As other large banks merge to create vast networks of branches, Chase Manhattan Bank is merging the databases of its various retail divisions into a vast proprietary data warehouse that is driving customer retention and prospecting.
Chase, New York, sends 300 million mail pieces a year, many in highly targeted batches of 10,000 to 100,000 derived from the mining of its data warehouse. The warehouse is the central point where information from separate databases of credit card, deposit, auto loan and other account holders as well as transactional data is gathered, analyzed and then disseminated across the bank, often in real time.
The data warehouse gives marketing analysts insight into customer transactions, account balances, product and channel use (branch, phone, online, ATM or mail) at their desktops.
“I could tell you right now how many accounts we opened yesterday, at what branch and what type of account,'' said Russel Herz, senior vice president of liability product management at Chase.
Instant retrieval and analysis dramatically decrease the cycle time of mailings and enable campaigns to be tweaked on the fly for better response or to adjust to changing market conditions.
Data mining picks up patterns and trends that can be used to steer customers to the proper channels for specific transactions. Customers can be rewarded for using low-cost channels like the Internet (1 cent per transaction according to a 1996 study by Booz Allen & Hamilton, McLean, VA) or discouraged from visiting branches ($1.07 per transaction) with an increase in fees. Customers tolerant of higher fees also can be identified.
Chase, which updates and expands the data warehouse with fresh information every three months, is in its sixth generation of expansion since merging with Chemical Bank in 1996. With each expansion, the bank lengthens its head start on competitors whose yet-to-be completed mergers will involve the consolidation of disparate databases.
“As an early arrival in the consolidation game, the skills people have acquired will give [Chase] a competitive advantage,” said Mike Haydock, vice president at IBM Global Business Intelligence Solutions, Armonk, NY. “You're taking about intellectual capital and experience. They've been through how to acquire customers and how to build the infrastructure.”
A deeper data warehouse also can improve customer retention through better targeting of offers to the right people at the right time. A postcard mailed earlier this month to 100,000 Chase bank-card customers who travel abroad offering free overnight delivery of foreign currency, for example, would not have been possible a year ago because of a lack of information.
“We now have a level of complexity and speed in processing information where we can time offers to those who are willing to buy,'' Herz said. In the last six months, Chase has executed similar seasonal campaigns with Nine West, 1-800-FLOWERS and Fodor's Travel Guides.
Chief information officer Denis O'Leary, who pushed Chase into the technology age, has said that having a branch across the street is less effective than having a terminal next to a salesperson. Investment in information technology, which reached nearly $2 billion in 1996, has helped Chase maintain 92 percent of its deposits despite cutting its branches from 900 to 500. That's a remarkable figure in an industry with an annual attrition rate of 25 percent, according to First Manhattan Consulting Group, New York.
The bank also is using its data warehouse to compete for business in areas where it has no branches. Sophisticated models built with known data create a profile of the type of customer that uses every Chase product. Prospects who meet that profile are sent offers or reached through one of the 140 million sales calls the bank makes each year.
“The majority of our customers are banking away from branches,” Herz said. “For a lot of our products, a branch is not necessary. We can still expand nationally without as many branches.”
While its own internal findings and those of Forrester Research, Cambridge, MA, indicate that consumers will continue to turn from physical to virtual banking, Chase still regards its branches as an important channel.
“What Chase is saying is, 'We're not going to concentrate on just one channel, we're going to concentrate on a variety of channels and we need to get people to utilize the channel they're most comfortable with,' ” said Clint Cave, senior vice president of U.S. financial services for Harte-Hanks Data Technology, Billerica, MA. “A bank can never be too convenient, and I think that's what they're trying to get to.”