Asset Based Lending
Chief Investment Officer
Commercial Loan Automation
BirdsEye Viewrelationships vs transactions
All banks say they are in the relationship business; however, the truth is that some are in the transaction business and others are actually in the relationship business. Hotels are no different. Some are in the hospitality business, and others are in the accounting business. The ramifications to either position are profound and long-term. Here is a case in point.
SCB Forums holds well over 40 meetings a year. Our attendees are an attractive crowd for high-end hotels: they are clean-cut, they often extend their stay beyond the Forum meeting time, and they also usually buy goods and services from the hotel. The business is steady and consistent even through difficult economic times. About ten years ago we attended a meeting at Charleston Place Hotel. It’s a beautiful hotel in the heart of a beautiful town. The staff was friendly and the service, by and large, good. The food was tasty but a bit skimpy.
When the bill arrived, it included items we knew we did not consume. We started debating with the food and beverage staff to no avail. After some time, I decided to cut our losses and pay the bill even though we knew it was wrong. But, we told the hotel we would never come back. A revised bill arrived soon thereafter and we have since held more meetings at that hotel than any other hotel we attend.
There are other reasons why we like Charleston Place; for one thing, the staff doesn’t turn over! The same servers have taken care of us for over ten years. They know I like real whipped cream with every meal, and that some of our guests enjoy bleu cheese for breakfast. They know we need huge bowls of strawberries and that we will eat them. They know we like comfy executive chairs. The same bell men, transportation manager and small group sales are still at the hotel. They make my life easier and delight our members.
Conversely, there is another hotel we used to go to. The facilities are brilliant, the grounds are beautiful, and the food is good. However, the staff there are uncaring. We enjoyed our first meeting there. When we wanted to come back, everything changed, from the room rate to the price of a shrimp. As Dick, my husband, said, “The accountants took over.” We tried to return several times, since our members liked the property, but the attitude changed dramatically, as did the price. We never went back.
Lesson learned: Charleston Place is in the relationship business, and so are we. They rewarded our members and us for our loyalty with outstanding service, price breaks and overall an excellent and consistent product. We rewarded the hotel by coming back time and time again. The other hotel lost hundreds of thousands of profitable business from us because they wanted to optimize a single transaction.
Implications for banking: I am a believer in customer profitability. I don’t think we should give away our products and high-quality service. At the same time, accounting isn’t everything. Long-term customers are worth far more than the profit entry on the general ledger. They contribute to consistency of earnings, reduce new customer acquisition anxiety (since the need to acquire new customers is somewhat lessened) and they make our associates’ lives better since they are typically happy and interactive customers.
My point is, building relationships should be a mutually beneficial arrangement which accrues value to both customer and shareholder. A business-like approach to relationship pricing, coupled with staff longevity and strong service tenets, will pencil out in every business, no matter how commoditized it may seem. As you strategize for the future, especially if you’re a SuperCommunity bank, you can inculcate this philosophy into your staff and bake it into your product pricing. All major constituencies will benefit: customers, shareholders and associates.