New legislation, privacy initiatives, consolidation of markets and the Internet are quickly changing how banks offer third-party programs, such as insurance, to their customers.
The excitement over the long-awaited passage of the Gramm-Leach-Bliley Act, or the Financial Services Modernization Act of 1999, has been tempered substantially by the actions of state regulators seeking to require stronger privacy standards. The federal bill did not preclude the sharing of customer level data with contracted, unaffiliated third-party marketers as long as certain procedures are followed, including clear disclosure of the bank’s privacy policy to customers and the provision of a conspicuous opportunity for customers to opt out of participation in these programs.
The Jan. 25 announcement by Chase Manhattan and New York State Attorney General Elliot Spitzer could be precedent-setting. Chase and the state regulator agreed that “names, addresses, and phone numbers … can be shared only if a third party cannot identify a customer’s personal financial information and the customer is first given an opt-out opportunity.” This action will create an increase in marketing costs, as it will become harder to accurately target potential buyers.
Affinity marketers are adjusting to the fact that in the future bank partners may not be able to provide campaigns with any customer targeting data. The current search is for sources of outside predictive data that can be used to model prospects based on geo-demographic information and cluster codes. Various types of cluster-coding processes developed in the 1980s are receiving new attention as a means to segment bank files and reduce marketing costs. These techniques are based on the premise of similarities in buying behavior of people who live near one another. More contemporary processes can now forecast response based on analyzing smaller groups of prospects based on ZIP-plus-four codes or census track-level data.
The credit card industry also is undergoing a period of consolidation. It used to have many players, but now the top 15 issuers service nearly 70 percent of total receivables. The big six issuers – Citigroup, Bank One, MBNA, Discover, Chase and Bank of America – alone control as much as 48 percent of the business. Although several thousand banks continue to issue credit cards, most below the top 25 are selling them primarily to their inhouse customer base of checking account, loan and commercial customers.
An important opportunity today is cross-selling to bank non-credit card customers – i.e., checking, auto loan, mortgage and small-business customers. Debit cards applied to checking accounts provide a platform to cross-sell insurance and other programs. Many regional and local institutions across the country have many more checking account customers than credit card customers. Banks still consider checking accounts their “bread and butter” market for loan and insurance services.
The challenge can sometimes be keeping service-intensive checking customers happy enough that they want to buy more from the bank. Auto loans, mortgages and small-business accounts have the potential to buy property insurance, as well as term life insurance, to cover the life changes that often accompany major purchases.
Every element of the marketing campaign must support the primary function of the primary relationship between customer and service provider. In the banking business that means it is great to cross-sell insurance and other products, but the campaign must make a positive impression on customers – or at least not a bad one. You never want to have your cross-sell campaign come up in a customer research survey as bothersome.
The “golden rule” applies double if you are working with shared customers. Many of the most successful bank credit card programs today are ones in which the card is co-branded with an airline, retailer, school or association. These relationships are very visible for the bank, and the co-brand partner frequently must approve any cross-marketing campaign. Flawlessness in execution is certainly a key. Telemarketing campaigns have been particularly difficult to gain approval.
Using a “white-glove treatment” can help you convince a conservative marketing partner that cross-sell campaigns can be conducted while keeping negatives to a minimum. In this approach use only your best telemarketing vendor and core staff of representatives – those who are experienced and have passed previous monitoring reviews for quality of communications skills and call discipline. Even so, double the amount of monitoring that you and your staff perform. The use of outside monitoring can be a plus in providing comprehensive supervision and documented reporting. You also may want to reduce the number of customer comments that can be addressed.
Affinity marketing is a perfect application of permission marketing for banks that capture e-mail addresses from their customers and prospects. Perhaps once or twice a month an e-mail promotion can be sent to those customers who have approved receiving information from the bank via the Internet. Requesting key data to quickly provide rate offers can support products that require quotes.
A further Internet role for third-party offers is in providing themes which can be promoted to bring traffic to a bank’s home page. Portal pages that Web users check routinely during the course of the day for news, weather and sports are a prime location for banner ads or story descriptions which when clicked bring the viewer to the sponsor’s Web site. Insurance offers such as term life, auto or home owners can be positioned as attention-getting subjects to attract traffic to a bank’s Web site, where the full range of services can be presented. n
