Last week (HERE) we looked at how deposit account tiering is used, some of the objectives that banks might employ and the effectiveness of tiering in total. As discussed last week, many banks tier without objective, without data, and without supportive marketing thus rendering the methodology worthless and possibly hurtful.
Because of tradition, we tier our deposit accounts according to size. For a typical bank, their money market accounts often have six tiers ranging from $2,000 up to $100,000. The question that always comes up is - do you have the right tiers and the right number of tiers? Are you using your tiers to drive profit giving low rates or are your tiers just serving to confuse your customer and drive up operational cost?
Take a second to think about how much of your operating, sales and marketing effort is spent acquiring new customers versus growing your existing customers. If you are like most banks, 95% of your effort is directed at new customer acquisition and not at increasing product usage. This is an area where banks can improve as when you look at conversion rates for bank products, the highest probability of sale is in those loyal customers that already use a product, just not to its fullest extent.
When was the last time you changed your fees? Most banks, when setting fees on bank products and services start and end by taking a look at what selected competitors are doing. This method, while not a bad start, will almost always result in a suboptimal setting of fees. The reason for this is not only is your bank very difficult to compare to your competition, but your competition is likely doing the same thing. In this article, we look at practical considerations for banks looking to set or revise their current fee structure.
Given that it is the start of the year, it is a common practice in banking to clean your desk to kick things off. When it comes to desk cleanliness, you have two choices: leave your desk alone or set it on fire.
According to the Community Association Institute, approximately 21% of Americans live in common-interest communities. For banks, particularly those that are in FL, CA, TX, IL, NC, NY, MA and GA (in order) on a client acquisition-cost-to-cumulative-lifetime-value basis they are one of the best clients to have. The reason for this is that they are plentiful (over 342k of them in the U.S.) they have high deposit balances, and they generate large fees with their lock box activity.
In the quest for deposits, one successful tactic at top performing banks is to target the right customers. While banking everyone in your community is egalitarian, it is also a poor use of resources. Some customers offer better returns because they use more banking services and have more deposit balances. Not to say you want to ignore some parts of your community, but why not focus more of your resources on those customers that are going to make your bank more profitable?
In a recent article we published on Where Your Deposit Balances Are Going, we might have underplayed the looming competition for deposits particularly from money market mutual funds (MMF) and online-only banks. Our article failed to highlight an important signal that has only been present since April of this year. As such, our use of second-quarter data, in retrospect, didn’t adequately capture the risk that many community banks are and will be facing.
Go to any bank conference, bank investor gathering or analyst meeting and the hot topic is the slowdown in deposit growth. As the economy keeps rolling and the Federal Reserve continues to raise rates, the topic of a bank’s increasing cost of funds, slowdown in deposit growth and the jump in liability interest rate sensitivity are on everyone’s minds.
When it comes to marketing bank products, email remains king. It is not only the preferred marketing channel of every age group, but it is the most effective as well. Of course, no one wants an irrelevant message that clogs up their day, so a bad email message also has the power to inspire the greatest backlash. In this article, we look at the data on email’s effectiveness and highlight ways banks can better hyper-personalize their message to take their email marketing to the next level.