Advanced Reading and Writing D2

Have You Ever Been Lure to Open New Bank Accounts? 

            ‘Free toaster, i-pod, coffee maker for opening new accounts!’ ‘Offer the highest interest rate in both checking and saving accounts!’ ‘5% p.a. in saving account on the internet-bank!’ Is these marketing campaigns really attract new depositors? Due to the deposit growth is the key component of banks, marketing campaigns mainly focus on free services with sometimes less in value. In this research project, I intend to show that only a few marketing strategies – innovative promotion campaign, specialized in market niche and skilled relationship manager – can be distinctive and efficiently retain existing customers and acquire new customers by gathering information from various sources and focusing on local banks in the US. Nevertheless, some strategies of leading banks may be stated in this research as a supplementary.         

Comparing a bank to a retail store, both of them earn small and tiny margin while they have relatively high fixed operating costs. In addition, bank’s products are considered as commodity products which means that banks often offer similar products to customers. For instance, checking account, certificate of deposit, credit card, mortgage term loan, etc. Once one bank had created and launched new products to the market, other banks followed by providing additional features with the similar concepts. In some worst case, the followers may just change product’s name and provide the same feature as the leaders did. According to Bill Stoneman in Banking Strategies in an article “After Free… What Is There to Offer?”, he stated that bankers are searching a new for the secret to deposit growth, hoping they can seize on the next hot idea before their competitors do.  

I believe that, in general, commodity market does not guarantee the successful for being the innovator or product leader. Others can imitate a new idea easily. Therefore, the possibility of merger and acquisition of local or community banks is increased. This is the right time to reorganize marketing strategy in order to compete and survive in tough market competition.  

Normally they do…A conventional method that has been used for many banks is bombarding customers with mails, phone calls and promotions to cross-sell additional products. They normally designed marketing strategies based on “typical customer” or “average consumer” responses (Steve Ledford, Tim Mills and Tom Murphy in a article “Your Depositors Aren’t Average” from Banking Strategies). Bankers presume that they know what their customers want, but in fact they inaccurately segmented customer base. Then, most of the initiative promotions did not reach target market and become the meaningless campaigns. Now they change…

Today, banks focus on their deposit growth by trying a variety of tactics such as offering free checking account with incentives, building new branches, pursuing small business customers, specializing in specific market niches, bundling products and marketing promotions. Are they successful?

Some say that free checking account gradually effect higher costs while provide barely competitive advantage since every banks offer it. However, Scott McBrair from Webster Financial Corp. says in “After Free… What Is There to Offer?” that “With many people moving regularly, even in the mature markets of the Northeast, free checking is still an effective way to draw customers into the bank, where they might be sold other accounts. From my point of view, free checking account is a requirement of most financial institutions to retain customers. Besides, customer’s loyalty in the banking industry has disappeared. Switching bank accounts to the superior one for gift incentives is widely used strategy by community banks. For example, Northern Saving Bank in Elyria offered a promotion that gave away companion airfare. If a current account holder referred a friend, both of them would get a free companion ticket. The bank has run different gift promotions in the past, but this has been the most successful. In addition, Certegy Inc., an America’s Community Bankers’ Business Partner, offers the Score Card Rewards Program, a loyalty marketing program that allows debit card holders to accumulate points for travel, gifts, or bank product discounts. I believe that only the valuable incentives, not i-pod or toaster, may lure customers to open new bank accounts.  

Next common strategy in all over the world is building new branches. Spending abundance money to construct several branches is sometimes risky. U.S. Bancorp, the biggest bank in St. Louise, favorably defeat Bank of America and small rivals by increasing branches and ATM, extending working hours and launching campaign for youngsters called “Just US Kids”. As a result, U.S. Bancorp holds the highest market share in St. Louise. Besides U.S. Bancorp, two top leading banks remain their top priority in building new branches including J.P. Morgan Chase & Co. and BB&T Corp. While J.P. Morgan Chase & Co. plans to open 150 branches, BT&T Corp intends to build 60 more branches this year. They may believe that the increasing in number of branches are the power of closeness to customers who will bring in depositors.  

According to McBrair, Webster Financial Corp, he says “Keeping small business owners happy isn’t complicated. Pay attention to them. Call them. Get out and visit them,” From my experience contacting corporate clients when I worked in bank, the small business owners are willing to discuss current business situation with bankers, despite they are usually busy during the day. Consequently, bank creates brand awareness that clients will think of the frequent-visited bankers while doing business. To achieve this strategy, professional training the customer services managers or the branch manager is essentially required.  

Creating a niche market approach is effective to City National Corp. in
Beverly Hills. It often cited by analysts for its strategy of serving wealthy individuals and businesses, but not mass market retail. However, it is widely known that developing a niche approach is very difficult to success. Only an advertisement is not sufficient to bring in the target customers. Marketers expect the existing customers tell how excellent of their services to friends.  As stated in the Social Ties and Word-of-Month Referral Behavior by Jacqueline Johnson Brown and Peter H. Reingen that “One of the most widely accepted notions in consumer behavior especially in micro level (niche market) is that Word-of-Month communication plays an important role in shaping consumers’ attitudes and behaviors.”, I, therefore, consider City National Corp. a competitive player in a continuously changing environment.            

            To retain profitable customers who use the online banking services, customers rarely come into the branch. The bank, KeyBank, need to change its routine advertisement to the new channel called “Video-On-Demand” (VOD) program. According to Bill Whiley in an article “Marketing to The Invisible Man”, he says ‘Marketing must grab interest by simplifying the concept being communicated because customers lose interest quickly when they do not understand the message’. Take KeyBank’s strategy for example. Over 30,000 customers watched the 3-minutes video named “Eliminating the Pain of Paying Bills” to build strong emotion toward problems. It led about one-third of the KeyBank online customers who viewed it to sign up for bill pay program. The marketing expert suggests that VOD work best when selling to large numbers of customers who need prepurchase advice. I believe that many banks will also follow the similar trend to maintain online customers. Bill Whitley also recommends that VOD should has three appeals as follow; easy-to-understand content, compelling to watch and motivational plus educational. The VOD strategy enhance the cross-sell products which bring in profit to banks.         

Furthermore, the front line employees and the branch managers are key component to service customers. Some may called them the relationship manager. Marketing team need to build strong relationship with branch managers or relationship managers. Diane Lanier, senior vice president of Heartland Bank, says in ABA Bank Marketing magazine that “You need to know what’s going on in their areas. Communication is the key. Bring them to involve in marketing strategies helps me understand what customers really need.” It’s always true in marketing department that the front line know our customers best. In addition, technology help bankers know when to interact with a customer, based on preset triggers, can lead to improved cross-selling and stronger customer relationships. Banks are learning how to use event-based marketing to successfully sell products and retain valued customers. It’s prove to be effective approach to several retail banks. What is an event-based marketing? From Rebecca Kucha in “Event+Message can Equal Effectiveness”,  It’s a program that analyze the customer base and identify key events. However, while systems can analyze data and automate multiple processes, much of the event-based marketing battle must still be fought on the front lines. A live customer interaction could lead to the discovery of some new or changing data that needs to be captured and acted upon. Also critical is the human ability to evaluate and guide the situation. If an angry customer comes to the branch to resolve a problem, this may not be the opportune moment to suggest a new product, even if the system indicates it is. 

In conclusion, marketers need more efforts to improve and create stunning campaigns and strategies. The fast movers have advantages over the followers in an limited of time. Keeping changing its strategies along with applying new knowledge about consumer behavior is needed to persuade new customers and retain existing customers. All marketing strategies stated above are proved to be very effective in many banks. Three successful strategies are mainly used included an innovative promotion campaign, a market niche approach, and a proficient and masterly front-line employee.   

Sources:

-         Banking Strategies, July/August 2005 Volume 81 Issue #4, “Event+Message Can Equal Effectiveness” by Rebecca Kuchar-         Banking Strategies, Volume 82 (2006): 20, “After Free… What Is There to Offer?” by Bill Stoneman

-         ABA Bank Marketing, Volume 38 (2006): 34-36 “Marketing to the invisible man” by Bill Whitley.

-         ABA Bank Marketing, Volume 38 (2006): 15-21, “The Lone Marketer.” by Tanja Lian Sablosky.

-         Community Banker, Issue 15 (2006): 24, “Gift Incentives For Customers Bring in Business” by Lisa Meagher.

-         Knight-Ridder Tribune Business News, April 2006 “Banking on change.” by Gail Appleson