When Genworth Financial Inc. realized all of the hoops it had to jump through to send pre-screened direct mail offers to prospects and customers, the company decided to switch to non-credit based or invitation-to-apply (ITA) direct mail programs.
Non-credit data models enable lenders to target their direct mail or telemarketing efforts toward prospects – or customers they may be cross-selling to – who are identified as most likely to respond to offers. The models include demographic, lifestyle and behavior data.
“When we send out insurance direct mail pieces, we have to have the pieces approved by each state’s department of insurance,” says Joseph Laskos, vice president of database management for Genworth Financial, a provider of financial security and protection services including retirement income, life and long term care insurance, and Medicare supplement insurance as well as related financial and wellness advisory services. “We found that when credit data was involved, we had to jump through many more hurdles to be able to do the kind of creative wanted. It just became easier to use the ITA programs.”
Richmond, VA-based Genworth Financial, which is currently ranked number 227 on the Fortune 500, is not alone. Many financial services marketers are shifting to non-credit based data sources as a way to promote their credit cards, mortgages, loans, investments and insurance.
Like most marketers, financial services database marketing managers are focused on strategies that can deliver more immediate returns as they are faced with declining acquisition response rates and increased budget scrutiny. Using non-credit base data sources is a key trend that database marketers are focusing on currently.
Shift to non-credit based data sources
Scott Watkins, vice president and division head of database solutions at ChoicePoint Precision Marketing, Atlanta, says, “increased concern over potential legislation, public perception, and unclear legal boundaries are driving more marketers to consider alternatives to their traditional FCRA compliant, credit-based campaigns.”
Genworth Financial mails out 26 direct mail campaigns each year, totaling 50 million mail pieces.
Laksos says, “We are seeing great success with our ITA program. It offers us freedom and flexibility and is even less expensive than credit-based data”
Deb Gustafson, a financial services industry strategist who focuses on retail banking at Little Rock, AR-based Acxiom, adds that many people “have opted out of the pre-screened process, and even some of the most affluent folks have done this, so to reach these people, banks have to focus on non-credit-based data sources.”
“Non-credit-based data is also a good tool to use when trying to reach emerging markets or different groups of consumers who are not as credit active,” says Denise Hopkins, vice president of product marketing at Experian’s Marketing Information Services.
Increased analytics and segmentation
Declining response rates and budget limitations are forcing financial services database marketers to re-evaluate their analytical strategies.
“People today are becoming saturated with marketing messages in every medium, and as a result, they are becoming less and less responsive to marketing messages,” ChoicePoint’s Watkins says. “Analytics, however, allows companies to communicate with their customers and prospects effectively because it enables them to learn what they really need and want.”
Watkins says that many financial services marketers are also starting to realize that they do not have all the resources they need to optimize their campaign analytics.
“As a result, they are beginning to better track campaign results and seek outside data that can be used to improve the accuracy of their predictive modeling,” he says.
In addition, he adds, “existing models are being updated and rebuilt on a more frequent basis and database marketers are placing increased demands on their marketing service providers to deliver more expertise and resources in this area.”
David Raab, president of consulting and software firm Client X Client, Chappaqua, NY, and regular columnist for DM News, says that while there are many ways that financial service marketers can segment their data there were three basic areas that stand out for the industry.
First, financial service marketers should look at key customer value, estimating customer potential. Second is to focus on if the customer is using particular products. From this the company can predict what other products will complement the services or be purchased next.
Of course in choosing the right database solution, Raab says, “It always depends on how you’re going to use it.”
In addition to considering the application of the tool, marketers should look at the scalability of the program in comparision to the number of files expected to be processed and the quality of the data that the company receives, as there are programs designed to clean data better than others. Another consideration is the skill level that is necessary in running the program and whether you have the staff that is capable of doing extremely technical work or if a more user-friendly interface is needed.
“Technology is always vastly in advance of anything that a marketer could want to do,” says Raab. “It is often the case of the marketers catching up to the technology, or of the software designers looking at ways to simplify the interface.”
Acxiom’s Gustafson says that financial services marketers today are also monitoring their analytics.
“They are not just making the model and walking away, but refreshing the model with recent information about the customer,” she explains.
Gustafson says segmentation is also a growing area for financial services marketers.
“Segmentation is being used more and more by financial services marketers to enable them to communicate with households – actual rooftops,” she says. “It allows marketers to track the buying behavior of [their] customers – such as if they go to Starbucks regularly, or buy children’s items – which in turn helps them decide which financial products or services each household might be interested in.”
Genworth Financial’s Laskos says that since 2005, when his company started to put more of a focus on analytics and segmentation, he has seen a 25 percent increase in his production and expense ratio.
“Analytics helped us stop mailing to people that were not profitable,” he says.
Following in the footsteps of increased segmentation, there is also an increase in event-based marketing or event triggers.
Historically, life events have preceded financial events, such as the purchase of a new home or car, and some life events may even precede a negative event such as bankruptcies. These event triggers rely on public record information and are widely used by database marketers.
“Life events often trigger purchase behavior,” Watkins says. “Being one of the first to reach a consumer after such an event is paramount.”
Watkins adds that today there is a push for additional event triggers that are not as easily sourced, such as pre-mover files, which list consumers who have put their house on the market.
“These are important because many move-related purchase decisions occur before or within a few days of a move,” he says. “And many times, the only way to affect the consumer’s decision is to reach them before a move takes place.”
Onboarding as a growth strategy
Onboarding, a structured customer orientation program supported by a series of proactive contacts with customers to ensure that the products they purchased match their needs, is not a new concept to the banking industry.
However, given the higher relative costs associated with new customer acquisition efforts in the financial services industry, there is an increased focus on targeting a marketer’s existing book of business though onboarding programs.
“Onboarding can be an intelligent segmentation strategy that helps maximize customer relationships across product lines,” says Watkins. “Combining traditional cross-selling and payback analysis techniques to onboarding programs embraces every new customer and existing customer with a more intelligent relationship building and revenue maximization effort.”
Watkins adds, “These strategies can be very helpful to financial services marketers wanting to increase their æwallet share.'”
For example, bank marketers may use these strategies in a cross-sell campaign to promote investments and insurance to their existing retail banking customers.
Financial services marketers are also focusing more and more on emerging markets as away to increase market share.
Hispanics, Asian Americans and African Americans are all groups that financial services marketers are targeting today. Particularly important are ethnicities that are new to the United States – financial services marketers want to reach these groups first because those that do usually get their loyalty.
Small businesses could also be considering an emerging market.
“Banks are really trying to target small businesses when they are small so as they grow there is some loyalty to their institution,” Experian’s Hopkins says.
College students could also be considered an emerging market, as well as baby boomers. Even though boomers have been using financial products and services for decades now, their needs are changing, which makes them an emerging market.
“Even though the label has been there since the beginning, baby boomers are entering new life stages,” says Hopkins. “They may be retiring or buying a second home, for example. As a result, they are considered an emerging market for some financial services marketers.”