By John J. Coffey, C.P.A. and Gene Palm, www.profitres.com, originally published October 2002, ABA Bank Marketing
History repeats itself; that's one of the things that's wrong with history. —Clarence Darrow (1857 - 1938)
In order to understand the present, you must understand the past. When you study the past, which could be the history of the world, your country or even your own past, you will find that there are patterns that occur over and over again. History really does repeat itself in many ways.
Your customers have their own history and have different financial needs depending on what stage of life they are living through at the time. These stages of life are very similar for each of your customers and they generate similar patterns. In addition, each stage of your customer’s life has a direct impact on your bank’s profitability.
For instance, when your customers are children, they may have a small balance in a savings account and generate very little profit for you. Later when they purchase a car, they become more profitable and still later when they settle down and purchase a home, they can become very profitable. However, late in their life, when they have paid off their mortgage and have a substantial amount of their savings in high interest CDs, they can actually become less profitable than at any other time in their life!
While it was possible in the past to review a customer’s financial patterns and how they changed from month to month and from year to year, it was just not a practical exercise. You would have to sift through reams of microfiche stored away in some dusty warehouse. Now, with the advent of relational marketing databases, it is possible to not only review a customer’s financial patterns over time, but even predict in real time what the customer is going to do next based on the actions they have taken in the past!
Something old, something new
Relational marketing databases have evolved very rapidly in the past 15 years and are now more powerful than ever. The oldest of these technologies is the tried and true Marketing Customer Information File or MCIF.
Using an MCIF, you can perform research on a group of customers who have a similar “life stage” demographic code based on age and income. For instance, if you are interested in studying your wealthy, middle-aged customers, you can examine the past product usage of the profitable customers in this segment to understand why these customers are so profitable. For instance, they might be profitable because they have a high balance in their home equity line.
You can then examine the product usage of the unprofitable customers in this segment. You might discover that they have a home equity line, but the account is inactive. After this research has been completed, a marketing campaign would then need to be designed to increase these customers’ home equity line balances. In order to do this, you would need to ship the research file to your direct mail house, have a graphic artist and a copywriter design the direct mail piece and then have the direct mail shipped. In addition, you would need to inform your Customer Service Representatives (CSRs) and Tellers that this direct mail had been shipped and you also might need to train these people on how to close and record the sale.
To complete this process, you would need to use the MCIF to gauge the success of your marketing campaign. Whew! And, while all of this effort can be more effective than placing an ad in the local newspaper, it still takes a lot of time and energy on your part.
Realizing the inefficiencies of this approach (as good as it may be) the MCIF industry has now integrated this technology into Customer Relationship Management (CRM) systems. The advantage of a CRM is that the research developed by an MCIF can be “pushed out” to every customer touch point and various customer interactions can be “pulled in” for further analysis.
One of the newest and most advanced of these systems uses MCIF-like rules that examine the customers’ history to predict what will be the most likely next purchase by the customer. For instance, a rule could be developed for wealthy middle-aged customers with inactive home equity lines. This rule could then be linked to a “pop-up” screen on a CSR’s platform that would enable the CSR to engage in a profitable face-to-face discussion with the customer. If the CSR were able to activate the account by having the customer increase their home equity line balance, then this would automatically be recorded by the CRM.
The system runs in real time and is smart enough to know that if a customer just activated their home equity line moments before he or she talked to the CSR, a different rule would be activated and a different interaction with the CSR would have occurred.
These pop-up screens can also appear on Teller platforms, ATM screens and personal home banking Web pages when the customer is interacting with the bank personally or electronically.
The beauty of this automation is that you as a marketer don’t have to spend your time developing direct mail campaigns or informing and training your CSR or Tellers. You can become much more effective by being the one who studies your customers’ past behavior in order to make the bank more profitable in the future!
John J. Coffey, C.P.A. and Gene Palm are the principals of Profit Resources, a consulting company that specializes in MCIF technologies. © Profit Resources, Inc. 2006
