Cosmos
TOWARDS BUSINESS: TOWARDS BUSINESS: ENTREPRENEURS SEGMENT MARKET SHARE EXPANSION STRATEGY ENTREPRENEURS SEGMENT MARKET SHARE EXPANSION STRATEGY
Petr Gnatyuk
Tatiana Suslova
Valery Danilik
Nikita Trofimov
Moscow State University of International relations
Moscow State University of International relations
Gubkin Russian State University of Oil and Gas
Moscow State University of International relations
ppp@gmail.com
tatyana.sus93@gmail.com
valery.danilik@gmail.com
5264305@gmail.com
+7(916)6677555
+7(915)3975725
+7(985)1841889
+7(903)5264305
Working experience Financial Analyst, Societe General, Rosbank, Capital Market & Investment Banking Case Championships: Semifinal at the VII Championship Changellenge Cup Russia-2014.
Working experience: internship at the Marketing Department at SAP CIS in Moscow.
Working experience: Team Assistant, McKinsey&Company
Working experience: Analyst at Joint-Stock Bank "Project Financing Bank“.
Case Championships: Semifinal at the VII Championship Changellenge Cup Russia-2014
Case Championships: Semifinal at the VII Championship Changellenge Cup Russia-2014
Case Championships: - 2nd place at KPMG and Bolshoi Theatre competition - Final at Alfa Bank Championship.
Forecasts
Audience
Channels
Anchor Products
Operating Efficiency
Bundled Services
Loyalty
Summary
MSE segment being oriented on transactional services is gaining momentum with the support of the Government which will result in 42,1% share of Russian GDP in 2017 +4% p.a.
42,1%
100
Cash management
7
37,5%
Payments Securities services
25
Trade
27 41
13% 35% 23%
30% 2014
2017F
Change in share of MSE in Russian GDP
Wholesale revenue
Investment banking
Lending and Capital Deposits markets
Transaction banking
Wholesale banking revenue breakdown, %
Due to unfavorable macroclimate in Russia and increasing pressure on Russian large companies MSE is going to be the main driver of GDP in 2017 •
Source: Federal State Statistics Service data, Team analysis
Transactional revenues account for 40% of the world’s banking industry in 2013 and would be make up 80% in 2017 3
Forecasts
Audience
Channels
Anchor Products
Operating Efficiency
Bundled Services
Loyalty
Summary
Rosbank should focus on transactional services in Trade Industry to gain maximum income from MSE segment Other Manufacturing
15.680 17.654
Small
Credits
9
Real estate 11
Deposits
58 Trade 11
+13% 2013 18.831
11
Construction
Transactions
21% 36% 57%
2017F
MSE Total revenue breakdown by industry
Trade industry needs for banking products*
23.461
Micro +25%
Dynamics of Revenue by MSE segments
Micro business in Russia is likely to grow almost two times faster than Small enterprises by Total revenue until 2017
•
Source: Federal State Statistics Service data, Team analysis
Trade industry is the most mass and perspective segment for banking services, as it accounts for 58% in terms of Total Revenues.
In order to gain substantial profit from trade industry with the focus on mass services, Rosbank should concentrate on the developing of transactional services
*Appendix 1
44
Forecasts
Audience
Channels
Anchor Products
Operating Efficiency
Bundled Services
Loyalty
Summary
Usage of media platforms will help Rosbank to catch up on the lag and attract 4,100 clients per year until 2017 to effectively manage business to find out new partners
The percentage of entrepreneurs using Internet and social media in business
4,100
Partnership
• Mass media announcements • Discussions of news • Government news and events
to advertise business; to find out news about market 33-44 Years old
to learn bonuses from banks and government.
Using
• Special publics for MSE • Reviews of latest business technologies • for searching partners
82%
Not using
18% 86%
Advisory
Measures
Raiffeisen Uralsib Alfabank 2% 7% 3% 17%
VTB
71%
Sberbank References of credits to SME by Banks in web – No Rosbank here Source: «OPORA Rossii» research 2013
• Publishing Success Stories • Platform for searching partners
• Using publics of business events to find out potential clients • Using pages for identifying needs
• comments of Rosbank analysts to the latest bills • Publishing Success Stories • Using pages for publishing the bank news and events
4,100 every year 5
Forecasts
Audience
Anchor Products
Channels
Operating Efficiency
Bundled Services
Loyalty
Summary
«Successful Start» integrated with bundled services provide the opportunity for Rosbank to penetrate extremely prospective market and attract 25,500 new clients by 2017 As franchise market grows steadily +45,1% p.a.
«Successful Start» rates & terms are more favorable for entrepreneurs going in line with Settlement & Cash services
111.624
76.515 25.194
2013 2016F 2017F Franchise market growth rate
-1.0%
-2.5%
from Interest Rate
from Settlement & Cash services
Lower collateral requirements
partnership
Only a few banks provide such service
«Proof of Concept» *Pilot Project… Rosbank
1
Raiffeisen
1
Vokbank
1
Sberbank
67
Number of franchise partners
In Moscow and in the Krasnodar Region in 2015
• Long-term relationship • Low risk clients • Transaction income
Source: Russian Franchise Association report 2013, team analysis, Appendix 3
& 25,500 New Clients
Experienced entrepreneur • Need settlement & cash • Want to expand
Fresh-entrepreneur • Want to start a business • Need money &consulting 6
Forecasts
Audience
Channels
Anchor Products
Operating Efficiency
Bundled Services
Loyalty
Summary
Adding entrepreneurs' funds to the operating accounts takes them to much time and efforts. Notice of departure service is to reduce waiting 6 times from 30 minutes to 5 minutes for encashment. How does it work?
Solution – Notice of departure Online-bank (mobile app)
A client needs to add some money to the operating account
Customer Manager (SMS)
ONCE a week… an average client visits the bank to add money to the account and has to queue
New function in mobile app
96 years less…
A client goes to the bank with cash A client has to queue
Encashment is too expensive Queues are so long
our clients will spend in queues in 2014
A client can send SMS to a Customer Manager in order to inform him
30 min in a queue several times a month •
Result
Source: Team Public Option Poll among MSE entrepreneurs and analysis
Trustful relations… between the bank and a client
5 min for encashment 77
Forecasts
Audience
Anchor Products
Channels
Operating Efficiency
Bundled Services
Loyalty
Summary
«Basic» and «Premium» packages with specially integrated brand-new anchor products for Micro and Small segments will increase an average products usage per client to 4.4x and double the annual profit from one customer by 2017 “Basic” Package
Brand-new Anchor Products Franchising
1. Settlement & Cash services
Operating efficiency
3. Dedicated Client Manager
Notice of Departure
Micro
100,5 +102%
49,8
50 0
“Premium” Package
Specific Field -> Specific Products Specific products requirement by field
1. Settlement & Cash services
Manufacturing: - Machinery loans - Expo participation loan
3. Dedicated Client Manager
Trade: - Commercial vehicle loan - Import insurance
4. Saving products
Agriculture: - Machinery and warehouse loan - ST and LT support loan
2. Online Banking & Remote services
•
150 100
2. Online Banking & Remote services
Small
200
5. Payroll services
Source: Team analysis; Roland Berger Strategy Consultants research on SME
Services: - SME project finance loan - Women entrepreneur loan
1
2
2,5
3
4
4,5
5
6
7
Increase in income per client depending on the number of products consumed +1,0% -1,5%
-1,0%
98,5%
99,0%
Discount
-1,5% 100,0%
Price
98,5% Settlement Cash
Payroll
Saving products Possible discounts and extras on Service Rates if bought bundled
88
Forecasts
Audience
Channels
Anchor Products
Operating Efficiency
Bundled Services
Loyalty
Summary
Loyalty strategies of the bank will help to decrease the percentage of clients who leave bank by 5% and the percentage of clients who become inactive by 10% 1. Management of relations between clients: Client A has problems with the Business
Bank (Manager) as a Mediator helps business to find each other and makes clients loyal
20.835
Inactive Client B has resources to resolve this problem
Active
176.515
115.927 25%
10%
81.423
75%
2. Training programs ⃰ for micro and small businesses in the bank’s business centers: The life-cycle of the client relations with bank
13 business centers
20 business centers
1.Activation 2.Dormacy 3.Renewal 4.Retention
3. Relationship/access to a bank Customer Manager. • • • • •
90% Clients 2014 New clients Leavers Clients 2017 Total clients base with the impact of Loyalty Management
As a result of conducting loyalty programs the percentage of clients who leave bank will leave by 5% and the percentage of clients who become inactive by 10%
Giving advice on business topics Financial, law and tax consultations Preparing a client’s financial statements Private meetings with clients Analysis of business experience of clients
Sources: Rosbank reports and official sites; IFC Advisory Services - Customer Management in SME Banking A Best-in-Class Guide – 2010;
25% 15%
10% 5%
2014
2017F
Clients who become inactive Clients who leave the bank
*Appendix 4
99
Forecasts
Audience
Channels
Anchor Products
Operating Efficiency
Bundled Services
Summary
Loyalty
Brand-new Anchor Products integrated with original Service Packages and innovative clients attraction channels are to increase Rosbank share in «Entrepreneurs» segment to 5,5% in terms of revenues and to 4,5% in terms of clients 200 150
100,5
100
49,8
50
+102%
0 1
2
2,5
3
4
4,5
5
6
7
Increase in income per client depending on the number of products consumed
20.835
An average products consumption per client from new Bundled services
Total Income per client increases twice
+65% p.a. 18.335.705
Segment-Oriented Loyalty Measures together with the Anchor Product and basic Rosbank services is to double Total Clients Base by 2017 Clients 2017
to 176,5k
Total clients base with the impact of Loyalty Management •
+25,5K New Clients
Settlement & cash + 9,1k
100,5k
176.515
81.423
New clients Leavers
Franchising in line with Bundled Services is the brandnew anchor product with the impact by 2017 of
Package
4.4x
115.927
Clients 2014
Loans +16,5k
Source: Federal State Statistics Service data, Team analysis, Appendix 2
2,4% 4.067.895
2,8% 5,5%
97,6%
97,2% 94,5%
2014 2017F Total revenue
4,5%
2014 2017F Market share by revenue
95,5% 2014 2017F Market share by clients
10 10
Appendix 1 Micro
Small
Settlement and cash services
+
++
Bundled services
++
+
Financing
++
Saving products
Products requirement by segment
Manufacturing
Trade
Agriculture
Services
Non-working capital financing
++
+
++
+
++
Leasing
++
+
++
+
+
++
++
+
++
+
Trade finance
-
+
Provide delay of payment of principal debt and interest
Payroll programs
+
++
Saving products
++
++
+
++
Import factoring
-
-
Conversion operations
+
+
-
++
小ash-management
-
-
Documentary operations
++
+
-
+
Leasing
+
+
Import factoring
-
-
-
+
Factoring
-
-
小ash-management
-
++
-
+
Banking services for private persons (employees)
+
+
Factoring
-
++
+
+
Risk Management products
+
+
-
++
Risk management products
+
++
Online Banking & Remote services
++
++
Online Banking & Remote Services
++
++
+
++
Specific products requirement by field
++ In great demand + In demand - Not in demand
11
Appendix 2
2014 2015F 2016F 2017F Change 2014-2017 CAGR, 2014-17 Micro(IND) Micro(LEG) Small Total Micro(IND)Micro(LEGl)Small Total Micro(IND)Micro(LEGl)Small Total Micro(IND)Micro(LEG) Small Total Number of clients 12740 57564 11119 81423 15288 77711,4 11674,95 104674,4 18345,6 104910,4 12258,7 135514,7 22014,72 141629,0265 12871,6324 176515,38 217% Yield per customer, %/month 7,47 3,38 4,43 4,16 8,964 4,563 4,6515 5,22 10,7568 6,16005 4,884075 6,67 12,90816 8,3160675 5,12827875 8,66 208% Revenue 1142013,6 2334795,84 591086 4067895 1644500 4255165 651672,4 6551337 2368079 7755039 718468,8 10841587 3410034 14133558,53 792111,825 18335705 451% 103,87596 Clients 2014 2015F 2016F 2017F Our share 2,8% 3,3% 3,8% 4,5% Micro(IND) 0,5% 0,6% 0,7% 0,9% Micro(LEG) 3% 4,1% 5,4% 7,1% Small 4,7% 5,0% 5,3% 5,5%
21% 20% 46%
Revenue Our share Micro(IND) Micro(LEG) Small
2014 2,4% 0,8% 2% 4%
2015F 2016F 2017F 2,9% 3,9% 5,5% 1,0% 1,4% 1,9% 3% 6% 10% 4% 4% 5%
12
Appendix 3 Franchise Retail Services Food others Total (LE)
New franshise (LE) Franchise with loans necessity (LE)
Annual growth
2012
2013
2014
2015
2016
2017
57%
8600
13502
21198
33281
52251
82035
14%
4600
5244
5978
6815
7769
8857
16%
2800
3248
3768
4371
5070
5881
30%
4000
5200
6760
8788
11424
14852
20000
27194
37704
53255
76515
111624
91 624 54 974
Settlement & cash services necessity with Rosbank (LE)
9 098
LE using bundled services (Loans&Settlement and Cash)
4 947
Source:
13
Appendix 4 The bank’s strategy to indicate and manage clients who is going to leave the bank or become inactive: Segmentation of clients who become inactive or is going to leave the bank:
The bank’s offers and activities are classified in accordance with the status of a client:
Reactive offers (client has decided to leave) the bank:
Performing Clients who do not show signs of credit deterioration Watch Clients who require attention even if payments are still regular; Delinquent Clients in default and typically taken over by collections and recovery functions.
• Analysis of portfolios; • Analysis of competitors´ offers; • Analysis of a client’s banking experience; • Access to new services and bonuses; • Activities of Customer Manager. Proactive campaigns (before a client decides to leave): • Management of relations between clients; • Activities of Customer manager; • Training programs; • subsequent monitoring of customer activities; • analysis of competitors´ offers, .
Training programs in business centers in order to inform clients to the bank products and services and develop their financial loyalty: Training programs
Content
Lectures, workshops
- Presentations of consultants, business couchers, and partners; - At times in partnership with third parties: universities, nonprofits; - Interactive finance and management presentations.
Seminars
- Lectures are combined with break-out group sessions to share best practices among the SMEs (Success Stories); - Seminars to train SME managers in the areas of HR, Marketing, Finance, Operations, and Personal Productivity Skills.
Consultations
Advice and guidance through business clubs or through partnership with business mentors and coaches.
Source: IFC Advisory Services - The SME Banking Knowledge Guide - 2010; IFC Advisory Services - Customer Management in SME Banking A Best-in-Class Guide – 2012.
14
Proof of concept Pilot project
Appendix 5
To select the location of the pilot project we have analyzed all the regions of Russia according to 3 parameters: • • •
State support for MESs The growth rate of the franchise business Representation in the region Rosbank City
Investment Rate
We have also analyzed the representation of franchise business in these regions
Types of franchises Rosbank branches
Government support for MSE
1 – Moscow
A1
>90
1,255 mln rub
2 - Krasnodarskiy Krai
13
800 mln rub
3 - Tyumen region
A1 3B1
8
400 mln rub
4 - The Republic of Tatarstan
A1
9
1,800 mln rub
5 - Chelyabinsk region
2B
7
500 mln rub
The most profitable region for the launch of the project is Moscow and Krasnodar region
Non-food retail Equipement Clothes, shoes, accessoires Entertainment Parfumery and cosmetics Gifts/Souvenirs Public catering Coffee/Tea Fast food Food retail
Manufecturing Equipement Services Real Estate Self-development
Krasnoda r Tatarstan Tumen 8
2
5
15 7
10 4
12 4
13 6
9 13
2 2
6 12 10
1 10 12
4 9 6
4
2
4 5
2 6
2 2
Total 90 69 48 The most prospective strategy for pilot strategy is to penetrate Krasnadar market with franchise partners in the non-food sector (clothes, shoes) and public catering (coffee-tea) Source
federal portal of MSE; Expert RA Rating Agency