Bank Brand Loyalty Tested With Every Move

When it comes to lifestage marketing events, new movers have always represented a significant opportunity and risk. This is because consumers who move tend to significantly increase spending in a variety of categories while also changing their brand loyalties as to where they shop, eat, buy personal services and even bank. 

But, with new home sales in 2011 being 80 percent below the peak in 2005 (making the number of existing and new home sales the lowest in almost two decades), should bank marketers still invest in this target audience? Do consumers still spend at the same rate as in the past? Is this target audience even scaleable?

Interestingly, despite the ongoing reduction in home sales, the number of people moving has steadily increased since mid 2009, indicating that consumers in transition still represent both a risk and opportunity for marketers. In fact, the New Mover Report 2012 from Epsilon found that consumers continue to spend thousands of dollars in the months following a move, representing a valuable opportunity for those marketers who can identify and effectively communicate to new movers. 

The study also found three major themes when they looked at consumer spending habits, brand affinity and channel preferences associated with a move from one location to another:

• Consumer brand loyalty is tested during a move, with new movers being twice as likely to change brands or service providers than non-movers.
• New movers have an interest in changing and/or upgrading services such as banking, credit cards and insurance after a move.
• Direct mail continues to be a highly valued channel for receiving information during a move, and is even highly valued by Gen Y consumers.

New Movers and Home Purchasers are Not Synonymous

According to the U.S. Census Bureau, roughly 17% of Americans move each year, representing more than 53 million people. Those who move tend to be younger, with the distance of the move also being greater for younger demographic segments. The only exception being those households reaching retirement (around age 65) who also are more likely to move. 

Research shows that while the economy is showing signs of slow and steady recovery, the volume of home sales continues to lag behind the highs achieved in the past. As a result, the ratio of renters on the move versus new homeowners continues to favor renters as it did in 2011. While this trend is not necessarily surprising given the scope of the housing market difficulties, marketers need to understand the difference between these two segments of movers as it relates to demographics, loyalty and purchasing behavior. The good news is that both new movers and home purchasers appear to be on the upswing.

The bad news is that as many as 33% of the people who move do not report their new address to the USPS (the central compiler of the National Change of Address (NCOA) file. As a result, targeting new movers (or even keeping a house file current) requires compiling multiple list sources including utility connections, phone changes, county records, etc.

Do Households on the Move Remain Brand Loyal?

Research shows that even when a household moves a short distance, marketers can't assume purchasing patterns will remain the same. According to the research done by Epsilon, brand loyalty is tested during a move, with the frequency of changing providers/brands being twice as likely for a new mover compared to a non-mover (some categories of services have a much higher propensity of change).

As shown below, some of the lowest levels of loyalty were in the category of professional services, where the difference in likelihood of changing brands between movers and non-movers were greatest for home insurance (3:1), auto insurance (2:1), credit cards (2:1), and banking accounts (3:1).

While a move, by itself, may not prompt a change in providers, it does appear to put loyalty to a specific brand or provider in play which indicates a defection risk for current customers and acquisition opportunity for prospects in a trade area.

When the research dug deeper into the reason for why movers changed brands, the overwhelming reason for change in the professional services category was the move itself (63%) compared to pricing (40%), service (19%) or any other feature/benefit offered.

Finally, beyond changing brands, new movers were also more likely to acquire or upgrade products and services in the professional services category. As was the case for the reason why movers switched brands, new movers indicated that the move itself as a major reason for acquiring or upgrading a professional service (59%), with pricing again being important but taking a back seat as a reason for upgrading (39%). 

What Communication Channel(s) are Best?

As consumers use more and more channels to shop and buy services, it should be no surprise that a multichannel approach is recommended to connect with new movers related to retaining or acquiring households on the move. While there is very little disparity between the preferred channel of communication between movers and non-movers, word of mouth (referrals), email and direct mail are the channels most often mentioned as the way households want to learn about products and services. 

It should be noted that recent research indicates the desire for direct mail being even more pronounced for the marketing of financial services as discussed in a number of previous blog posts including As Channel Proliferation Increases, Consumers Still Prefer and Trust Direct Mail for Financial Services Communication (December, 2011). This study also indicated a higher preference for direct mail among Gen Y consumers than for any other channel.

And while there is always a great deal of buzz among marketers around the use of social media, this channel is the least desired by both movers and non-movers. That said, social media should still be integrated as part of a marketing strategy since targeting new movers using social media will be much easier than with other channels such as mass media and email (due to list availability and accuracy).

Key Take-Aways for Marketers

As I mentioned in my previous post on the subject, Targeting New Movers for Enhanced Growth (February, 2010), the keys to reaching this transitional segment include:

• Be the first in the mailbox (or on the computer, phone or newspaper box) after a household moves to avoid clutter and benefit from early decisions
• Develop a system of immediate processing of prospects/customers to provide the foundation for being the first to reach the new mover in your category
• Measure the incremental impact of the program against your alternative acquisition/retention initiatives

For the majority of my clients, a new mover program is the foundation of their acquisition efforts, generating one of the strongest returns on investment and a steady flow of new households at a time when market growth is at a premium. In addition, a physical convenience is becoming less important for households, more and more of my clients are looking for ways to identify current customers who may be preparing for (or have just completed) a move to protect this household from attrition.

According to Don Hinman, SVP of Data Strategy at Epsilon, "An average household moves every five years on average and spends approximately $9,000 on a broad array of goods and services. By understanding at a deep level where new movers are spending and what opportunities are available to gain share of wallet, brands can create more effective, targeted campaigns to reach consumers during this transition."

The 2012 New Mover Report can be downloaded free of charge here.

Additional Insights:

U.S. Census Bureau Geographic Mobility/Migration Tables - December 2012

Generating Loans With Behavior Triggers

While loan business overall is down, the ability to quickly respond to a customer's behavior when they are shopping for a loan can be the difference between expanding a current relationship or potentially losing a customer. 

By leveraging relatively easily accessible credit bureau insight, you can deliver highly relevant communications through multiple channels to generate a steady stream of qualified and ready-to-borrow households.

As the name implies, a loan behavioral trigger lead is created when a customer or prospect is applying for a new loan or is about to refinance an existing loan. Used extensively by the mortgage industry recently due to the large number of households seeking to refinance, triggers also point to households looking for an equity line of credit, new car or even a credit card. 

These loan shopper lists are available on a daily, weekly (1-7 days old) or monthly basis (1-30 days old) and are very time sensitive since the candidate is actively seeking a loan or line of credit. As can be expected, using daily triggers is the most expensive due to both the cost of the list and the cost of daily processing/production, but these lists also produce the best results.

The lists can be customized, allowing a financial institution to select candidates based on filters such as credit score, amount of revolving debt, seasoning, LTV, monthly payment amounts, number of recent inquiries on file or any other criteria desired. Phone numbers can also be appended to the lists for an additional charge. History shows that those households with multiple recent inquiries are better prospects since they are considered 'active shoppers'.

By helping to solve for the mystery of timing, many multichannel loan trigger programs can result in marketing program performance improvement of 5x, 10x or more compared to traditional loan acquisition programs. The challenge for many banks and credit unions is developing an implementation strategy that can process and deliver communications daily and can follow-up on the leads quickly and effectively.

Loan Behavioral Trigger Process

If the program is focused on identifying current customers shopping for a new loan, there is the potential to connect with these households using direct mail, email, digital communications, mobile and a phone call. This integrated cross-channel strategy is the most effective since most institutions don't know which channel(s) their customer is most responsive to. In addition, while a phone call and email are the quickest to implement, the penetration of usable/allowable phone numbers and email addresses is limited.

Some banks reach out multiple times using direct mail and email to ensure they are 'in the mix' when the customer makes a final lending institution decision, while many financial institutions are using their online banking 'offer' pages and even retargeting strategies to keep their message front and center. Due to the time sensitivity, mobile messaging may also be effective if a financial institution has the capability to connect with a customer through texting. In all cases, landing pages are an important component of the communication strategy.

Loan behavioral triggers can also target prospects within a certain geographic area using close to the same strategy. The primary difference is the difficulty in appending as many phone numbers to the files and the hesitation of most organizations to use email for prospecting. Digital communication can still be integrated, however, using advanced geo-targeting techniques combined with SEO tools. With prospecting, integrating a landing page is paramount to success.

The chart below illustrates the potential effectiveness of a behavioral trigger program built by Datamyx, a provider of tri-bureau data for financial institutions. As can be seen the impact of such a program across product lines can be significant.

List Options

All major credit bureaus have the ability to support behaviorally based loan trigger programs and can provide lists on a daily basis. They can also allow your institution to select your candidates based on a wide selection of credit and non-credit attributes. But all credit bureaus are not created equal. Each tend to use different collection, aggregation and reporting strategies and as a result differ on their depth of data for any particular household.

As a result, many of my clients have begun to use multiple bureaus to support their event-based trigger programs. By doing so, greater data can be leveraged for both selection and modeling purposes. In fact, a recent case study by Datamyx found a 70% lift in marketing universe (scalability) as well as a 25% improvement in both response and conversion rates by using three bureaus as opposed to just a single bureau.

Benefit of Tri-Bureau List Sourcing - Datamyx 2012

Creative Messaging

As with any effective direct marketing program, it is important to use creative that clearly states the benefit to the customer as well as how the customer should respond. Since the nature of this marketing communication is in response to a overt customer activity, the communication should be direct with regards to why the customer should include your bank in the competitive set for a new or refinanced loan. If they are a current customer, you should also leverage the power of your relationship with the customer.

All channels should support each other and should provide multiple options for response. A phone number should be provided as well as a landing page where the customer/prospect can initiate the loan application process. Most importantly, since the loan can most likely not be closed online, immediate follow-up by a live representative of the lending area is paramount to the success of the program. Without timely follow-up, the customer/prospect will move to one of the several other alternative organizations that have also reached out to the candidate.

Test and Learn Approach

Behavioral trigger loan marketing requires a 'test and learn' approach to determine the most effective list and channel combinations. This is especially necessary given that the most effective trigger based data is derived from a combination of potentially dozens of credit criteria. The payoff for testing alternative strategies is directly correlated to the level of investment in sourcing, creating, evaluating, testing and modifying trigger criteria over time.

Additional Insight:

Are Your Customers 'Missing in Action' - Datamyx White Paper (2012)

Best Practices for Leveraging Mortgage Acquisition Triggers - Datamyx White Paper (2007)

Implementing Trigger Based Marketing to Drive Customer Loyalty - Genroe White Paper

Digital Marketing Capabilities Lacking At Many Banks

With continued rapid growth of both online and mobile banking, banks and credit unions need to come up with better ways of marketing through digital channels. 

The technology is readily available, and best practices can be found at companies like Google, Amazon and others, but many banks are still at the infancy stage in terms of digital marketing capabilities.

To succeed in the future, financial institutions need to have a single view of the customer across channels, be equipped with advanced analytics for predicting behavior, be able to deliver offers to customers in real time and effectively integrate social media into the marketing mix.

A just released study by Efma and Wipro Technologies entitled, 'Global Retail Banking Digital Marketing Report', found that only a few banks are prepared for the digital marketing revolution, with the potential for improvement significant at most organizations. This first ever study also revealed that social media is not yet a part of mainstream marketing and is not a key customer interaction channel for most banks.

According to Rajan Kohli, vice president and head of banking and financial services at Wipro, "Digital technologies, social media and the explosion of data are redefining customer engagement models. The CMOs that we spoke with made it clear that the role of the CMO is changing as banks adapt to the development of new channels and capabilities."

For most banks surveyed, digital delivery channels were seen as complimentary to branches, being more important for processing transactions than for customer service and advice. With this transition across channels, it is believed interactions will be more frequent, insight collection will be more prolific and communication opportunities will be more direct.

As part of the Efma/Wipro study, a Digital Marketing Capability Index was created to benchmark capabilities vis-a-vis the best in class. Only 13 percent of banks surveyed demonstrated the highest level of maturity in digital marketing. The survey measured eight different capabilities including:

• Ability to get real time single customer view across channels
• Segmentation using customer lifetime value
• Ability to microsegment
• Availability of predictive analysis
• Real time, event driven marketing
• Personalization of offers on a 1:1 basis
• Implementation of test and learn approach
• Measurement of return on marketing investment (ROMI)

While banks in developed countries scored higher in most categories, key takeaways of the research illustrated the following potential for improvement:

• One of the weakest areas for banks is the ability to get a real time, single customer view of products held and transactions occurring across all channels.
• There was a surprising lack of test and learn processes and measurement of return on marketing investment in digital channels.
• While most banks are proficient at the use of advanced analytics (such as predictive analysis), most don't have the capability to integrate this insight in real time for marketing on a multichannel basis.
• While involvement in social media is standard practice at many banks, these channels are only used for outbound marketing and monitoring complaints. Using social media for transactions and digital interactions is lagging.
• Effectiveness of 'big data' projects (in the few places where implemented) has been modest, yet several of those surveyed believe big data will play a significant role in the future.

Interestingly, many smaller banks scored relatively well on digital marketing capabilities, possibly signaling an advantage of relatively new, non-legacy IT systems. The two direct only (online) banks in the survey both scored high in digital marketing capabilities.

Marketing Spend

The marketing mix at banks continues to change in response to the growth in digital channel usage. While the research indicated that traditional advertising comprises around 50% of a bank's marketing budget, this spend was less than 50% for banks in developed countries and as low as 20-25% of the budget at some of the more progressive banks surveyed.

When asked to project what the marketing mix will be in 5 years, traditional advertising and sponsorships continued to slide, with non-traditional (digital) and direct marketing increasing due to the potential for better targeting and measurement.

The Digital Marketing Capability Index

Using data collected from the survey, it was clear that big differences existed between the leaders and laggards in digital marketing. While significant work would be needed for many banks to reach 'best in class' status, the index provides a valuable index to measure opportunities for improvement.

Review of the actual study will provide additional insight into the measurement process and weightings, but a standard 'bell curve' was the 'digital maturity' output of measuring over 100 banks from 38 different counties from November 2012 and April 2013. Sixty-two percent of the responding banks were smaller banks, while 38% were medium/large institutions. Fifty-eight percent were from 'developing' countries with 42% being from higher income, developed countries.

As can be seen below, on average, banks feel most proficient at developing predictive analysis and segmentation. Deeper discussions with the banks in the study, however, indicated that very few banks are able to do analysis in real time or link the analysis back to individual customer offers on a channel level.

In addition, most banks fell short on the ability to leverage real-time, event driven marketing or 1:1 personalization which is becoming expected by customers in the digital age.

Real Time Single Customer View

Not surprisingly, most banks have a real time, or at the least a periodic, view of retail customer product holding, product use and transactions. What is less likely is for a bank to have a view of all accounts within a household or across business and personal accounts. All of these capabilities were projected to improve significantly over the next five years according to the study.

Segmentation

Segmentation for better targeting and customer experience is not new at banks or credit unions. In fact, 90% of the banks covered in the Efma/Wipro research are increasing their segmentation efforts to take into more detailed demographic categorization and even channel use. This is important since traditional demographic segmentation (age & income) has recently been found to have limited use. (see Bank Marketing Strategy coverage on the weakness of demographic segmentation here)

The missing element in many cases is lifetime value segmentation for use in dynamic, real-time marketing. In addition, online data such as web clicks and social media is still used rarely for segmentation purposes by banks while used extensively by other industries like retailing and travel.

Business Intelligence

One of the more significant challenges for financial marketers today is the collection and analysis of unstructured data from within and outside the bank. As mentioned earlier, while predictive analysis was still found to be done in the majority of institutions, the use of this analysis to drive real-time decisioning was still rather rare. The same could be said for micro segmentation as shown below.

Real Time and 1:1 Personalization

The surprising lack of use of lifestage behavioral triggers and and 1:1 personalization of offers by financial institutions have both been covered recently by the Bank Marketing Strategy blog. The findings of the Efma and Wipro digital marketing capabilities study found the same deficit. 

According to the study (and realizing that the numbers are marginally better in developing countries), only 36% of the banks can do any real time event marketing, and only 47% make 1:1 personalized offers. 

Obviously, with more banking and credit union customers using online and mobile channels for the majority of their everyday banking, the inability to be agile with offers puts many banks at a disadvantage. 

Test and Learn

The concept of 'test and learn' has been used in banking since the early 1980s, with large credit card companies being the earliest and most well known proponents of this strategy. More recently, other large banks, such as PNC, Chase, U.S Bank, Bank of America and others have integrated this technique as a standard operating procedure within their direct marketing and knowledge management teams.

Surprisingly, the global banking study found that 70% of banks reviewed use test and learn in less than 25% of their digital marketing campaigns, with only 10% of the banks using test and learn in more than 75% of their campaigns. Possibly more disturbing for seasoned financial direct marketing professionals would be the finding that while test and learn was used for individual programs, the findings were not retained and retested as part of an ongoing process.

Return on Marketing Investment

Despite the importance of measuring the results of marketing campaigns to justify future investment and determine which programs should be continued or curtailed, only 25% of the banks surveyed measured ROMI in more than 75% of their digital marketing campaigns. It was also found that the confidence in the measurements done was not high, potentially the result of different attribution strategies.

Interestingly, several of the banks surveyed also believed that almost all digital marketing campaigns were effective and that it was not necessary to measure the impact of any one campaign result. This is obviously a faulty assumption.

Social Media in Banking

It comes as no surprise to any financial marketer that the growth of social media has realized a parallel trend to digital marketing. Facebook, Twitter, YouTube, Pinterest, LinedIn and other popular social media sites have become the focus of discussion and debate within the financial industry as to the effective use and potential value of these channels. Adding to the confusion is the fact that most social media site users skew towards the younger demographic segments (that traditionally have a lower immediate value to banks and credit unions).

Because of this doubt, and despite a great deal of 'noise' that seems to point to the contrary, the spending on social media efforts by banks is still relatively small, with less than 500,000 Euros ($637K) being spent by 80% of the banks, with a very small number of banks spending over 1M Euros ($1.3M).

1M Euro = Approx. $1.3M

Not surprisingly, Facebook continues to be the primary channel invested in by banks, followed by Twitter and YouTube. Interestingly, while user generated content was currently used least, this is an area of social media where more future investment seems to be heading.

Currently, social media is used more as a branding and broadcast communication tool and as a way to monitor customer comments and complaints. Despite some well documented successes in developing countries as well as in Australia and other countries overseas, most banks are not looking to social media as a transaction tool at this time. This may change as perceived security of these channels improves, but demand for integrated social banking does not appear to be strong in many countries.

Social Media 'Plateau' in Banking

Given the doubts surrounding the value of using social media extensively for bank marketing, the researchers involved in the Efma study believe the use of social media by banks has reached a 'plateau'. "While some banks are of course just catching up, the leading banks are still working out how to best use social channels in the future, conducting experiments, and looking for indicators from other industries," states Efma.

Other social media observations include:

• Social media is proving useful as a customer engagement tool.
• Most banks do not see social media as a strong ‘channel’ for product sales in the near future.
• Banks are considering using social media to ‘promote’ their services through advice and support, such as forums around house purchase
• Some banks are looking at how to make use social media for advocacy – using promoters to get positive messages out relating to new products or service
• Measurement of the effectiveness of spend on social media has been relatively basic, looking at high level metrics such as the number of “likes”on Facebook. (many banks are beginning to view these metrics as misleading)
• It is unlikely that most banks will try to offer transactional services through Facebook or Twitter in the near future, although some will make it possible to do small person-to-person payments to Facebook friends.

Note: A very detailed look at current social media initiatives globally is provided within the EFMA/Wipro research report available here.

Big Data in Banking

Despite a lot of noise and trade press that may give financial institutions the thought that they are 'falling behind' in the capture and use of 'big data' (no definition attempted here), the Efma/Wipro survey shows that only a few retail banks have begun to work on big data projects. Of those that have initiated big data projects, the effectiveness for increasing revenues or reducing costs is relatively modest so far.

In my travels across the country and in speaking to many marketers at some of the largest banks, it appears that most banks are using new technology to gather and analyze new 'small data' sources such as transactional data and money in / money out movements. While these would usually be considered 'structured' data uses, most banks want to maximize value of these data sources before tackling 'unstructured' data.

In other words, with digital marketing, social media marketing and big data, taking small steps may make sense before trying to 'boil an ocean'. The key is to not move too slowly . . . since the marketplace is moving at breakneck speed.

Additional Resources

'Global Retail Banking Digital Marketing Report' - Efma and Wipro (May 2013)