10 Ways That Banks Can Build Small Business Customer Relationships

September 27, 2012

As the U.S. financial system emerges from the financial crisis and the resulting recession, leading banks are refocusing on the small business banking sector, with some banks reporting strong growth in small business loan originations.

Following the financial crisis, banks are seeking to have a more equal balance between new customer acquisition and optimizing existing customer relationships. With this in mind, here are ten tips that banks should consider in growing their relationships with small business customers.

Communicate small business commitment. Feature small business in advertising campaigns and other communications (e.g., in-branch merchandising and on their bank website) to demonstrate their commitment to the small business segment and rebuild the trust that was damaged during the financial crisis.
Target high-potential segments. Identify and target segments that are underserved or have significant growth potential. Examples include KeyBank focus on women-owned businesses, Wells Fargo’s marketing to minority-owned businesses, and Fifth Third’s targeting of healthcare firms.
Market bundles. Generate greater revenue per customer, while also reducing propensity to switch, by bundling products and services. Banks that are currently prominent in marketing small business bundles include Wells Fargo, U.S. Bank and M&T Bank.
Deploy dedicated staff in branches. As small business owners migrate to self-service channels for day-to-day banking transactions, the branch’s role to selling and relationship development through dedicated small business staff. Compensation structures for these business banks should reflect customer relationship goals. Bank of America recently hired 130 small business bankers in Florida, as part of a broader plan to add 1,000 small business bankers nationwide.
Market special offers. Leverage small business customer data to develop targeted cross-sell offers. These offers can be based on different factors, such as customer firmographics, activities, milestones (such as anniversaries) and external events (e.g., Wells Fargo markets Appreciation Offers to coincide with National Small Business Month in May every year).
Reward relationships. Develop rewards programs that recognize the totality of the small business customer relationship. A standout example is the KeyBank Relationship Rewards program, which enables the business owner to generate points from various activities and business product ownership. The program also gives anniversary bonuses and allows small businesses to combine business and personal points.
Develop customer outreach. Develop and implement a communications plan to build engagement with small business customers. Focus on key stages of the customer life cycle (first 90 days, anniversaries, etc.).
Provide information and advisory tools. Enhance your positioning as a trusted financial advisor by providing a range of resources to help small business manage their business. A number of banks are leading the way with online small business portals that combine information, advice and networking opportunities. Examples include Associated Bank’s Associated Connect, Bank of America’s Small Business Community and U.S. Bank Connect.
Market online and mobile banking. Reflect small business owners’ comfort with using Internet-based tools to manage their business by continuing to add online banking functionality, while introducing/enhancing mobile banking. Integrate online and mobile banking with other customer service channels to provide a consistent user experience. Where appropriate, incorporate sales functionality into service channels.
Sell personal financial services to small business owners. Capture significant revenue opportunities and reduce the propensity to switch by cross-selling personal banking and wealth management services to small business owners. This opportunity has been greatly facilitated by recent moves by many leading banks to dismantle their silo-ized organizational structures, which has led to improved communication and data-sharing among different business units. In addition, banks are changing compensation structures to reflect the value of generating referrals and cross-sell revenues.

7 secrets for smart use of gamification

September 10, 2012

Enterprise gamification — the application of social gaming theories and techniques in business environments — is taking off, with Gartner projecting that 70% of Fortune 2000 organizations will have at least one gamified application by 2015. However, Upstream recently reported that, while 78% of marketers believe that customers are more likely to respond to game-based marketing, only 27% have actually deployed the strategy. Reasons for this disparity include a reluctance to embrace new technologies and processes, as well as the lack of a blueprint on how to create and roll out such programs.

However, we are now seeing a broad range of firms from many industries deploying gamified programs to educate customers, train staff, introduce new products or service, as well as building greater engagement with customers, prospects and employees. Some recent examples of gamification in action include:

Health care benefits provider Aetna teamed up with Mindbloom to offer the premium Mindbloom Life Game to improve personal wellness for customers and employees.
Extraco Bank of Texas used the Bonus Banking Game to promote benefits and improve conversion rates for a new checking account.
GM’s Buick created a series of smartphone games to educate consumers on e-Assist, its fuel-saving technology.
Verizon Wireless gamified its online entertainment and lifestyle portal, Verizon Insider, which resulted in significant increases in traffic on the site.

Based on EMI’s experience in developing and deployment gamification programs for our clients, here are a few best practices to guide your success:

Clearly define your game objectives, or you’ll find it gets lost in chutes and ladders. Articulate your goals and make the desired changes in customer/employee engagement measurable. And don’t limit yourself to education…product testing, employee recruitment and customer acquisition can all be addressed with gamification.
Remember the technology baseline and limits of your audience. User experience is key to success; if your audience is all mobile, test on the full spectrum of devices and keep the real estate and graphic limitations of smartphones and tablets in mind. If you’re targeting employee audiences in locations far and wide, download speeds can be a limiting factor.
Make it fun, but not too easy. Everyone loves to win, but make it too easy and boredom will drive users away. Make winning too hard, and the game will also fail.
Positive feedback is required. Who doesn’t like encouragement? Let players see their wins early and you’ll encourage longer sessions, more attention and greater learning.
Mix up the rewards. Choose incentives based on the desired behavior changes and their value to you, and use “soft” rewards like badges and leaderboards to increase ROI. Of course, real incentives like miles, points or virtual currencies up the ante.
Ensure that players understand the ultimate aim of the game. Players may view the knowledge or experience they gain from the game as additional incentive to play. For instance, if the ultimate purpose of your enterprise gamification program is to enhance customers’ financial literacy, players may be just as motivated to play by the education they will receive as they are by the points they earn along the way.
Keep score on user engagement. Get feedback from users on their experience, and use it to improve future programs.

Banks pull back on marketing spend in 2Q12

July 30, 2012

A scan of second quarter 2012 marketing spend data for leading U.S. banks revealed that most reported year-on-year declines. These declines have been driven by both general economic uncertainty, as well as the fact that many banks have recently put ambitious cost-cutting initiatives in place. Of the 12 banks studied, only four reported y/y increases in spending. And Capital One’s spend excluding the impact of the HSBC card portfolio acquisition was also lower than in 2Q11.

The largest declines among the banks studied were at SunTrust and Bank of America.

SunTrust reduced marketing and customer development spending 30% y/y in 2Q12. Its spend for the first half of 2012 was also down 30% from the same period in 2011. In the presentation of its financials, the bank provided an update on its PPG Expense Program, which it expects to generate $300 million in annualized savings by the end of 2013.
Bank of America is following a similar a pattern, with marketing spend down 20% y/y in 2Q12, and down 19% y/y in the first half of 2012. Like SunTrust, Bank of America devoted a section of its earnings presentation to discussing its New BAC cost reduction program, which has a goal of generating $5 billion in annualized cost savings by the end of 2014.

For other banks, the declines in 2Q12 follow significant recent growth in marketing spend.

JPMorgan Chase’s marketing spend in 2Q12 was down 14% y/y. This follows a rise in 28% spending in 2011.
Citigroup reduced its marketing budget 6% in 2Q12, following a jump of 40% in 2011.

For some banks, marketing spend patterns can be related to timing of campaigns.

U.S. Bancorp’s marketing and business development spend was down 11%. However, looking at the first half of the year, spend is up 22% over the same period in 2011).
Capital One actually grew spending 2% over the same period in 2011, and it reported that spending in the second half of 2012 would increase, due to the timing of some marketing campaigns.
KeyBank increased marketing spend 6%, which it attributed to a spring home equity lending campaign.

Finally, American Express reduced spend 3% y/y, but (at $773 million) its marketing and promotion expense still represented 10% of net revenues, a much higher percentage than at other leading financial institutions. American Express’s goal is for its marketing and promotion expense to be around 9% of revenues.