Next-Generation Solutions to Build Relationships

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Buffeted by increased competition from larger banks and financial-services companies, a regional bank in the Midwest faced the challenge of establishing stronger, more profitable relationships with its customers. It identified and targeted customers with inactive direct deposit accounts with balances under $500.


A direct mail campaign offered three options: close the account, maintain an increased level of activity or strengthen the relationship with the bank by selecting one or more products mentioned in the letter. In each case, the products offered were tailored to the customers' needs because the bank had obtained data from syndicators to enhance its own customer data.


The results were very positive. Several unprofitable accounts were closed, while many other customers selected additional bank products. The bank now is monitoring the profitability of the reactivated accounts to determine the campaign's long-term success.


Another regional bank faced the challenge to reduce the cost of acquiring new customers. Its Marketing Customer Information File (MCIF), updated quarterly, was being used to solicit new credit-card holders -- but despite its best efforts, the campaign's response rate never exceeded 2 percent. The bank had been executing campaigns without first attempting to establish the value of each potential credit-card customer, even for those who already used one of the bank's other products. The pertinent data was kept outside the MCIF in disparate databases.


Once the data was consolidated, each customer's value could be calculated. As a result, the overall response rate for acquisition campaigns increased to 6 percent to 8 percent. In addition, revenue per acquired customer increased and the costs of executing a marketing campaign decreased 40 percent.


When customer value is established, the strength and profitability of customer relations can be dramatically improved. But it requires becoming a customer-centric, as opposed to product-centric, organization. Instead of asking "To whom do I market this product?" the more pertinent question becomes "What products are most appropriate for this customer at this time?"


Transitioning to customer-centricity implies understanding and responding to


the customers' individual needs and the present time.


How can your organization become customer-centric? By establishing a continuous dialogue with each customer. Data must be sought and captured each time the customer comes into contact with your organization. For a bank, this includes each time a customer visits a branch, uses an ATM or visits its Web site. Marketing campaigns are viewed as a means for customer interaction, rather than as a discrete event, and can be more focused than the mega-campaigns that banks usually conduct.


Smaller, more focused marketing campaigns are able to deliver consistent messages via each customer's preferred channel. For example, by analyzing behavior, a bank may determine that certain high-value customers withdraw cash while paying for supermarket purchases. Cash withdrawal at supermarkets provides convenience, but it deprives the bank from an important channel for customer interaction. As a result of this insight, the bank decides to install ATMs in stores of the specific supermarket chain and achieves two objectives: serving the customers' need for convenience and establishing a new channel to communicate with them.


Marketing campaigns must be based on data that reflects the entire relationship between the organization and its customers. To be effective, data must be clean, detailed and updated frequently (weekly, or in certain cases, daily) from operational databases, including direct deposit account data and partner databases, such as credit-card processing data. This allows campaigns to be driven by transactional data rather than based solely on data aggregations. Recent transactional data is the best indicator of future


activity.


There are three key requirements to become a customer-centric marketing organization:


* Open marketing databases must be created to integrate detailed and frequently updated customer data with knowledge of customer demographics and products used. This information can be assessed relative to business rules and industry and competitors' practices.


* Database marketing tools must be used to tightly integrate advanced analytic methods with campaign management and the marketing database. Analytic methods provide the means to establish a customer's value and predict future behavior. As a result, an organization can identify the most appropriate product mix, the best offer through which to promote the product mix, the right channel to engage the customer and the most effective messages to communicate.


* Campaign management tools should be used to conduct several multicell, event-driven or continuous marketing campaigns. These allow for focused, cost-effective targeting of current or potential customers and the leveraging of an organization's strengths.


Customer-centric marketing lets an organization understand its customers and determine the most appropriate product mix and distribution channels for reaching customers. Equally beneficial is the use of analytic methods for identifying high-potential areas of expansion in the product portfolio and geographically. Expansion without proper understanding of targeted markets and customers often do not produce expected results.


Evangelos Simoudis is CEO of Customer Analytics Inc., San Jose, CA, a provider of industry-specific, end-to-end relationship marketing applications and solutions.
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