Banks Get Hip. No, Really!

Deliver Magazine, December 2006

Banks Get Smart

Gone are the days of toaster giveaways. Banks are getting hip with innovative marketing ideas.

BY TRACY MAYOR

You know the drill. You deplane and begin wandering the airport, searching for something you need even more urgently than a latte or a restroom: an electrical outlet. Your mobile’s out of juice, your laptop shut itself down mid-flight, and you need to get up and running again, pronto. But how?

If you’re in the Indianapolis International Airport, that question’s easy to answer, thanks to skinny, bright blue signs with snappy sayings (“This outlet works. Now you can too.” or “You and your laptop may sigh with relief now.”wink that point the way from eye level down to available energy.

The outlets and the easy-to-spot signage are sponsored by Chase Commercial Banking, designed to capture the attention — and perhaps the accounts — of business decision-makers in what Chase spokeswoman Nancy Norris describes as a chaotic, media-saturated environment.

Gone are the days of the boring bank promotion. Financial institutions nationwide have discovered that to get themselves noticed, they have to break from their traditional marketing modes and get a little crazy. And it’s not just the creative.

In an increasingly competitive marketplace, in which many banking services have become undifferentiated commodities, more banks are sharpening their marketing efforts through use of predictive analytics: trolling their data — their own customer files or a combination of inside and outside information such as local real estate data and customer-behavior profiles — looking for patterns and triggers. It might be a large quantity of money hitting a checking account, say, or a car payment made in advance, which often indicates a windfall. The bank can then send a customized offer via direct mail, e-mail, phone solicitation or some combination of media.

Deployed correctly, predictive analytics can serve as a kind of statistical “magic bullet,” allowing banks to both predict customer needs and interests and anticipate customers’ financial windfalls and sudden plunges into bankruptcy.

For example, Click Tactics Inc., a Waltham, Mass., multi-channel marketing services firm, has clients that use its business-rule-based platform to be the first to contact people moving into a new house — sending them a personalized direct mail piece within days of their arrival in a neighborhood.

The goal is not just to capture that first checking account or home improvement loan but to establish a long-term, multi-product relationship with the household through an onboarding program, says Click Tactics vice president of marketing Steve Morse. He quotes research that shows that most banks do 80 percent of their cross-selling within the first six months of customers’ opening an account.

Other Click Tactics clients use predictive analytics to give branch office managers the ability to roll out direct mail uniquely targeted to customer demographics within a few miles of their branch location.

“Rather than a big [mail] blast from a central location, now branches are sending out small batches that allow them to respond to specific customer triggers or a unique event in their competitive area,” Morse explains. One branch might court the young families in its neighborhood, while across town, another branch could emphasize attractive CD rates to its older, wealthier customer base who may be at risk of switching to a new competitive local offering.

TAKING AIM
Other banks are turning to analytics to tell the future, in a manner of speaking. Zions Bank, a subsidiary of Zions Bancorporation, which operates some 140 branches in Utah and Idaho, is currently in the midst of a pilot program in which the bank has analyzed one-quarter of its customers to predict which bank product — be it a mortgage, home-equity loan, CD or estate planning services — they are most likely to need next.

According to Steve Thomas, senior vice president for customer loyalty and retention at Zions, the program has combined data that the bank has on file — balance, trans-actions and profitability of the customer relationship — with appended demographic and psychographic information. Sharp Analytics Inc. then created custom segments and models to predict a customer’s next most likely product.

From there, the bank is able to pinpoint its offers to each group via direct mail, Thomas says. Customers who were targeted in this way were significantly more likely to respond to specific offers than non-modeled customers and, according to Thomas, the number of new accounts that resulted from the pilot is encouraging enough for Zions to continue and expand the program to the remaining portion of its customer base.

IMPROVING PERFORMANCE
Aegis Mortgage Corp., headquartered in Houston, has used advanced data techniques to breathe new life into a previously underperforming direct mail technique: invitation to apply. Unlike offers of preapproved rates, which banks mail to customers on whom they’ve already run a “soft” credit check, invitation-to-apply mailings require no credit check and are, therefore, cheaper to compile.

But traditionally, invitation-to-apply hasn’t performed as well as preapproved, says Forrest Young, vice president of marketing at Aegis, because there were too many unknown variables about the prospective customer base: variables like a homeowner’s level of debt, current mortgage payment or amount of equity available.

Aegis teamed up with analytics firm Intellidyn Corp., cross-pollinating its own data with Intellidyn-supplied information such as current home value, local home sales and appreciation rates, credit data, and attitudinal and lifestyle data.

In the end, Aegis comes away with multiple target bases of targeted prospects — customers with adjustable mortgages that are ready to adjust upward; those who have had to carry mortgage insurance due to their high loan-to-value ratios; those whose homes have appreciated to the point that they can cancel mortgage insurance; or those in a position to take cash out of their homes.

Aegis is then able to “touch” those homeowners with copy and creative materials specific to their personal situation, explains Intellidyn president and CEO Peter Harvey. That, in turn, measurably lifts response, while the more accurate property information boosts conversion rates, allowing Aegis to simultaneously lower solicitation volumes and achieve higher performance rates.

“We’re seeking response rates from ITA mailings that are close to our preapproved rates,” reports Young. “That opens up a lot of markets that we didn’t have open before. We have a much larger population than before, and we’re able to send them more targeted offers.”

TAKING A SNAPSHOT
On the other end of the spectrum from Aegis, local community banks use analytics to keep up with bigger players.

When Rob Pyper signed on in 2005 to be marketing director at Barnes Banking Co., a 115-year-old Utah institution, he was well aware that community banks like Barnes compete best with regional and national banks when they offer personalized service that captures the spirit of the community.

But Pyper also realized early on that Barnes was ready for a better understanding of those customers.

“The assumption was that Barnes Bank had a pretty old customer base that’s conservative, that’s not interested in cutting-edge new offers,” says Pyper. “As it turned out, we also have some of their children, some 30-something high-income families, and also empty nesters with high income. That was a bit of a surprise for us.”

Barnes made that discovery using a business-intelligence service from Sharp Analytics of Salt Lake City to analyze the banking patterns of its customer base and their profitability. The end result — a more detailed snapshot of the bank’s customers — spurred him to create new products.

Predictive analytics help not just with product development but with marketing as well. To promote its new premier checking account, Barnes built a list of targeted customers and then mailed an oversized postcard or a personalized letter signed by Barnes’ president. Those two pieces, supplemented with newspaper advertising, employee cross-selling and signs in bank branches, brought in $24 million in deposits, Pyper says.

GIVE AWAY TRAINS, NOT TOASTERS
Financial marketers are also getting much more creative with their materials, too. While banks have offered toaster ovens and blenders for ages, Susquehanna Bancshares Inc., put a new twist on that old warhorse with something its target customers would really take notice of — a model train set.

Trains are an integral part of life and of business in the Pennsylvania-Maryland-New Jersey-West Virginia region where Susquehanna operates, says Susquehanna vice president and chief marketing officer Stuart Mullendore. “This is an area of the country where people understand trains,” he explains. “They’re going to respond to the image of a steam engine as being powerful.”

Respond they did. Working with Diccicco Battista Communications of Horsham, Pa., Susquehanna identified about 200 key local businesses as potential new customers, including, in some cases, companies with which the bank had not previously been able to open a dialog. Each business received a series of teaser postcards showing pictures of trains, with sequential messages such as “your package has just left the station,” “your package is on its way,” and “your package is about to arrive.”

That was followed with a large box, delivered by mail, containing what Mullendore characterizes as a very substantial gift — an entire toy train set, including the locomotive, rail cars and tracks. Everything except the power pack. To get that, recipients needed only to call the Susquehanna relationship officer identified in the package’s printed material.

“The message for the companies we were trying to appeal to was that all they need is the power — our power — to get going, to keep them on the track,” Mullendore says, adding that the mailer won an award from the Philly Ad Club for direct-to-business campaigns.

Some 40 percent of recipients followed up to receive their power pack. The bank was able to immediately establish relationships with a significant number of those respondents, and dialog that Mullendore characterizes as “promising” continues with a number of others. The response was so successful that the bank is considering sending another round of train sets.

In addition to its airport electrical outlet signs, Chase Commercial, with help from Bradley and Montgomery Advertising, conducted a campaign that played off the quintessential business traveler experience: finding the car service chauffeur holding a sign with your name.

In the case of the Chase campaign, the company positioned people dressed as chauffeurs at curb side, holding signs that read, “Mr. ‘I’m ready to expand my business beyond the US’: Your bank is here,” or “Mr. ‘I need local expertise in dozens of local markets’: Your bank is here.”

It was the perfect way to get noticed by harried business executives rushing to get to their next meeting.

Smart marketing which is sure to pay off for any business — and you can take that to the bank.