Use Our Letter: Targeted Prospecting in The Relationship Banking Model

In recent blogs (HERE and HERE), we discussed why now may be the right time for community banks to embrace a relationship banking model instead of a pay-for-risk banking model. In a pay-for-risk model, banks emphasize generating revenue by charging for exposed risks. In a relationship banking model, banks focus on a consultative approach with customers. They sell services and advice based on the customer’s particular situation and their needs. These banks also emphasize the customer’s evolving financial or business needs over a long period. In a relationship banking model risk exposure is avoided, mitigated or hedged if possible. However, relationship banking can only succeed with the right talent, education, and motivation from the front line. In this blog, we share a simple strategy used by a successful lender (Emily P.). We saw how Emily used a relationship strategy to increase her relationship banking skills, connections and success rate. We have shared this strategy with other lenders who have used it successfully to increase loan booking rates and portfolio profitability.


Success Factors in Relationship Banking


Since relationship banking success relies on the lender providing insight and advice to the customer, the successful relationship banker must develop the expertise that customers find useful and valuable. Banking expertise comes from experience and intellectual curiosity (learning). Therefore, commercial lenders must develop a strategy to increase industry knowledge in the fields of finance, business, accounting, tax, M&A or some other fields. Emily called her strategy "concentric relationship building." Concentric relationship building is very simple and premised on learning from one account, and applying the knowledge gained to the next account that was in the same industry, same vertical or in the same business cycle.


Concentric Relationship Building


Emily identified two steps in her concentric relationship strategy. The first step is to identify the industry where the lender can gain the most knowledge and have the highest opportunity. The second step is identifying prospects and building from the one to many relationships.


First Step


Here is how Emily went about deciding which industry to pursue - she analyzed only four criteria for her focus as shown in the graph below.


Bank Prospect Targeting



Emily would identify the following criteria to target an industry:


  1. The banker’s own knowledge and experience. This was the least important criteria since Emily felt that he could learn and change her expertise through study and experience. In Emily’s case, she had good knowledge of hospitality because her uncle ran a hotel for many years. In her years as a lender, Emily acquired expertise in four other industries and became knowledgeable in tax and M&A strategies. Different lenders possess different backgrounds and interests, but anyone can learn a new industry or develop an expertise in a vertical or business cycle. 
  2. Emily would focus on profitable industries. Unprofitable customers do not make good borrowers and do not generate high ROE for banks. Emily identified industries that could consistently generate cash flow in up and down cycles such as hospitality, medical professionals, and funeral homes.
  3. Identify borrowers in your region. For example, aviation companies may be profitable and a lender may understand that industry well, but if there is only one bankable aviation company in your driving radius, you cannot create concentric relationship building. Emily believed that you must identify a critical mass of borrowers in your region that you can learn from and apply that knowledge to the next customer in that industry. 
  4. Ensure that your bank has the expertise and willingness to lend in a specific industry and has the products and services that industry needs. If you want to emphasize C&I loans to financial advisors, but your bank only lends on real estate collateral, you will have a hard time developing a relationship banking model in that field.  Make sure that the industry you pick is a good fit for your bank’s appetite, or you must find another employer.


Second Step


In the second step of the concentric relationship building model, Emily would reach out to her focus industry prospects and try to gain an audience with decision makers. This is the most important step in Emily’s model and where most lenders fail. We talk to many lenders who lament that they wish they could meet with more prospects. Referral business is great, and introductions at chamber of commerce lunches, city council meetings, and corporate boards are also great, but Emily found the vast majority of her initial customers through simple database mining, followed by content, calling and marketing.


Here is an example of Emily’s process.  She identified a desired geographic region (for example Tulsa, Oklahoma) and her database would list all businesses in the region as shown in the screenshot below. There are many of these third-party database services such as D&B, ZoomInfo, Vertical IQ and others. 



Bank Commercial Customer Prospecting



Next, Emily searches for industries that he is targeting and in the screenshot below he identifies hospitals and clinics.  


Commercial bank prospecting



Then Emily searches all of the decision-makers in this subset (c-level executives).  



Commercial customer Prospecting for banks


Emily now has 1,300 results (C-level executives within the targeted industry and in her geographic reach). Emily then sends out a letter that describes why she wants to meet with the prospect and why now is the right time to finance or refinance.


The form of our tested sample letter can be downloaded HERE.


The goal is to narrow down the initial results to a core list of approximately 15, qualified prospects that are open to doing business with your bank. From there, Emily can go to work learning all about the customer (as we discussed HERE) and building her “trusted advisor” status.


Once Emily closes a loan for one hospital or clinic, the next customer in the concentric circle is much easier to close because Emily now has credibility, industry knowledge and a referral source. Emily keeps building on her success by expanding the concentric relationship. We witnessed that Emily could build 10, 15 and sometimes even 20 customers within one industry by following the strategy.




Like every successful sales activity, the process is very important. The concentric relationship strategy is one way that commercial bankers can increase their effectiveness. The process works for Emily and many other lenders. The concentric relationship building process is simple, inexpensive and effective for many seasoned and young lenders alike.