Financial Marketing and Cross Selling Blog
For years the financial services industry has researched over and over again what their customers are looking for. What are the most important attributes to the relationship they have with their customer? What promises would be most likely to attract new customers? The word service is always at the top or near the top of the list. So what did the marketers and ad agencies do? They all claimed to have great service. But that misses the boat. People define service differently.
When I was in Citibank’s credit card marketing group in the late 1980s we realized this. We found that we needed to define service in our marketing communications in order to make it a meaningful benefit. We were astonished to find that the strongest relationships were actually the ones that had previously had a problem. An inaccurate statement suddenly became an opportunity. It was the handling of the problem that built the stronger bond. A problem that was well handled was like glue to the relationship. We learned quickly and soon our TV commercials were demonstrating real people getting their problems solved by Citibank. We had defined service in the consumers mind and clearly put ourselves as the leader in providing that important benefit.
Dodd Frank legislation will undoubtedly translate into less fee revenue. So how are banks going to make it up? With rates so low and flush with deposits, many banks are focusing on lending, especially to small business. But right now there doesn’t seem to be enough demand from qualified borrowers to make up the revenue shortfall. Once again the industry is talking more and more about the need increase revenue per customer, cross selling, building share of wallet. It all means the same thing. The real challenge is that this need is coming right at a time when cost controls are forcing budgets down, including marketing budgets. That means that bank marketers must find more efficient ways to market.
According to a recent article entitled Piloting for Multi-Channel Marketing by Alan Schiffres and Jim Bramlett of the bank consulting firm Novantas LLC, about 25% of retail bank customers almost never visit a branch after opening their first account and 50% are big users of remote channels instead of a branch. So how is a bank supposed to increase its cross selling when fewer customers are coming into the branch? That question is especially pressing now, when cross selling is seen as a necessity to shore up fee revenue lost under the new Dodd Frank regulation.
There is a way. Let’s think about how educational information links to a sale. Imagine that you want to build a fence in your back yard. It’s likely that you will seek information on how to build the fence before you buy the fence posts. Lots of top retailers are well aware of that. It is why Home Depot has educational information on fence building not only in their store but on their website where they can catch your eye while you are looking for help. They know quite well that if they provide the helpful information that you are looking for, you are likely to come to them to buy the fence posts.
My career in marketing, product development and targeted customer promotion has been about storytelling; how to get a message out, to romance a product, to turn a want into a need. From publishing (Vogue, Conde Nast Traveler, Vanity Fair, The New Yorker) to film (New Line Cinema) to television (Discovery Channel, Travel Channel) to catalogs (Harry & David) , and working in every available communication channel, I’ve come to understand that marketers need to find something truly unique to talk about, a differentiator for their brand in the clutter of their industry, and romance that difference to the max.
Joining the community banking industry in 2008 was an eye opener. Here was an industry with limited product differentiation, trying in some ways to differentiate themselves from the big banks, but just as often following the big bank’s lead on pricing and products. Read more >>
The impact of life event marketing in the financial services industry has been known for years. When someone gets married, they may be looking to buy a house. When someone has a baby, they may be in the market for life insurance. When someone changes jobs, they may be thinking about rolling over their 401(k) plan. And when someone is getting into the retirement zone, lots more comes into play; retirement income, rollovers, and on and on. A recent Forrester Research study of 26,000 online households shows that consumers are 43% more likely to buy a financial product around a life event.
Let’s start with a definition. What is the mass affluent market? Various financial organizations define it differently, but I will use a definition and data from Forrester Research published in a March 10th article in The New York Times by Nelson D. Schwartz entitled, “Got $100,000? Have a Cookie: Banks Try Luring the Top 10%”. Forrester defines the market as those with assets between $100,000 and $1 million, not including the value of their home. They estimate that there are 40 million people in the US today that fit into this category. Forrester also estimates that a third of all retail investment assets are held by this mass affluent market segment.
That’s where the money is and that’s where banks want to sell more. As Schwartz says “The aim is to sell higher-margin products like mutual funds, stocks and retirement advice to depositors who have traditionally looked to their local bank only for checking and savings accounts”. He cites some research done by Pinnacle Financial Strategies of Houston that supports this effort. It says that a study of a West Coast institution revealed that they earned $1,193 from a typical mass affluent household while only $630 from a mass market household in general. That’s a big difference; nearly double.
We all know the phrase “you only get one chance to make a first impression.” This is never more true than with banks and credit unions today. Based on research completed by Truebridge, Cross Selling Success Factors, one of the biggest problems that financial institutions face when it comes to cross selling is that they are seen narrowly; as the place to go for transactions involving deposits and loans and not much more. How much easier would it be for banks and credit unions to cross sell if they were also seen as the place to go for so many other financial products that people buy as they move through life from sending kids to college to living in retirement. Research shows that people only buy an average of two out of ten financial products from their bank or credit union. That’s because these financial institutions often fail to take advantage of a golden opportunity to change perceptions.
At Truebridge, we have done research to identify the barriers to cross selling and published the results. In a nutshell, we identified the need for banks to shape their image as the place to go for more of their customers’ financials needs beyond deposits and loans. We also highlighted the fact that banks needed to do a much better job in creating referrals. There are several ways that these barriers can be overcome. Why aren’t banks attacking these problems with more force?
A recent conversation with the president of a community bank gave me a good understanding of their points of pain and it sets up a real catch 22 for the whole industry. The low interest rate environment has squeezed margins and driven down revenues forcing expense cuts. On top of that, new regulations are adding to the cost of banking. What is needed most now is revenue growth. But growth takes money. Money that is not there to spend. Read more >>
According to the recent 2012 Bank and Credit Union Financial Marketing Survey developed by Jim Marous of Bank Marketing Strategy and Jeffry Pilcher of The Financial Brand, cross selling is at the top of the list of marketing priorities. With fee revenue under pressure from new federal regulation, it is not surprising that generating more revenue per customer is so important. This is nothing new. Looking at this year’s Grant Thornton LLP’s 18th Annual Bank Executive Survey, along with previous years’ surveys, you will see that organic growth (cross selling) has been a top priority for quite some time. Read more >>
In a recent article from the Financial Brand, Datamining Social Media Profiles for Actionable Results, the first paragraph talks about the biggest challenge to cross selling. ”If a financial institution could know that one of its customers just got married…Or had a baby…Or got divorced…Wouldn’t those life events create selling opportunities for that financial institution? If a bank or credit union understood its customers’ life situations, wouldn’t they be able to market specific products and services centered around people’s unique needs? If only there was a way to figure out what was going on in people’s lives…”
As the title of the article indicates, it went on talking about data mining as a way to see these customer needs.