Similarities and Differences in Consumer and Commercial Sales

Credit Unions tend to do quite well with serving their membership.  This service involves expanding the share of wallet of the member, whereby more of the financial services used by a member is supplied by the credit union.  Many CUs have a strong sales cultures that raise the awareness of their membership for the various consumer services they offer.  Some even go as far as measuring and rewarding successful efforts on the sales front, in a healthy sales culture.  We saw last year the results from an unhealthy sales culture with Wells Fargo!

But can a consumer sales culture be transformed to a commercial one?   Before leaders implement this change, it is good that similarities and differences between the two marketplaces are explored. 

A big similarity is that both areas require a command of the products by the loan officer.  In consumer, you must understand the different loan types, pricing matrix, and parameters that you will do loans in.   Commercial requires the ability to assess, manage, and get paid for the risk in the credit.  The discovery period for commercial risk is much longer than consumer risk and often involves assessment of several additional factors.  In the end, members on both sides enjoy working with people they view as competent and knowledgeable. 

One big difference is the sales conversion cycle is much different in consumer and commercial.  The consumer cycle is often shorter and is transaction oriented.  The member comes into the credit union needing to finance a new car or to open a checking account after they have moved to a new city.  Typically, this occurs after the individual has already researched and made their decision on what they need and which institution they want to use.  The transaction becomes the springboard into building a relationship and the initial cycle is short.

In commercial, the sales cycle is quite varied and can be very long at times.  Relationship building begins well before the loan is closed and often may take years to develop.  Often, showing that you are competent and can deliver for the business over a period of time, is what is needed for the business borrower to open up to you when a request with the primary institution has been delayed or denied.  The “no” answer in many cases is really “not now” or “not in the way you presented it to me”.

A commercial loan creates a bonding relationship between the company and lender, whereas many consumer activities are more transactional in nature.  Once the MBL is closed, ongoing check-ups are required to monitor the health of the business and assess if there are any changes to the risk profile for the borrower.  Most consumer transactions do not require frequent check-ups on the borrower if the payments are made timely. 

One key to success on both sides is having various folks that send business to you.  We call those centers of influence or referral sources.  On the consumer side this could be car dealers or residential realtors.  Commercial centers are often commercial or land realtors, economic development entities, attorneys, and accountants.  Developing relationships with these folks can help to drive commercial business your way.  It also requires getting out of the office.  I believe that much of the consumer side is reactionary to a member coming in, while the commercial side has success based on going out. 

Advertising is also different between the two lines of business.  Consumer advertising is often dominated by a special rate or program.  Commercial marketing is creating more top of mind market awareness in the community.  Rate cannot be decided upon until the financing request and risk inherent is known.  Also, starting out the MBL conversation with rate, places the lender at a huge disadvantage in the negotiation.  It also makes you gain business by often being the low-cost leader.  That is not a position that most smaller and many larger institutions want to get into. 

Both sides will require lenders who are great listeners, highly skilled in their field, and creative in order to long term success.  My hope is whatever area, consumer or commercial, you will win on the field that you play on.