Old Kent Bank, Grand Rapids, MI, is seeking to increase customer loyalty by turning its customers into investors.
The bank, which has 250 locations in Michigan, Illinois and Indiana, plans to enclose inserts promoting its new online stock-purchase plan early next year in the monthly statement envelopes of 600,000 of its account holders. The company hopes that if its customers own a piece of the 147-year-old, publicly held firm, they will become more loyal to Old Kent and will be less likely to look to other banks for their financial services needs.
“To the extent that we can turn investors into customers and vice-versa, the vice-versa is probably the real big bang,” said Jim White, assistant vice president of investor relations at the bank. “Then they are less likely to leave.”
The company’s OK Invest Direct program allows anyone to purchase stock directly from the company via the bank’s Web site, located at www.oldkent.com. A minimum purchase of $250 is required. It also allows longtime shareholders to enroll in a dividend reinvestment plan and allows customers to enroll in automatic account-deduction programs for ongoing stock investments.
In addition to the statement insert mailer, which might also appear on the bank statement, White said Old Kent may examine print advertising and in-bank promotions. However, “the first phase is to just do mass marketing to the [consumer] deposit customers,” he added. “Then, as we get more sophisticated about who our investomers are, we might try to do some other things.”
Although the bank expects to reduce its paper costs by transmitting financial statements electronically to online investors, White said he wasn’t sure yet if the company would attempt any direct e-mail marketing to those people, particularly in light of the recent legislative focus on bank customers’ privacy. About 95 percent of the investors who have bought stock online have agreed to receive their statements electronically.
Stephen Klein, senior vice president of marketing and business development at StockPower, the San Francisco company that supplied the technology allowing Old Kent to sell shares directly through the Web, said studies done by StockPower partner Bain & Co., Boston, show that customers who also are stockholders have double the lifetime value of customers who do not own stock.
“What happens when you take these customers who are coming to your Web site and put stock in their hands, it can have a very profound impact on the bottom line,” he said.
Klein said that through the analysis of shareholder-customers at other retail companies, StockPower has determined that customers increase their spending at companies by an average of 50 percent per year once they own stock. They also are more likely to hold onto the stock for a longer period of time than noncustomers – more than seven years vs. less than two years for noncustomers.