In recent years, banks heavily promoted Free Checking primarily to improve profitability through:

• Increased fee income
• Cross-sell opportunities
• Greater share of customer wallet (higher account balances)

What really occurred:

• Local accounts were attracted, often in large volume, as those consumers dissatisfied with their current bank did opt to switch.
• Most banks found they were poor at cross-selling.
• Fee income did go up, giving added incentive to the continued marketing of free checking.
• Many banks found that 25 to 30% or more of new checking customers didn't stay "switched." (1) and overall attrition rose to 18% average customer loss, comprised of: 8% to 12% existing customers leave due to death, relocation, or dissatisfaction; and 30%+ of new customers leave due to dissatisfaction

Most banks then attempted:

• Sales and service quality training
• Internal calling programs
  
• Additional price incentives
• More costly media marketing to support brand awareness

Still, Performance Gaps and Challenges became apparent:

• Growing dissatisfaction with the sales and service ability of frontline personnel.

• While BAI studies find that 75% of cross-sales to new retail checking accounts occur within the first three months,2 there is simply not enough sales resources and capability to cover the available opportunities.
• Gift incentives and discounts often add cost, not relationships.
• Customer attrition increased due to dissatisfaction with product value (costs too high for the level of service, errors experienced).
• If new customers are dissatisfied, then so are some customers who remained.
• Community and small to medium regional banks felt additional competitive pressures from the marketing budgets of the large national banks and begin to feel that "nothing is working."

Opportunity

• Big banks usually don't have long-term value or service advantage as their pricing often involves fee strategies; bureaucracies usually aren't conducive to high levels of service quality.
• "Asking for the business" still works and can be done cost-effectively through automation (3).
  

Solutions

• If you can't change behavior (fast enough), re-engineer the environment.
• If communication is the basis for all relationships, then communicate directly to your customers to build relationships.
• If your frontline sales performance lacks, then automate communications.
• Matrix Mail, the comprehensive, personalized, highly customizable, automated, one-to-one communication program.

Matrix Mail Onboarding component

• New customers are highly susceptible to moving most or all aspects of their financial relationship if they are asked to do so. After all, your new customers gave your bank the opportunity to cross-sell them— build on that opportunity.

Focusing on new customers has the advantage of:

There is almost no other opportunity when a customer is more open to changing most of their banking relationships

The customer is most likely to respond to any communication from their new bank, especially if it is personalized to the customer.

New customers who receive personalized communications are the most likely to respond by coming to a branch or calling a branch, providing frontline personnel yet another opportunity to cross-sell.

Matrix Mail Attrition Component

Matrix Mail incorporates specific targeting of new checking account customers to reduce attrition and to cross-sell additional services

Personalized letters are automatically sent to the customer from the branch service representative who can directly help the customer if a question or problem occurs. By creating a communication channel, service issues or questions can be addressed and avoided.

By systematically presenting product suggestions to the customer from the branch's sales representative, then additional product sales occur and the relationship becomes substantially more resistant to attrition.

Matrix Mail Cross-sell Component

Through dynamic modeling and predictive models, customers are segmented based upon their likelihood to purchase additional products and services. These segments are prioritized based upon the asset/liability needs and marketing objectives of the bank.

A series of personalized letters are then initiated, from one branch service representative to a specific customer household. The personalized letters are targeted product recommendations. The product recommendations are re-evaluated each month as product relationships, balances, and other triggers change.

Matrix Mail Advantages

Proven results in a wide variety of institutions.

Results validated using control groups and long-term studies.

The automated nature of the program assures you that the program continues reliably no matter what other priorities demand time from the marketing department or the branches.

Adding costly profiling systems or expertise becomes unnecessary.

Personalized communications with customers is the most cost-effective method for improving services-per-households, increasing balances, and long-term retention of the customer relationship.

For more results documentation and more information about Matrix Mail, contact: Mark Rodrigues, The Biltmore Group, 847-276-2676.   430 N. Milwaukee Avenue, Suite 5, Lincolnshire, IL  60069

Footnotes

1 Dove Consulting, 2004

2 McAdam, P., Nagarkatte, A. and Klinkerman, S, "Window of Opportunity," Banking Strategies, Nov./Dec. 2003.

3 bankmarketingblog.com/2007/01/24/marketing-automation-is-not-a-fantasy.aspx

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