Customer Onboarding

By David Funsten

Ben Franklin defined insanity as: “doing the same thing over and over again and expecting different results.” Given that budgeting for next year’s marketing plan is just around the corner, how might this quote apply to the way you manage your bank’s growth?

From our experience, nearly 70% of a financial institution’s marketing budget is allocated to customer acquisition, leaving the remainder to retention and cross-selling. Financial marketing professionals spend an exorbitant amount of resources every year in creating prospect databases, discounting product pricing, and training staff—all to acquire new business and achieve the company’s expansion goals.

Yet the container of new customers has leaks in it. According to Dove Consulting, a Boston research firm, first-year account attrition averages 25% to 35%. Half of that attrition occurs within the first 90 days! So while you spend 70% of your budget to bring new customers in the front door, 30% of them drift out the back door every year.

Why Do New Customers Leave?

Financial institutions typically don’t take advantage of cross-selling opportunities. First Manhattan Consulting noted that less than 25% of checking customers were being approached for cross-sell. According to the Council on Financial Competition, customers who hold more than one product with the bank are 37% less likely to leave than customers with only a single-service relationship.

Many customers still select their financial institutions based on locations and convenience rather than products. A study by RightNow Technologies shows 73% of customers leave because of poor customer service, while the Rockefeller Corporation finds that 68% of customers leave because they think their financial institution does not care about them. So, what most of your customers really want is for you to be attentive and provide an optimal experience when they visit the bank or when the bank touches them in some way.

Savvy Marketing Directors realize that opening the account is only part one of a long-range acquisition strategy. Part two of that investment involves the short honeymoon—or as Harte-Hanks calls it, the “Onboarding” period.

Acquire New Customers the Right Way

Onboarding is a two-way conversation with new customers during a critical period in the customer lifecycle—the first 90 to 120 days. Customer Onboarding is:

• Efficient and relevant: Communications are targeted only to those customers who are considered to be the most profitable or to have profit potential. Product offerings are consistent with the needs of these customers.
• Cost-effective: Customer Onboarding supports the original acquisition investment. The strategy decreases attrition and increases the opportunity for cross-selling, leading to higher balances, improved ROI, and enhanced loyalty.
• Personalized: Customer Onboarding serves to build a caring, long-term one-to-one relationship with the customer as messages are personalized to their needs and interests, sent via their preferred channel (mail, e-mail, telephone, etc.), and delivered by a financial services representative who can answer questions and efficiently complete the transition.
• Measurable: Customer Onboarding is a profitability-based program built upon incremental results. By focusing on customer segments that need the encouragement to respond to a unique offer, companies cut costs by sending the right offers to the right universe of customers. This optimizes response/conversion levels and eliminates natural responders who would act regardless whether a campaign was undertaken.
  

Six Steps to Onboarding Success

1. Strategic Development. The first step to success for any Onboarding program is to gain a clear understanding of the ROI that the bank wants to achieve overall and within each customer segment. This figure will help determine what new customer segments to solicit, what types of offers to make, and what communications to use to maximize ROI. A comprehensive matrix of new customer segments, offerings, and communications then is developed to provide product offerings that are relevant to the customer and delivered at the appropriate time and via the appropriate channel (direct mail, e-mail, telemarketing, etc).

Relevancy and timing are the critical factors to any Onboarding campaign, so it is essential to create a library of offers by targeted customer segment that are comparable or better than what is available to the mass market. The more aggressive offers are substantiated by the potential profitability—higher balances, increased fee income, lower charge-off—of the targeted customer segment. Having an approved arsenal of offers to pull from provides flexibility and lessens the lead time of customer communications.

2. Effective Targeting. The second step to a successful Onboarding and cross-selling strategy is knowing who the customer is and how he behaves. By using modeling and data mining on account information, financial institutions can predict opportunities to get deeper and wider with customers and communicate offers that will maximize existing high-value relationships. Based upon the type of account that the new customer opens, opening balance and product features, data mining can determine the types of products that new customers would be more likely to buy. For example, if the customer is a high-balance, single-service, $30,000 CD customer, the bank is probably capturing only one-third of her wallet share. If she has a CD, she might respond favorably to other types of investments or deposit products.

To take full advantage of the marketing investment, targeting specific customers should be based upon incremental modeling methods. Incremental modeling selects customers who need additional encouragement to carry out the desired behavior. This is done by comparing mail and no-mail (control) groups of new customers and identifying characteristics that are most predictive of the accounts that require an incentive or more aggressive offer to generate additional business. Through the use of incremental modeling, financial institutions can maximize profits by soliciting customers who have both the propensity to respond to an offer and also the capacity to generate long-term, incremental profits.

One of the possible challenges to financial institutions in developing a successful Onboarding program is the inaccessibility of new customer data. For some financial institutions, customer data which is less than a month old is held in disparate systems throughout the company and it can take anywhere from 30 to 60 days before a complete and householded picture of that customer relationship is put into a marketing database. To address this information gap, we recommend populating customer relationship management (CRM) and other online systems with several key questions for the Personal Banker to ask, which then migrates the new customer into the right matrix.

3. Communications Plan Development. The third step to success in all customer Onboarding programs is a communications effort that is simple to execute, professionally designed, and clearly linked to the bank’s brand. Creative positioning is less important, so there is little need for expensive dimensional packages or flashy graphics. Typically, the customer will open anything that appears to be from his or her financial institution, you have just four seconds to communicate your offer to the customer. Direct and clear copy is essential. It must acknowledge the customer’s relationship with the financial institution, have a professional tone, and state the offer right upfront.

The primary channel to communicate Onboarding offers should be direct mail, but if possible, a variety of channels should be used. For example, if the customer does telephone banking it is best to communicate with them via telephone. If they use the online bill payer program, they will be more responsive to e-mail. Our data miners have proven that if a customer responds through multiple means, they are more responsive overall—and more profitable.

4. Commitment to Executing the Plan. The fourth step to success for customer Onboarding is to have senior level sponsorship and support for the program within the organization. Financial institutions’ marketing departments are typically structured by product; therefore it is important for all product managers to realize that customer Onboarding will generate incremental business. They need to be aware that customers selected for this solicitation should be excluded from product mailings during the same time period to avoid conflict in offers or response tracking. Branch and customer service personnel must be informed of the Onboarding communication plan and have guidelines and job aids to address questions and complete transactions.

5. Learning, Job Aids, and Coaching. Onboarding is a process, not an event. In our experience, when Onboarding communication is done in tandem with better conversation skills inside the branch, the program becomes both self-sustaining and a win-win for the bank and the customer. St. Meyer & Hubbard’s Onboarding modules, job aids such as 22261, and its overall approach to sales managers becoming better coaches are good examples of how marketing and sales can come together to form a dynamically integrated Onboarding system.

6. Measure, Evaluate, and Refine. The final step to success in customer Onboarding is to effectively track and measure results. In creating and implementing thousands of direct marketing programs for clients every year, we have found that success is in direct relationship to distribution, readership, and comprehension of the tracking results. Never minimize the importance of clear, concise, and unarguable measurement of your Onboarding program. The tracking methodology and report schematics should be established and agreed to before the mail goes out the door. No-mail (control) groups should be established to compare incremental results and program ROI. Summary and detail product purchase behavior should be analyzed by customer segment to understand not only what offers the customer responded to, but also other products the customer bought. The information on other products the customer bought (sometimes called “halo products”) is invaluable in designing additional offers and in predicting buying trends within your tracking segments.

Without a doubt, if your bank is not allocating some of your acquisition budget to an Onboarding program, you are not following through with your initial investment to achieve your growth goals. At the outset, I quoted Benjamin Franklin’s definition of insanity. In fact, this quote has been attributed to both Albert Einstein and Benjamin Franklin, but I like to think it was Franklin, as he was a banker. Among Franklin’s many accomplishments—patriot, diplomat, founding father—he was also a successful moneylender, allowing him to retire at the age of 42. Franklin understood that overlooking details now can waste huge amounts of money later. As you prepare your 2007 marketing budget, are you putting all your emphasis on acquisition marketing while overlooking the effectiveness of Onboarding? That would be insane.

David Funsten is a Vice President of Strategy for Harte-Hanks Financial Markets Organization.

Coaching Corner: Mind Traction

By Holly Sansone
Executive Vice President of Client Development

Mind Traction. What’s that you ask? It’s what most business bankers, trust and wealth management professionals, private bankers, and even retail bankers don’t have with many of their clients (and certainly pre-clients). There is lots of stuff in the gray matter between the ears of business owners and consumers. Unfortunately, when a financial need pops up in the mind of that client, it may lead them to another financial resource.

Mind Traction can be created via many channels. For example, when was the last time you looked at your own website? Is it all about you, your people, your mission, your products or does it have a resource that clients can click through to for information? What about a section where the customer can read a review about a new business book? What about a section where the business owner can read an article about how to write a marketing plan or generate some free publicity? How about a section that highlights a citizen of the week/month? That’s the kind of stuff that causes your bank to stand out compared to all the others…mind traction.

Mind traction can also occur by helping businesses with industry intelligence. First Research is continually making its 200 profiles richer and fuller. When a banker uses the Factiva portion of First Research to send regular articles of value to a client or pre-client, those touch points show value, show interest, show concern…mind traction.

Here’s the challenge. I write all the learning interventions at St. Meyer & Hubbard. Our firm and the thousands of other companies that offer knowledge improvement programs do the best we can do teach bankers to improve key sales behaviors. Unless those skills stick in their gray matter through continued use and coaching of those skills becomes constant from their managers, they will never improve. We hear “I make lots of calls” from every bank we have ever partnered with. Calls are tick marks: isolated events with little connectivity. Mind traction is created when face-to-face calls, phone conversations, e-mails, faxes, letters, web hits, and other touches rise from the “white noise” of everything else that is going on in their heads.

Register for Conversation Signposts

The third quarter is well underway. Ideas in Conversation Signposts are creating sales funnel opportunities to create a mojo for the fourth quarter and into 2007. Bankers tell us the tips they find in Conversation Signposts have contributed to some significant wins on behalf of their clients and pre-clients. If someone else at your bank could benefit from Conversation Signposts, forward this edition and have them click on the hyperlink below to register: it’s FREE! What’s not to love?

http://www.stmeyerandhubbard.com/signup.html