How To Quantitatively Build a Customer Base This Holiday Season (Part II)

Bank Marketing

A couple weeks ago we discussed Part I of the best tactics we learned for building a bank customer base over the holiday season. Traditionally, while the holiday season is one of the worst times to market, this campaign is designed to take advantage of bank customer behavior and put the odds back in your favor. Since growth is so difficult to come by these days, we are looking for every advantage we can get and this campaign starts the year off with forward momentum.

 

While we are fans of digital marketing, sending a series of cards via snail mail still holds a return for most banks. Since December is one of the worst months to market almost any bank product, we advocated starting early with a Thanksgiving card to give honest thanks for the support of your stakeholder base including potential customers. 

 

We also advocated building on this momentum in the New Year, so Part II comes into play by setting up the New Year’s card with the objective of wishing each customer and prospect Happy New Years, reminding them of your brand and starting the year off with a promotion. While there are a lot of bank promotions, we try to bring you ones that we have tested and can bring you a quantified return. Like last time, we break it down into steps.

 

Step 1 – Get an Offer Ready. After the holidays, we are ready to go into sell mode and nothing gets retail and business customers going than a good offer. The trick is to offer a significant discount on a service combined with a free gift. The discount can be ID theft protection, the waiving of fees on a deposit account, reduced loan fees are a free safe deposit box. Whatever it is, the goal is to build greater customer interaction and make use of your existing infrastructure. Given the lack of profit margins and banks in this day and age, the combination of both a discount and gift is psychologically important to move a bank customer to action. The gift does not have to be big, but it has to come with a story.

 

A great example is to tell a story (in a letter, blog, etc.) about the success of one of your business customers. Spend some time explaining the background and the obstacles the business owner overcame to get on the path to profitability. One of the banks told the story about a divorced mother of three that seemed to have no marketable skills other than to be able to make great pastries. She used those skills and started a business selling to local restaurants and grocery stores. The bank added value along the way by helping her fill in the gaps in her knowledge on financial matters. For this promotion, the bank hired her to do a sampling of three mini-scones.

 

The gift was pitch-perfect. At the end of the story you wanted to support the business and what better way than to stop by a branch. While you are there, the offer also included a premium checking account that had all the fees waived for the first year. Once you opened an account, you got the customized cellophane wrapped mini-scone taster that you couldn’t buy elsewhere. This created traffic for the bank, great exposure for the business and the community loved it. Total wholesale cost of gift to the bank was about $2.00. The bank could have given away a $25 gift and still not have created the emotional attachment, community support and brand reinforcement that the bag of scones did. For the business owner, she was able to tie her brand to a well trusted bank, while directly marketing to her perfect target customer. It was a win-win partnership.

 

Step 2- Create the Offer. Create a unique New Year’s card wishing all a happy and prosperous New Year. Mention that to ensure their success in the coming year, you want to start the year off right with the attached offer to save them money. It is important that the actual offer be an insert that is separate, as that will increase the probability that it gets read, which thereby helps conversion rates.

 

The offer should say something along these lines:

 

"Boost Your Finances For the New Year – January 7th through 10th only!

 

To thank you for your business [or to boost your business or help your household, etc.], [your bank] is holding a 2014 New Year’s Kick Off. For four days only, we’re discounting our popular [insert product/account] [X, 100%?] percent.

 

[if the customer already has the product, you can choose to extend them the discount or allow them to pass the savings to another friend in the referral structure we discussed at the start of last month .

 

As an added thank you, we’d also like to give you the special [insert gift] that we wrote about [refer to blog or attached story] just for coming in. [Describe the gift and why it is special.] Just bring this insert or mention “2014 Kick Off Day” and we’ll hand over your present. You don’t need to buy a thing; we’d just love to see you! (We only have only a limited number of these, so please drop by sooner rather than later. We’d feel awful if you came by and we were out.)

 

We’re offering the discount and the free gift FOR EXISTING and SPECIAL, PREQUALIFIED CUSTOMERS ONLY and just for these four days! So don’t procrastinate, or you’ll miss out.

 

Can’t wait to see you!

 

[add contact for CEO, regional President, branch manager, etc.]"

 

Note the call to action, the special targeted audience that makes the recipient feel special and the limited time offer to move the customer or potential customer to action. Time frames are kept short to create urgency.

 

Step 3 – Get It Out. Mail the offer right after Christmas, in a colored envelop that says, “Happy New Year’s Free Gift Enclosed.”

 

Step 4 – Follow Up. Hopefully you also have the email address of the target list of customers and potential customers as this offer works best if it is reinforced two times during the first week in January and at the start of the offer period on the 7th. Each of the two email messages should use about the same wording that was developed for your insert, with the extra line on top that says: “We wanted to make sure you know that we’re holding a four-day 2014 Kick Off event in each of our branches, and as one of our favorite customers [or potential customers], you’re invited!”

 

Step 5 – Ask For The Business. The logic is that most customers or potential customers will not stop by for a variety of reasons. However, the statistics on this carefully designed campaign shows that about 15% of the respondents will, which is about 10x more than what most banks get for their offers.

 

If customers come in to claim their free gift, staff needs to ask “Are you interested in taking advantage of [insert off such as premium free checking for a year]? Typically, if the customer or potential customer took the time to come in, about 25% will say yes depending on the offer.

 

Alternatively, if you feel you can’t discount your products in a promotion, then you can discuss a fee price raise, but let them know if they come in you will hold the price constant before the fees on the checking account [or whatever] go up 30%.

 

Banks need to tweak the above to make it fit their particular circumstances, but the idea is to send two cards and two emails to reinforce your community message while giving those open to doing business with you a reason to motivate at the second most susceptible time of the year - A time when many households and businesses feel that they need to take steps to get their finances in order.

 

As detailed in Part I, you likely spent $6.2 in cost and fees for the first card and likely spent and additional $5.70 for this promotion for a total of $11.90. If you send this to 1,000 targets, that is a cost of approximately $11,900. Assuming 15% respond and 25% of those follow through with an open account (loan, deposit, etc.), that is 38 new customers. Assuming these customers mirror a free business checking customer, that is about $865k of balances at an acquisition cost of about $313 per customer. Depending on the product, you might break even or take a small loss the first couple of years but then come out ahead in year three.

 

If you take the example of a premium business checking account (every bank should have one), then you would have spent approximately $313 upfront to gain a customer with a lifetime net risk-adjusted value of approximately $750. Not bad, as that is still about a 39% risk-adjusted return per year (assuming an approximate six year retention rate) plus you got your holiday wishes paid for. Further, to the extent you can cross-sell down the line; the return should be at least double for the percentage of accounts that take multiple other products.

 

If you are interested in running a similar promotion, let us know as we stand by ready to help and share our data and experience. Banks need to get more active in marketing and this well thought out way is just the program to get the New Year started with momentum. As you head into the heart of this holiday season, give this campaign some thought and if you have a better one, please share as we all need help growing our business.

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