By Walt Albro
Only 34 percent of community banks say that they are using data to acquire new customers.
“That’s extremely sad,” says Stephanie D’Amico, director of business development for SourceLink Inc. Banks that are effectively using data have a competitive edge, she notes during a presentation at the recent ABA Bank Marketing Conference in Denver.
Why use data for customer acquisition? These days, many consumers expect businesses to use data in targeting their communications. She points to the example of Amazon: Almost everyone has had the experience of purchasing a product based on the provided list of “what other customers like you have purchased.” Two out of five millennials complain that organizations are not using data in a meaningful way to reach them. Younger millennials who have limited income and live with their parents, for example, are irritated at banks that send them mortgage promotions.
Data is good, but more data is better. D’Amico gives the example of statistics about pie sales at supermarkets. Based on the sales of 30-centimeter pies, the supermarkets might jump to the conclusion that apple is America’s favorite pie. But, when you look at the sales of 11-centimeter pies, the statistics say something different: apple is only the fifth most purchased pie.
How do you explain the difference? The larger 30-centimeter pies are typically purchased for groups with varied pie preferences. The purchaser has to take in account the first as well as second choice of each person planning to eat the pie. Apple is clearly the most popular second choice. But with 10-centimeter pies, mostly purchased for individual consumption, it is clear that apple is not the most popular first choice.
Bankers frequently complain about their inability to extract the appropriate data from their systems, D’Amico says. But, often this is a poor excuse. “It’s not about technology.”
Andrew Tasset, vice president of marketing at the Central Bank of the Ozarks (assets: $1 billion), Springfield, Mo., observes that his bank operates under 13 different charters under different bank presidents, with data isolated in many siloes.
“Data lives everywhere. It is overwhelming,” he says. There are MCIFs, CRMS, loan systems, teller systems, retail systems. Yet his bank is still able to identify and use the data needed to acquire customers and spur sales.
Tasset suggests that marketers start by defining exactly what they are looking for and then searching for where that data resides. Marketers should partner with IT and retail and build routines inside of the system to pull out the needed information. If that doesn’t work, the marketer should engage outside sources to find what is needed.
“You really don’t need to have all the data at once,” he says. “Usually, you need the data for only one campaign or task.”
Your best ally in the quest for relevant data is retail, Tasset says. “Retail has access to the systems that you can use to gather useful data.” He suggests that marketers meet weekly about data with their retail partner.
You must be gathering more than just transactional data, says D’Amico. You need to identify information such as: Who is the individual in the household who actually does the banking? And who makes the financial decisions?
Another thing to keep in mind is data usefulness. A surprisingly large number of customers fail to keep the bank informed of address changes. Make sure you are periodically cleansing your data and having the customer verify its accuracy, she says.
Some marketers get caught up in trying to decide which channel to use for communications, when the key questions are: What is the list and what is the offer?
When you are trying to target the right audience, you should append as much data as possible to your list. Many banks make the mistake of appending only basic information, such as age. You should also append data about socio-economic status and lifestyle, and the data should come from a wide variety of sources. “Even baby boomers behave very differently from each other.”
A useful exercise is to compare how your customer profiles compare with the overall profiles of your market area. Are you customers under-represented in certain categories? If so, you may not be offering the right products to reach these categories. Are your customers over-represented? This may be your niche since you are clearly satisfying this category.
After you have collected data and appended it, then it is time to build a model of your prospective customers—as well as models for the next likely product for existing customers.
A great response does not necessarily mean a successful campaign. “What was your goal and did you reach it? Is it new money to the bank? Are these people who will open other accounts?”
Every campaign should be tested for a marketing return on investment (ROI). A simple formula: Marketing ROI equals the incremental financial value generated by the marketing, divided by cost of marking (putting in all the net interest margin, fee income and other relationships generated).
Central Bank of the Ozarks has been utilizing data together with mass media offers for the last nine years in order to acquire checking account customers. The campaigns center on direct mail and are typically conducted from May to October, which have shown to be the months when prospects are most likely to open a new checking account.
Prospects are usually offered a financial incentive, about $50. The incentive has been adjusted over the years, from a low of $25 to a high of $75, depending on market conditions. “The key is targeting the right people with the right offer,” Tasset says.
The result: During this nine-year period, Central Bank of the Ozarks has seen a 7 percent average annual growth in new checking customers.
D’Amico’s key points:
–Use your data to drive your market. It does not matter what channel you are using. It’s a matter of really understanding the data that you have access to.
–Make the data useful. Append additional variables. Make sure that customer addresses are up to date.
–Don’t make assumptions based on limited data.
–Let the data guide your strategy.
–Begin with the end in mind. Track what you do. That way, you will have something to use as a benchmark that next time for conduct a similar campaign.
Walt Albro is the content editor of ABA Bank Marketing.