another path for selling to banks. "Imaging is totally dependent on the quality of the documents," he says. "Financial institutions need to have their documents designed image friendly. The industry is crying out for distributors who can do this. If they can lock into this niche, they can lock in a lot of business."
RDM conducts training seminars to teach distributors how to design documents that are image ready. When a document is not image friendly, banks have to rely on manual operators to key in information, says Norm Macpherson, RDM's distribution manager. There is a large market for distributors who can design documents "clear, clean and free of any junk in the background," he says. "If everything's working perfectly, the cost of a document might be five cents. If the quality of the document is poor, it might cost them a dollar."
Image-friendly documents have certain design elements that "drop out" when a document is digitized. The document's print contrast signal (PCS), which is the difference between print reflectance and background reflectance, determines whether a design element will drop out or be captured by the equipment. Essential printed data is more likely to be captured by imaging equipment if it has a PCS of 0.6 or more. It is advisable to have your manufacturer or financial institution's equipment vendor recommend an appropriate PCS and then test the documents.
Of course, there are other technologies driving demand in the financial industry. "Things are changing real fast," Franks says. "[Financial institutions] are looking at different ways to do things other than with the old standby of printed forms. They're going to electronic forms. They're automating from all different angles. I see the day when there will be a lot less printed forms. There will be a computer warehouse storing those forms and they'll be printed on-demand. We need to be prepared to facilitate print-on-demand and electronic items as they become even more popular."
Decreased personal contact between banks and their customers also has some distributors branching out. "You can go to your bank and not even face your teller anymore," DeNofa says. He points to the popularity of ATM machines and notes the profit possibilities for distributors. "With every ATM," he says, "you need a card, a receipt roll and deposit envelopes." He provides ATM cards to several smaller banks, which then encode the cards at their facilities. Michael Stewart, an account executive for CU Forms, a distributorship in Birmingham, Ala., says home banking via the Internet is another hot technology around the corner. "[The Internet] will be driving the financial world," he says.
Product Diversity Turns a Profit
In the supposedly staid and stodgy halls of banking, sometimes nothing sells better than Dum-Dums and dog biscuits. Franks, who markets himself as a one-stop shop for community banks, provides financial forms, office supplies, plastic bags, ad specialties, nylon ties for courier bags, encoding supplies and computer supplies.Diversifying product offerings is one of the most effective tools distributors have for finding and keeping business in the financial market. Puntney's company handles items such as printer ribbons, office products, ad specialties and even furniture for its banking clients. "If your customer can go to one place and get all their needs taken care of, it's a lot more convenient," he explains. It's not unusual for large banks to have up to 500 different items on their wish lists, he says.
Transaction receipts and checks may be the lifeblood of bank sales, but ad specialties often provide a needed transfusion. Franks uses promotional products to open doors to new financial clients. He's not alone. Struggling to distinguish themselves, many financial institutions are casting a fresh glance at ad specialties. "We have done some unique applications to market credit unions," Stewart says. "We do shirts going and coming. Embroidered, PoloŞ-type shirts and khakis with a logo so they could be worn as a sort of uniform." Thomas Joyce, co-owner of The Joyce Company, a distributorship in Lowell, Mass., serves a few banks that sponsor golf tournaments. When Joyce comes across a good price on golf accessories or a new promotional product that fits into the theme, he lets clients know about it.
Commercial printing also is booming as financial institutions feel pressure to market themselves better. DeNofa, who says commercial printing is one of his banking best sellers, provided 2,800 copies of a bank's annual report. The 40-page report featured a 6-over-6 cover produced in 4-color process with spot gloss varnish, plus silver ink. There were seven different areas of embossing that portrayed buttons on a keyboard to represent the bank's dedication to electronic banking. Rack brochures, which detail the services banks offer, are another popular application. The brochures can be simple or elaborate. "It really depends on what the bank is trying to portray," DeNofa says. One of his customers has 11 branches and is very image-conscious. DeNofa furnished this client with 4-color rack brochures on 80# coated paper.
Product diversity is critical for anyone selling to financial institutions, says Joyce, whose company supplies everything from passbooks to office products. But, he says, it's also important for distributors to remember their focus, which is to provide the best service they can, not just the most products. Joyce's company, for instance, frequently supplies rack brochures, but usually passes on opportunities for annual reports. "There are just other things we do better," he says.
Service Superstars
Colette Joyce, president and co-owner of The Joyce Company, also is a graphic designer. When she had the chance to design a bank's logo several years ago, the work served as an entrŽe into the financial industry. Today the company sells to 15 financial institutions of varying sizes, and graphic design constitutes just one offering. In fact, while the distributorship has kept up with technology and diversified its product line, its main strategy for penetrating the market remains offering value-added services, including an in-house materials management program.As part of the program, a representative from The Joyce Company visits financial institutions and catalogs their inventory. A complete list is made of all the forms or other supplies the distributor will track, then products are alphabetized. Bank employees are given the alphabetized list and numbers indicating the shelf number where items are stored. The Joyce Company establishes reorder levels, checks inventory regularly and even unpacks product cartons when they arrive. The service is free, Thomas Joyce says, because "we've got to convince the customer of the total package value we're offering as opposed to simply going in and offering the lowest price [on products]. We have to convince them that they want our service. We go in at the beginning and say we want to do everything. They like that idea."
Outsourcing has become prevalent in the financial industry, Puntney says, because banks want to concentrate their time on profit-making ventures, not taking inventory. "That's a good trend for distributors," he says. Of Independent Forms Services' total sales to the industry, the vast majority results from forms management, including warehousing, tracking inventory, distribution and more. The company has an extensive pick and pack operation and handles virtually every item this way, Puntney says, particularly envelopes and checks. The need for pick and pack service among financial institutions is increasing, he says, largely because multiple branches each require small quantities of certain forms.
Independent Forms Services delivers products to numerous financial institutions. The majority of the company's clients are in the Chicago area, and the firm has three delivery vans out daily to serve them. Even that small bit of personal contact solidifies the relationship, he says. "I have customers who know our drivers by name," Puntney says. "That makes a big difference."
Franks' customers often ask his opinion about projects they're working on. Other times, he simply helps them choose the right toner. Regardless, he has made himself just a little more indispensable. And in an environment with the "here today, gone tomorrow" potential of the financial industry, that's all a distributor can ask for.
Jonathan Rollins is assistant editor of FORM Magazine.
Survival Advice for the Financial Industry
Be steadfast. If you think every niche market is the same, change your mindset before approaching financial institutions. "You're probably going to have to be more persistent and possibly more professional" than in other markets you target, according to Frank Franks, owner of Financial Forms & Systems LLC, a distributorship in Zionsville, Ind. Franks still visits banks that haven't given him substantial business for six years. "But the day the person they're buying from goofs up," he says, "I think I'll be there to take over."
Financial institutions search for signs that you care about their well-being and that they can place their confidence in you, says David Puntney, president of Independent Forms Services Inc., a Joliet, Ill., distributorship. "It takes a long time to develop that," he says. He can count on one hand the number of times he has received a bank's business on his first sales attempt.
One approach Puntney believes in is showing prospects what separates him from his competitors. He takes customers to his company's warehouse so they can see that "it's very systematic," Puntney says. "It gives them a different concept than a dungy looking place with a dirt floor." And the good news is that after earning an institution's trust, "they don't feel so uncomfortable giving us a lot of eggs out of their basket," he says.
Stay informed. "Know what you're talking about," says Michael Stewart, an account executive for CU Forms, a distributorship in Birmingham, Ala. "And I don't mean the printing part of it. [Financial institutions] don't want to train you to meet their needs." If you're just starting to target the market, begin by finding one account that is easy to work with and "ask every question you can possibly think of," Stewart says. "There isn't a school to teach you about the needs of the financial industry. It took me a solid year of asking how everyone ran their credit union."
Where you go is as important as what you know. Locating the appropriate person in a bank to listen to your message is a daunting challenge, Puntney says. Talking to one manager may lead to a dead end, while the manager next door may invite you in with open arms and an open mind. Ten years ago, Puntney says, his company found the most success targeting middle management. Today, he says, top management is more receptive to hearing about the benefits of forms management. Puntney has a theory as to why the prospective buyer has changed. Increased efficiency and new technology sometimes eliminate jobs, he says, threatening some managers. Upper level management is interested in anything that improves results, Puntney says, because their jobs are more secure.
Your name precedes you. A solid reputation and good word of mouth work wonders in the financial market. "Bankers probably talk among themselves more than any other business," Franks says, and they readily recommend you to peers if you do quality work. "I would say name recognition and reputation go farther in the banking industry than in most industries," says Norm Macpherson, distribution manager for RDM Corp., a supplier of imaging testing and MICR testing equipment in Waterloo, Ontario. He recommends teaming up with a manufacturer who produces quality financial work and developing a joint sales approach.
All financial institutions are not the same. "Bank" is definitely a 4-letter word at credit unions, Stewart says, because of competition between these types of financial institutions. If you mistakenly call a credit union a bank, he says, some credit unions will refuse to do business with you. "It is that heated of a battle right now," he says. Also be aware that credit unions operate as not-for-profit organizations, Stewart says, so you won't receive the margins you might by selling to banks.
Get to know your client on a personal level. Independent Forms Services belongs to the Bank Marketing Association and chambers of commerce at the county and city level. "There's some advantage to belonging to banking groups depending on how active you want to be," Puntney says. Occasionally Puntney runs across a new client through these networking groups, but finds them most useful as a way of cementing his current relationships. The casual atmosphere of these meetings, a relaxed dinner or a round of golf are great opportunities to learn more about your customer on a personal level, he says. "To just sit there and talk about something other than 'what size do you want that form' tends to reinforce the relationships," he says.