AN INDEPENDENT BANK TWIST ON MARKETING

Studies show the banking industry will spend close to $11B on marketing this year alone. Driven by extreme competition in loans and heavy runoff in customer deposits, independent banks have increased marketing budgets by nearly 62% over last year. As strong competition continues, projections for 2007 show banks will ramp up spending even more. As such, it is more important than ever to use promotional dollars judiciously. For those banks feeling pretty confident about their marketing, consider the findings of a recent IBM Consulting Group analysis of thousands of banking customers. In it, people were asked whether they would recommend their current bank to a friend. Interestingly, 39% said they really didn't care if they did or not, while another 37% said they were adamantly opposed. The study also found that 26% of customers think their bank does a poor job of listening to their needs and showing appreciation for their business. Clearly there is always room for improvement. Since financial institutions spend a total of about $15,900 to acquire each new business customer, monitoring marketing expenditures and effectiveness (as a component of overall cost) is extremely important. Note that about 8% of total acquisition cost is spent on direct marketing, or about $1,275 per new customer. Overall, banks spend an average of about 0.2% of assets on marketing, or about $200k per year for a $100mm asset institution. For banks looking to reduce marketing expenditures, one effective method may be to start a "friend-to-friend" marketing program. This grass roots effort is designed to break down "us" and "them" barriers between employee and customer. The success of this company-wide approach finds ways to better integrate employees into the community in order to be more effective. In particular, the approach asks such question as: 1) Are customers being treated as employees would treat their friends? 2) Do employees get beyond warm welcomes and small talk with customers in order to deepen the relationship? 3) Do employees consistently ask questions to learn what customers know about the bank and its products and better understand what they might need? 4) Do employees give customers the same personalized attention they would give their own friends? 5) Are employees supportive of each other in these efforts? Building mutual trust and delivering results is the key to success. This program helps build rapport and serves as a catalyst for repeat business, positive word-of-mouth and better customer cross-selling (to increase lifetime customer value). As customer loyalty increases, employees' jobs often become easier and more rewarding. This enhances employee satisfaction, which, in turn, further enhances customer satisfaction and reduces employee turnover. With all the money being spent on marketing, isn't it nice to find out that with a little training, a program of good old fashioned listening remains one of the most effective customer acquisition methods?