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Sep 12, 2005
How To

How to Use Segmented Marketing to Lower Banking Customer Attrition Rates

SUMMARY: Both financial services and database marketing pros will enjoy this exclusive interview with Fifth Third Bancorp's VP DM, Research & Analytics. Discover how the central marketing department uses automated systems to help more than 1,000 branches figure out which customer accounts are in danger so they can respond before it's too late.
Account age is the single most critical factor when it comes to the loyalty of Fifth Third Bancorp's customers at its more than 1,000 US branches.

The bulk of accounts that close do so before their third month is out. "If you graph attrition rate by tenure, you'd see the slope of that curve changes dramatically around 90 days," says Katherine Black, VP Direct Marketing, Research and Analytics.

Over the past 18 months, Black's team has launched a multi-channel retention marketing campaign to lower new account attrition rates. In an exclusive MarketingSherpa interview, Black revealed how this retention campaign works.

Step #1. Direct mail program

When the campaign first launched in January 2004, direct mail pieces were mailed to new customers almost 60 days after they opened an account. It was a long lead time, Black acknowledges, but "believe it or not, it worked."

Now, however, the amount of time that elapses between a new customer signing on and the time they receive their first direct mail piece ranges from five to 21 days.

The package is a #10 carrier containing a two-color, 8 1/2 x 14 sheet with a "coupon" at the bottom that re-emphasizes the offer the new account joined for. "It kind of looks like a statement," says Black.

The specific copy varies by account but in general the copy reminds customers about free services, such as online bill pay. "We re-emphasize how to use it in the hope that they'll become a stickier account."

Step #2. Follow-up phone calls from your branch

Each bank branch receives a list showing which new accounts need to be called and what DM messaging went to them. "By and large, it's the person who opened the account who calls," Black says. "They call and just say, 'Hey, is everything going okay?'"

The bank hopes those calls will help sell additional products, but in the main, "If you're having problems with your experience, we're hoping to catch it at that point and remedy it," she says.

The customer service reps making the calls receive a list of talking points. Newer reps tend to use the talking points the most, while those who have been with a branch longest don't seem to need them.

The branch people were excited about the campaign from the beginning, says Black, because in a lot of cases it automated what they were already doing as well as giving them some reinforcement with direct mail. "Participation rates have averaged 50% to 75% in terms of contact rate. Management has really gotten behind it because retention is so important."

Step #3. Rules-based trigger program

Black's team has created an automated trigger program that evaluates all accounts daily. The program looks at about 90 rules - mostly changes in account usage such as a large change in balance or in number of transactions - that they have found to be indicative of attrition.

If there are signs of activity that indicate a higher than normal risk of attrition, Black's team automatically lets the branch know. That means another phone call from the branch. "Again, it's a very soft call, 'Just wanted to check in with you make sure you're getting quality service.'"

Step #4. Ongoing spot research

Black has also found that research conducted to find out how satisfied customers are with their banking experience is a key to keeping attrition rates low.

"We're doing a lot of talking to our customers, understanding where there are infrastructure-type issues," she explains.

The bank currently works with a company that conducts outbound calls every month to customers who have used a branch in the last 30 days. Then her team develops branch-level reporting that analyzes the results to improve problem areas and corporate-level reporting to identify large trends.

If a customer reports having a problem during the survey, the person making the call asks if they would like to have someone contact them from the bank. If the customer says yes, the information is funneled back. "We get emails daily from anyone who said they have a problem and would like to be contacted."

Most often, says Black, those calls aren't true problems. Generally, they're about bank policies that a customer may not like.

-> Three more lessons learned:

o Existing accounts not worth the trouble. Initially, Black's team experimented with extra reach-out efforts to existing accounts. "What we found was that it does work, but you lose the benefit because they're probably going to stay anyway."

o Complex products hard to market. With customers that maintain higher balances, Black thought that offering investment products would be lucrative. She found that trying to sell something complex to someone who just opened a checking account isn't as effective as selling another deposit account or something more lateral.

o Improvement in account size better than in household. "Our balance retention has improved more than our household retention, so we're doing a better job of retaining the bigger accounts than the number of accounts," says Black.

Useful links related to this article

Quaero, the company that revamped Fifth Third's marketing database, enabling these segmented campaigns and tracking: http://quaero.com/

Fifth Third Bank: https://www.53.com

See Also:

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