Copyright Bank Marketing Association Jul/Aug 2004| [Headnote] |
| When choosing a branch location, what's the difference between parcel 'A' and parcel 'B'? They may look and cost the same, but subtle distinctions could have an impact on viability. |
Problem: You need a location for a new branch. You have completed your demographic survey and you have a fairly good idea where the branch needs to go geographically, say within a half-mile radius. Within this target area, you have identified two comparable sites at the same price (so cost is not a factor). How do you decide which site is better? In other words, what are the nitty-gritty details you have to take into consideration when narrowing clown the site choices?
We posed these questions to a sample of live site-selection experts who work for clients in the financial services inclustry. Their observations and comments are organized below under seven categories of "tilings that need to be taken into consideration."
1. Are both lots big enough?
When estimating your lot-size need, have you taken everything into consideration? "You want to be sure your branch footprint will fit on the site," says Robert Schrader of Branch Facilitators LLC, Troy, Mich., "so have an architect standing by to evaluate the site-the architect will help establish how much you need for your ideal positioning, too."
The ideal branch position is not always the one facing the street. If the majority of your parking will be away from the street, behind the building, your main entrance should face where most of your customers will be arriving, so your prospective site must have enough space to accommodate parking behind the building. Zoning ordinances may have more to say about how much parking is enough than you will, so be sure to check the local requirements before you decide that the site is adequate. Also, "Will there be enough space for a drive-through window?" asks Mary Beth Sullivan of Capital Performance Group, Washington, D.C. In addition, you'll need space for an "escape lane," notes Steven Reider, of Bancography Inc., Birmingham, Ala. You want easy ingress, egress and circulation around your branch.
"You may need to buy a site that is bigger than you want or need to get a premium location," says Schrader. "When the market is hot and there is a lot of competition for one location (from pharmacies and retailers as well as other Ixtnks), you may need to pity extra for the site that is truly the best for you, but it will be worth it."
Buying three acres when you only need one may seem wasteful or impractical, but it can give you greater flexibility in positioning your building. Then, you can sell or lease the land you are not using, keeping control over who your new neighbors will be.
For urban sites, if you are choosing between two storefront sites, you probably won't be as concerned about a drive-through, or even parking, but you may be focused on the size of the existing site and whether there is room to expand (if it is a small site or if expansion is definitely in your plans). The size of your site will depend on the potential for growth in the market, says Joseph Sullivan of Market Insights Inc., Chicago. "In the current craze for building branches, many banks are choosing suboptimal sites," says Sullivan. "Base your decision on the potential for that market and whether the target market will be well served by that location and that size building."
Be cautious about planning for future expansion, notes Reicler. "We are adding branches faster than we are adding people in many communities, so it would follow that the size of mast branches will decline. It won't be possible to support a larger branch if deposits hold steady or decline."
2. Location, location, location
Locating your branch near other popular retailers is essential to success, say all five experts. Work with a local, knowledgeable real estate agent when you evaluate the potential of different sites. "The agent will have the 'historical' knowledge of some sites and can tell you if businesses have succeeded or failed in those locations," says Reicler.
"Many banks assume that a busy street will bring in many customers. If the busy street is midway between two "destination" locations, such as a grocery store and a 
Target, but there isn't much around the bank itself, the bank might as well be located on a highway," he observes. "It's more important to operate within the sphere of someone else's draw because banks can't change customers' daily paths. Be sure to assess the quality of the surrounding retailers."
If you are considering a site within a strip mall, it is veiy wise to consider the free-standing out-parcel, according to Reider. If you do select the out-parcel, have your bank's door face the doors of the other stores: It will be more inviting to customers.
For larger malls, be sure to evaluate the site within the mall or the out-parcel carefully, says Blair, or you may have a veiy poor location within a great location. One bank selected a location within a mall, but failed to examine the traffic flow or the visibility. The institution got a better price on its parcel and thought it had found a great deal, but it turned out the best location was at the other end of the mall and there was no visibility for the branch where it was situated.
Be sure the surrounding locale is appealing too," says Maiy Beth Sullivan. By an appealing locale, she means surrounded by trees and well-maintained shops instead of a junkyard. The surroundings can draw or repel customers.
Another location favored by many banks is near or at a traffic light. This provides excellent visibility, notes Kevin Blair of NewGrouncl Resources Inc., Manchester, Mo. However, there can he drawbacks, too. If at certain times of the day there are long backups at the light, it is actually more difficult to get in and out of an establishment at the comer because the entrance/exit is blocked for several minutes during each light cycle. Also, if there is a median in the road that prevents turning in one direction or prevents drivers from turning into your branch easily, fewer people will use your branch.
3. Traffic flow
Related to location is traffic How. "You want to get a 24-hour traffic count at each site (which you can request from your municipality)," says Joe Sullivan, "to ensure that your site will have the high level of traffic you need to make your branch profitable." But don't rely on high numbers alone. The retailers that surround the location affect the site's traffic flow, too, either positively or negatively. "Again, you want to be sure you are destination-oriented, " says Joe Sullivan. "It increases your drawing power if you are located near places your customers will go often (like the grocery store, or Target or Wal-Mart)." Reider concurs: "Pass-tlirough traffic won't stop."
Another aspect of traffic flow to consider carefully is if it is heavier in a certain direction. "You want to be sure to be on the side of the street that more people travel at a certain time of day," says Mary Reth Sullivan. "You don't want your customers to have to cross a heavy line of traffic to reach you if you liave a choice. If 'Site A' allowed you to be on the 'busy side' of the street, it would be preferable to 'Site B' on the other side of the street." Sometimes, you might just have to drive it to see which side is the "better side of the street" for your branch, she adds.
4. Visibility
A part of the traffic flow question is visibility, a key factor in site selection, say both Joe Sullivan and Mary Bern Sullivan. "Your branch is not just a transaction location, it is a marketing tool," say both. "If your potential site is blocked from view by a large building, it would be less desirable than a site that allowed customers to see your branch and your signs as they approach." Mary Beth Sullivan notes. "What's around your site also affects how you position your building-whether or not to put it on a slant or directly facing the street." Your visibility is an essential factor to consider when selecting your site. Mary Beth Sullivan says the signs you choose are key to attracting attention and customers, as is the environment around your bank. "You only have a few seconds to get customers' attention."
5. Target market
Your demographic surveys will have indicated whom you will be serving the most, but remember to analyze the market's future potential. Is the area built out or still growing? If two sites are near each other and one is located in a growing area and the other is not, that might affect which site you choose, says Joe Sullivan.
"You can't please everyone, so you must detennine your key markets and allot the correct amount of space for those customers-small business, moilgages, baby Ixximers planning for retirement, and so on." Sullivan says there is a trend toward fee-based products geared for aging baby Ixxxners, therefore there is less emphasis on the teller line and more on facilities that allow one customer-service representative to handle multiple transactions. "There's more emphasis on 'relationship building' space, and there should be more emphasis on proper merchandising," he says.
As you consider who will be using your branch the most, your plans for entrances may also be affected. Will you have wider doors? Automatic doors? An ATM lobby? Few or no steps? "Younger generations will appreciate more automation, a more 'video-oriented' environment. Older generations will want a place to come in and read," says Mary Deth Sullivan. Choosing a site that allows you the flexibility to offer the right environment for your target market is critical.
"Align the conveniences of your locations with customer needs-smaller, nearby branches for everyday needs like checking, and larger locations that may be a longer drive for 'big stuff like mortgages and retirement accounts," says Reider.
6. Competition
"I don't fear proximity to other banks," says Reider. "When consumers choose banking relationships, they choose normal banking locations. If they have chosen to leave a bank that is already on their regular route and you are right next door, they will be likely to switch to you." Reider also says, "If you don't think you can succeed across from the competition, if you don't believe in your products enough to go up against their offerings, you may need to rethink your product line."
There may also be an advantage in locating near a competitor. A small bank may be able to capture customers near a new big bank because of the difference in service or products it provides, says Joe Sullivan.
Robert Schrader says choosing a site can be used as a specific strategy to eliminate a competitor, when the competition for the site itself is between your bank and another bank.
7. Restrictions
The most desirable, affordable, ideally located site can turn out to be a disaster if you haven't done your due diligence research into xoning and signage restrictions, and examined many other legal details (including checking the reputation of the property seller). "Always ask, 'What can we do to protect ourselves?'" says Blair.
"Make sure you review building and xoning restrictions thoroughly," he says. "There may be height restrictions for your new building that would keep it blocked from sight by an existing building; there may be covenants that dictate what design you may use and what signage is permitted. Bankers don't think of themselves as retailers but zoning officials will treat you like retailers."
"Check for xoning on curb cuts and look into variances to ensure you can build access to the site, " he says. "I low quickly a branch can be built on a site may also affect your decision to buy."
When you have decided on a site, takeit with an option-120 to 160 clays to review the site and check all approvals before the deal is closed, says Blair. "Most sellers only want to give you 30 days, but don't let yourself be rushed. Also, always include a clause that says 'subject to the approval of the board of directors' as a final way to dissolve a deal if necessary."
Environmental issues are a huge concern when purchasing a site, whether it is completely vacant, has existing unused buildings or is a storefront. "Have an environmental study done on all property you are considering, including soil testing for hidden contaminants," advises Glair. "Drill down all around the perimeter of your planned footprint. You may find rock or a water table that will prevent you from building a basement."
"Finally, make sure all city officials have signed all approvals so that you won't be saddled with the cost of widening a road or adding stoplights. Many last minute assessments have been added to site deals that have almost mined the bank's plans and have cost them hundreds of thousands of dollars," he observes.
Poor site-selection procedures over the years have created headaches for more than one bank. For example, there once was a financial institution that opened a jazzy new branch on a busy street, only to see it fail because few stopped by. In another case, a bank Ixjught a terrific empty lot for a branch light in the center of town only to find out later that the parcel was brimming with hazardous waste. By following the few, simple precautions outlined above, you can avoid these problems when making your final site selection.
How useful was this article?
Please use the postage-free Reader Opinion Card provided in this issue or leave a message at (202) 663-5075. You can also send comments by e-mail to walbro@aba.com.
Meet the Experts
The five site-selection professionals quoted in this article are listed here in alphabetical order.
Kevin Blair,
NewGround Resources Inc.,
Manchester, Mo.
Telephone: (314) 821-6443
Steven Beider,
Bancography Inc.,
Birmingham, ALa.
Telephone: (205) 251-2262
Robert Schrader,
Branch Facilitators LLC,
Troy, Mich.
Telephone: (248) 879-2264
Joe Sullivan,
Marketing Insights Inc.,
Chicago.
Telephone: (773) 348-7752
Mary Beth Sullivan,
Capital Performance Group,
Washington, D.C.
Telephone: (202) 364-4749
| [Sidebar] |
| THE IDEAL BRANCH POSITION IS NOT ALWAYS THE ONE FACING THE STREET. |
| [Sidebar] |
| LOCATING YOUR BRANCH NEAR OTHER POPULAR RETAILERS IS ESSENTIAL TO SUCCESS. |
| [Sidebar] |
| YOUR BRANCH IS NOT JUST A TRANSACTION LOCATION, IT IS A MARKETING TOOL. |
| [Author Affiliation] |
| Tanja Lian Sanlosky is a former editor of ABA Bank Marketing magazine. She writes from Herndon, Va. |
My Research
