By Charlie Gross and Tim Berger
You just heard the big news that a competitor in your market has been bought by a larger out-of-state bank. Subject to the necessary approvals, those customers are just a few months away from having their accounts converted to a new system, with terms and fees that could make your product lineup look very attractive in comparison.
If you sense an opportunity, you are right. Any disruption in the marketplace can result in a potential windfall. And it doesn’t have to be an acquisition. Branch closings, fee increases and changes in product features all provide a similar gateway to new business growth. Here are four steps to help you succeed when opportunity comes knocking in your market.
Step 1 – Draw Circles
Wouldn’t it be great if a list of your competition’s customers was readily available? Because such a thing doesn’t exist, you’ll need to develop a strategy to find them as best you can. Because proximity to branch locations is a key selection factor, the best place to start is with a map.
Mapping software makes this easy, but you could also do it on paper. Plot your branch locations and those of your competitor. Draw circles around each. If you are in a suburban setting, try a 3-mile radius. In a more densely populated urban setting, you’d need to use smaller circles.
Where your circles overlap the competition’s turf is the geographic footprint that you share. This is the area where going to your branch is just as convenient as going to the competition. Here’s where you’ll find a higher percentage of disrupted prospects than in the community at large. Using the map, you can identify the postal carrier routes or neighborhoods that best define the target.
Step 2 – Refine the Audience
Once the target area has been defined on a map, further refinement is possible, and perhaps necessary, if the starting number of households is too large for your budget. Simple demographic selections (age, income, dwelling type, etc.) will help reduce the size of the target universe. It’s also possible to create a highly-detailed profile of your current customers and use it to reach out to non-customers sharing similar characteristics.
If your institution is looking at the acquisition of a nearby competitor as an opportunity to bring in a specific type of customer or product, using refinement tools to focus the targeting will be useful. On the other hand, if you are looking to attract as many new customers as possible without regard for the products they might be bringing with them, think instead about casting the widest net possible. Remember, there is no way of knowing which targeted households are actually customers of the soon-to-be-acquired competitor.
Step 3 – Build a Communications Plan
In the case of acquisitions, most merger announcements usually include the target date for completing the transaction. Some acquisitions move along quickly, while others require a significant amount of time to account for special shareholder meetings, regulatory approvals, systems work, etc. Whatever the announced schedule is, use it to build your own communications timetable.
No matter how many months there are from announcement to conversion, it is important to remember that there will be customers at various levels of receptivity as this process progresses. Some will make up their minds that they need a new bank as soon as the first announcement is made. Others might wait to see what their accounts will look like post-conversion before making a decision.
Studies have shown that under most circumstances, the decision to move a checking account to another institution is not made impulsively. In fact, it can take some consumers as long as six months before the new account is finally opened. It is reasonable to assume that an acquisition would speed up the decision to switch considerably.
A solid communications plan includes being in the market often enough pre-conversion to build share of mind. Remember that conversion materials are typically sent to customers 30 days in advance. It’s at that time that everyone knows what their accounts are going to look like in just a few weeks.
At a bare minimum, potential customers should be contacted right before the conversion takes place and again 6-8 weeks post-conversion. By that time, after the customers have gone through at least one statement cycle, they will have a better idea of whether they like their current account situation or not.
Step 4 – Have a Good Offer
The financial services industry is more competitive than ever. If you are going to invest in a multi-pronged communications plan, make sure you are giving these potential customers more reasons to leave their current bank than they have reasons to stay. For some customers, the opportunity to stay with a local bank is all they’ll need. Bear in mind that your competition’s bill pay, direct deposit and mobile app services have magnified the inertia that must be overcome.
A solid offer, plus the proximity of your own branches, should help greatly in bringing many new relationships to your bank in markets where the competitive landscape is being redefined. That’s why you’ll want to have a plan in place when the opportunity arises.
Charlie Gross and Tim Berger are Senior Vice Presidents at WordCom, Inc., Ellington, Conn., a target marketing company specializing in the financial services industry. E-mail: [email protected]. E-mail: [email protected].