Chase Uses Safety Message to Promote Signature Debit

Chase Bank has recently reached out to their converted WAMU customers who are receiving a newly branded debit card asking them to "always select 'credit'" when paying for their debit card transactions, stating that the transaction is actually safer than entering a PIN.

The slightly confusing message has not gone unnoticed by industry experts who have come out on both sides of the argument around safety. According to an article in the April 21 edition of American Banker, consultants from Gartner and Aite believe that the PIN provides an added level of security, and that the Chase message may be driven more by the opportunity to generate the higher interchange income associated with a signature based transaction as opposed to a PIN transaction.


Alternatively, Marite Ferrero, CTO of France's CardSwitch Technology, stated on April 22 that he believes the pen is mightier (and safer) than the PIN since fraudsters who skim a customer's mag stripe can use the captured PIN to perform non-personal transactions at an ATM and online.

Whether the Chase message resonates with customers as much as the significant incentives and rewards offered by Chase and most other large and small banks for signature based transactions remains to be seen. From what I have heard in my travels over the past couple months, however, the Summer and Fall spending seasons will most likely see a significant uptick in mass media and direct marketing promotions to get customers to change their debit card transaction habits. With Reg E expected to negatively impact fee income, almost all institutions will need to find new ways to cover the cost of checking and related services.

Be Careful of 'Mental Opt-Out' With Email Marketing

For those who read my Blog, you know that I feel strongly that the email channel is significantly underutilized by the banking industry. Not only do marketers not effectively leverage this channel in conjunction with other direct and mass marketing options, most banks do a terrible job at even collecting email addresses in the first place.

Unfortunately, for those who have begun to use email marketing in support of customer communication efforts, some have gone to the opposite extreme by viewing email as a 'free' marketing tool without giving adequate thought to the importance of relevancy. As many realize in their daily scanning of their email in box, overusing the email channel can have a detrimental effect of the value of this channel and negatively impacting the overall customer experience.


It was with great interest therefore that I read a recent op-ed in DM News written by Mark Smith from Portrait Software discussing the mental opt-out that occurs when a company bombards a customer with too much untargeted email marketing communication, only to have the reader open the email and then quickly hit the "delete' key. The impact of multiple irrelevant emails is to either explicitly receive an opt-out to future email or to implicitly lose the intended reader's trust and attention for future communication that may have been of interest.

As Mark mentions in his op-ed, if you get a reputation for sending irrelevant communications, you are basically asking for mental opt-out. And just because a customer's name doesn't appear on the do-not-contact list, it doesn't mean they are paying attention.

As financial institutions get more comfortable with this channel, it will be important to ensure that adequate targeting is done and that the focus of each email is to positively impact lifetime customer value.

Banks Can Accelerate Revenue Growth by Managing Digital Experience

According to the March issue of the McKinsey Quarterly, digital channels can assist companies in unifying the customer experience and help move customers from interest to loyalty. In the article, "Four Ways to Get More Value From Digital Marketing", David C. Edelman discusses how companies can increase revenues through a better coordination of the digital end-to-end experience (see exhibit).

By focusing on the capture of a larger amount of Internet traffic through improved mass media key word positioning and SEO, increasing customer engagement through easy to navigate sites and targeted messaging, converting more of the digital leads to sales with strong offers and building digital loyalty through online and offline channels, revenues can be optimized.

The article discusses how marketing investments need to be proportional to the influence they will have on the consumer's purchasing decision. But any shift in investment will only yield results if the channels are integrated and coordinated and if the appropriate metrics are established linking investment to performance. This may require marketers to move out of their comfort zone and to step back from tactical, day-to-day execution and take a more strategic view of where to invest and make changes.

IAB Study Discusses Optimal Marketing Channel Allocation

Gone are the days of the Mad Men, when the marketing channels were limited and mass media was king. Today, there are more marketing channel options available and the attention of the consumer is more difficult than ever to capture.

As a result of this fragmented marketing mix, measuring the effectiveness of media spend and optimizing this spend is more complicated than ever. In fact, with the interactive channels (including social media) playing a vastly increasing role in establishing brand and product presence, and with tools like the DVR giving the consumer more control over their consumption patterns, the need to understand how to allocate budgets across marketing vehicles has never been more important.

Last week, the Interactive Advertising Bureau (IAB) released an excellent new study entitled, Interactive Advertising and the Optimal Marketing Mix where research by MarketShare Partners was presented that discusses opportunities for optimizing marketing spend in three different industry verticals - consumer packaged goods, financial services and automotive. In the study, there was a strong case made for a much better measurement of the impact of all marketing investments, both offline and online, as well as the use of incentives as part of the marketing mix. While the study makes a case that traditional advertising has somewhat diminishing returns, too much money spent on any channel was found to be suboptimal.

In addition, it was found that because of the reach and power of interactive advertising as well as the synergies with offline media, the optimal allocation of interactive media spend should be between 1.6x and 2.2x the percentage of the budget normally allocated to interactive. This increase in allocation made all channels more effective in the case studies presented. It was also found that there was a benefit to matching the media with their relative strengths - mass broadcast for brand building, print for information, radio for call to action, online for information, etc.

For the financial services case study, it was believed that the media mix selected needs to support the building of trust in the brand and that it was important that the consumer have some level of emotional connection with the specific brand they choose for certain products. Using the proprietary tool Compass from MarketShare Partners, it was found that the case study institution spent too much on mass media (TV and print) and not enough on online paid search and display. Interestingly, the statistical models employed recommended an increase in out of home marketing (billboards, bus stop ads, etc.) that support the local location. While in this case, the models indicated a need to slightly increase marketing spend for an increased marketing ROI, some of the cases presented actually recommended a decrease in spend for better results.

In most cases, the work of MarketShare Partners supports the importance of mass media to the marketing mix. Despite the growth of the internet and social media, TV is still effective. It is just that this investment in most cases is too high. It was also found that a relatively small reallocation of media spend can have a significant impact on marketers’ revenue. For example, one media optimization scenario examined in this study demonstrated a 6% increase in revenue - even after a 13% decrease in total marketing spend - when dollars were shifted to interactive.

The key takeaway from the research paper from the IAB and MarketShare Partners is that it is more important than ever to employ some type of science to your art of marketing to determine the optimal marketing medium mix. And while some generalities can be 'taken to the bank', the effective allocation of investment will vary from industry to industry, company to company and even program to program based on the objectives of your marketing plan. But with budgets limited, it is imperative that we begin to look at balancing resources to maximize the impact on revenue and profit.

Is your bank measuring the impact of different channels on your program's success? Are you confident in the measurements made around the impact of alternative media? How about the measurements around the impact of mass media? I would love to hear how your bank is allocating your marketing budget.

A special note: More than 15 years ago, I was teamed up with Wes Nichols when we both worked for Response Marketing Group out of Richmond, VA. that eventually was acquired by Brann Worldwide (now part of Euro RSCG). When we worked together, it was clear Wes was a visionary who wanted to test the limits of direct and interactive marketing that was then in its infancy. Through the years, he has led several different marketing organizations, moving more and more from the art of direct marketing to the science of media mix allocation and optimization. Currently, he is the co-founder and CEO of MarketShare Partners out of Los Angeles, a firm that leverages data and analytics to help Fortune 500 firms determine optimal channel spend as opposed to traditional survey based solutions.

Marketers Not Aligned With Consumer Marketing Channel Preferences

Technology is rapidly changing the way consumers interact. We wake up each day to a barrage of messages coming from both traditional and new media. We check our Facebook posts and text messages at the same time we watch television, read the newspaper, listen to the radio or conduct work online. 

Marketers have long recognized the shifts in media consumption that are redefining how customers absorb information and offers. However, recent studies indicate that marketers may not be in total alignment with consumers as to how the new media is consumed and their degree of reliance on various media for making buying decisions.

A new research study by Acxiom entitled, Tug of Love: The Changing Relationship Between Consumers and Brands found that more than four in five people (82%) believed they were in control of the relationship between themselves and their brands (with 'control' being defined as receiving the information they desire, when and through the media they want). This was more than 50% higher than marketers thought, indicating that 'push' broadcast marketing is quickly being replaced with 'pull' marketing where the individual is in charge of message consumption.


Interestingly, the perception of having the ability to filter messages that were either inappropriate or not of personal interest increased with age, possibly due to less messages being sent using electronic channels and due to improved targeting available for older households. Older households also benefit from having longer relationships with their brands, resulting in less bombardment of messages occurring.

Despite feeling in control, however, one in four households still say they receive 'inappropriate' marketing communications, while marketers feel they do a better job of targeting. Even with this ability to screen messages, only 27% of consumers believed their brands understood them or communicated with them appropriately. The good news is that some of the best numbers were recorded for financial services communications, even though less than half believed they were understood and communicated with well.

One of the most surprising findings in this study and in a recently published study from the European Journal of Marketing entitled, Comparing Perceptions of Marketing Communications Channels (Vol. 45, No. 1/2, 2011, pp 6-43), was that although email is well established and widely used by marketers, the traditional channels of television, radio, newspapers and to a significantly greater degree, direct mail retain historically favored attributes of trust and reliability. Conversely, some of the newer media such as SMS and mobile received much lower rankings than marketers believed they would, making these channels less powerful or accepted by consumers of any age category. In fact, direct mail was reported by both customer and prospect groups in both studies as being in the top two marketing channels preferred next to email.

In the Acxiom study, 71% of current customers cited direct mail as an appropriate way of reaching them, with 57% of prospects preferring direct mail. These acceptance ratings were far above what marketers thought who were asked the same question. Only 35% of marketers thought prospects would welcome direct mail. They were much closer with customer perception, noting that they believed 75% would be positive about direct mail. Email acceptance was 77% for customers and only 52% for prospects, still significantly higher than other newer media. In fact, only 12% of consumers felt mobile advertising was appropriate, with the figure for SMS being only 9%. As could be surmised, marketers believed the acceptance rate on these media options would be much higher. Despite the industry focus on and massive growth of interactions through social media, only 4% of consumers wanted to be reached using these channels.

Customer Acceptance of Alternative Marketing Channels (Acxiom, 2011)

Prospect Acceptance of Alternative Marketing Channels (Acxiom, 2011)

The European Journal of Marketing study dug deeper into the perceived attributes of the different media channels as determined by both the sender and recipient. As could be expected, channels that were considered annoying or irritating included SMS, phone, door-to-door and email. Consumers found direct mail to have the qualities of being informative, reliable and trustworthy, while they found most mass marketing to be informative and enjoyable.

Perceptual Mapping of Marketing Channel Attributes - Recipient (European Journal of Marketing, 2011)

'Senders' as defined by the study had a pretty close correlation with recipients regarding most marketing channels except they viewed email in a significantly more favorable light than consumers. Part of this bias may be caused by the lack of measurement between the stages of clicks and consumption of the email opened. The chart below illustrates the perception of the senders of marketing messages on the same dimensions as the above graph.

Perceptual Mapping of Marketing Channel Attributes - Sender (European Journal of Marketing, 2011)

Regression analysis found, not surprisingly, that a marketing offer is more likely to be successful if the recipient regards the information as important. In addition, higher involvement with the product or service is also more likely to result in greater engagement. Finally, it was found that receivers are more likely to be persuaded by the marketing offer in a particular channel if they find communications in that channel to be enjoyable and entertaining, and if the channel that has a reputation for reliable information. Again, this illustrates why some traditional channels such as direct mail and, to a lesser degree, email continue to perform well.

While the Acxiom study was conducted in Europe and the European Journal of Marketing Study was conducted in Australia may impact the specific numbers, but most likely dramatically change the trends found. Both of these studies and a recent white paper published by The Winterberry Group entitled, The Multichannel Revolution: New Media, New Approaches, New Opportunities also emphasized that no single channel strategy will be enough in today's multichannel world. Instead, marketers need to develop a long‐term, audience‐driven multichannel strategy, gaining insight into customer attributes, demand drivers and response cues that are the key to optimal budget allocation.


Finding that right balance of media (and having the courage to respond quickly to its changing dynamics) will
prove essential to growth in tomorrow’s competitive marketplace.

I would like to hear from you. How is your bank's media mix changing as you plan for 2012 to reflect changing media consumption patterns, shrinking budgets and greater emphasis on ROI?

The Mass Affluent: An Elusive Bank Target

While targeted by every bank, mass affluent households are difficult for bank marketers to reach. They have a distinct lifestyle from the rest of the nation in terms of media consumption, technology use, financial attitudes and preferences for financial products and services.
 


Representing a sweet spot between the mass market and affluent segment, the mass affluent segment is not homogeneous, but a diverse array of micro segments that differ from each other. To reach this group, new products and services need to be developed, new messaging needs to be used and varied channels need to be leveraged.


Three recent studies help to shed light on the opportunities and challenges presented by this highly sought after segment.

According to Nielsen, the mass affluent segment consists of more than 13 million households and represents approximately 11 percent of all U.S. households. The segment is defined as having income producing assets between $250,000 and $1M (excluding real estate) and an average household income of $105,000 in 2011. This income is more than 50 percent higher than the national average household income of $62,912. In depth analysis also shows a high correlation between income and assets for targeting purposes.

Well educated, this segment is primarily comprised of baby boomers who grew up in the middle class.  Many are over the age of 55, married and primarily empty nesters, but the segment is far from monolithic since many are in the 45-54 age range with teenagers who have not left the nest yet. The segment as a whole tends to tune out traditional marketing strategies and, interestingly, don't consider themselves to be 'rich'. Instead, they like to be under-the-radar and considered savers or conservative investors. 

Other highlights of the mass affluent consumer (based on the Nielsen research):

• Their estimated aggregated income producing assets total more than $7.5 trillion
• Two-thirds are over 55 years old
• Most are couples without kids or empty nesters
• They own their own homes
• They work in Finance, Business and Management careers, or own their own business
• They are avid readers of newspapers, trade journals, travel and home-related magazines
• They possess multiple investment accounts including 401K, IRA, CDs and hold a fixed mortgage
• They are adopters of high-end technology like digital recorders, video game consoles, smartphones and tablet devices
• They tend to shop less frequently than other groups, but spend more per shopping trip

Product Use

For the financial services industry, while the segment is rich in opportunity, it has actually shrunk over the past few years due to the economic crisis (impact on savings and investments) and because some have moved into the affluent segment. The product use of the mass affluent segment has also decreased in recent years, but is still significantly higher than the mass market. With households in this segment beginning to roll over their 401(k) funds into retirement accounts and many receiving inheritances, the opportunity is still significant. 

Financial Products by Affluence

Banking Channel Use

Channel use for this segment is also different than other segments, with acceptance of direct deposit being high as well as ATM and mobile access. As could be expected, the use of smartphones and tablets increases with income within the mass affluent segment.

Mass affluent households go online multiple times a day, at home and at work, averaging 23 hours a month online. They receive financial and business electronic newsletters and use online sites to track investments, pay bills and even register gift cards. While this segment embraces new technologies, they are still 8 percent less likely than the average consumer to access the internet using their mobile devices.

Obstacles to Deeper Relationships

According to the Nielsen research as well as new research from HNW and a report published by Aite Group and Scivantage, the primary obstacle to a deeper relationship with this segment is the perception of a 'one size fits all' value proposition offered by banks. They feel like they will be treated indifferently despite their balances and relationship potential, and that a bank is not the best option for investment services or financial advice. They also view their relationship with their bank as remote as opposed to being a 'trusted advisor'.

HNV WealthPulse Research, 2012

The segment wants to be recognized for their value and provided services commensurate with their worth. They don't want to be 'sold' products, but provided advice that is client-centric. Waiving bank fees is definitely not enough.

Despite these seemingly negative perceptions, banks still have an opportunity in today's market since the majority of traditional services are still maintained at a bank. In addition, while this segment does not currently use a bank for their investments, the relationships with their non-bank advisors are not as well entrenched as their more affluent counterparts.

HNW, Inc. WealthPulse Research, 2012

Opportunities for Banks

Because this segment also believes they are somewhat ignored by their current investment firms, there is still an opportunity for banks . . . and there are significantly more households in this segment than in the traditional affluent segment. 

“Caught between two worlds—the middle class and wealthy—the mass affluent are looking for solutions and advice, but failing to find it from advisors within the retail banking space,” HNW’s CEO Stacey Haefele said in a statement. “Retail banks have an opportunity to tangibly demonstrate worth by getting customers to consider them for their investment needs.”

Leslie Paladin, senior vice president of HNW, asserts that banks must do a better job of communicating to their mass affluent customers about their services and advisory expertise if they want to compete with wirehouse and independent advisors. She added that banks would do well to push advisors to “work within the ecosystem of the brand.”

Beyond baby boomers, the mass affluent segment also includes a growing sub-segment of Gen-X and Gen-Y consumers that have a potential for banks. While many of these households still have not accumulated enough assets to be considered mass affluent, there are some who do meet the criteria.

“Gen-Xers and Gen-Yers have been far less loyal to their investment providers over the last few years compared to Boomer and Silent Generation investors, indicating that young consumers have yet to find their ideal investment providers,” said Sophie Schmitt, Aite Group Senior Analyst, Wealth Management. “Banks seeking to maximize their ability to retain and grow share of wallet with young investors should work on growing their online investing capabilities and providing more convenient services.”

Reaching the Mass Affluent

HNW, Inc. WealthPulse Research, 2012

The mass affluent is a huge opportunity for banks, but it is not a monolithic customer segment. While the asset and the income range of the mass affluent segment is similar, reaching this segment must go beyond traditional mass media. The group is made up of voracious readers of traditional print (newspapers and magazines), but their taste in reading material reflects their individualized lifestyle. The segment is not best reached through radio. And, while they are significant subscribers to cable packages, they are much less likely to watch TV (broadcast or cable) than the average U.S. household.

Bottom line, financial marketers will need to subsegment the mass affluent based on their demographic and behavioral differences. They will need to understand the channels each subsegment uses, the products they prefer, the media they consume and the way they want to be communicated with. Because of the diversity of this segment, targeted direct communication is the best vehicle. Both digital communication and direct mail should be used, leveraging as much internal and external data available. 

The marketplace is opportune for banks to develop models to serve the mass affluent. But those firms interested will need to move quickly since competition for relationships is high and unique product and service offerings are being developed. Failure to develop a cohesive strategy will not only limit the potential for growth, but could ultimately result in the loss of relationships already in place with this segment.

Additional Insight:

Affluence in America: A Financial View of the Mass Affluent - Nielsen (2012)

The Race For Next Generation Assets: Can Banks Maintain Their Lead? - Aite Group and Scivantage (2012)

The Elephant in the Branch: Retail Banking and the Mass Affluent Opportunity - HNW WealthPulse Research (2012)