By Contributing Editor Dianna Huff
When asked to name a recent mailing he had received from a vendor, Sean Lydon, hesitated and finally said, “Hmmmmm . . . nothing stands out."
Lydon, VP Retail Operations, The Provident Bank, an Amesbury, Massachusetts-based community bank with $300 million in assets, went on to say, “Most everything I receive has the same feature/benefit statements. Or else it screams junk mail. I never open that stuff and throw it away immediately.”
He's not alone. Half a dozen more banking executives we interviewed for background for this Special Report agreed wholeheartedly with him. Their biggest beef: marketing targeting banks focuses on vendor capabilities and not the banks' needs.
The good news is, if you can re-gear your marketing campaigns to appeal to banking execs, you'll stand out in the crowd. Plus, the opportunity for growth (especially if you’re a company selling IT products and services) is enormous. So what works? Read on....Quick facts about banks, credit unions, and the large financial services industry
If you're one of those b-to-b marketers who considers "financial services" a niche vertical, get ready to change your mind. This broad catch-phrase doesn't appeal to many executives who work within it. Why? Because the umbrella of financial services actually comprises of four different industries. To market successfully to executives in any of these, you must approach them as a unique and special industry (even if you secretly think of them as being very similar to the others.)
The four industries are:
1. Securities and investment firms – In this group you’ll find securities brokers and dealers, investment banks and advisers, and stock exchanges (think Morgan Stanley, Fidelity, and Goldman Sachs Group).
2. Insurance companies -- Property/casualty and life/health companies and agents, brokers and service personnel comprise the insurance industry. Here you’ll find companies such as Liberty Mutual Group and Travelers Property Casualty Corp.
3. Banks: Commercial and Savings Institutions (aka Thrifts) – According to the March 2005 FDIC report “Statistics on Banking,” there are 8,975 FDIC insured savings and commercial banks with over 76,000 offices and branches in the U.S.
4. Credit Unions – The smallest group in the financial services industry, credit unions offer many of the same services as banks and even investment firms, but they are not banks. Credit unions differ because they are not-for-profit and are “owned” by the credit union members.
This report focuses specifically on marketing to commercial and savings banks.The Top Five Challenges Facing Banks Today
53 million Americans bank online, where they do everything from pay bills to research investment options, according to a 2004 survey by Pew Internet & American Life. And, even if you don’t bank online, you still may not even step foot in a bank – let alone know who your banker is. Direct deposit, ATMs, and automatic bill pay make it so you can conduct banking chores 24/7 – without help from a teller or branch manager.
Banks now offer a plethora of products including health savings accounts (HSAs), investment vehicles (CDs, money market accounts, etc), commercial and residential loans, and even student loans.
These changes have been good for banks and for consumers, but they’ve also ushered in numerous problems, many of which revolve around technology or IT.
Issue #1. “Phishing” and online fraud
According to research firm Gartner, phishers make up a growing portion of the estimated $2.75 billion in annual bankcard losses. In a phishing scam, a fraudster sends out millions of spam email messages urging recipients to “update” or “verify” their personal account information on a fake Website set up to look like the real thing. A typical phisher can victimize 25 – 50 people on single scam.
“Phishing has just about paralyzed this industry,” states Gaston Legorburu, Managing Partner of Planning Group International, a firm specializing in interactive marketing. “Banks do want to provide more self-service via the Internet because customers who bank online have great retention and lower costs associated with them. However, email marketing programs have been shut down due to phishing, and that has hindered banks’ ability to market themselves.”
Compounding the problem are slow to move banks who can’t keep up with changing scams – according to American Banker Online, banks have been trained to follow policies and procedures; hence thieves are able to exploit this weakness – and consumers who don’t install anti-virus or firewall software on their home computers.
In another American Banker Online article, “What Industry Leaders Want in 2006,” industry insiders want to see increased use of biometrics, anomalous-transaction detection systems (the same thing being used to detect unlikely credit card transactions), and stronger online banking security that doesn’t require new hardware. (Current two-factor authentications systems, for example, include those little gizmos that flash passwords that expire after one use.)
However, all of these solutions are difficult and costly to implement and detract from the customer experience. Hence, banks are hesitant to use them.
Issue #2. Internal fraud
We’ve all heard about banks who’ve lost critical customer data by shipping unencrypted files via UPS or who have had laptops stuffed with customer data stolen or gone missing. Those are the big stories that make the news. What doesn’t make the news is that 50 – 70% of fraud happens on the inside, according to Jacob Jegher, a senior analyist with IT firm Celent LLC, in an interview with American Banker.
For major banks with tens of thousands (or more) employees, protecting against internal fraud is an almost incomprehensible undertaking. Employees can easily bring in storage devices such as MP3 players and PDAs to steal data or can download Instant Messaging programs, which are difficult for IT to monitor, let alone regulate for compliance reasons.
Issue #3. Cross selling / Getting CRM to “the branches”
Despite all the negative press about CRM, banks have installed or will install these systems and understand what CRM can do for them. The problem is banks still don’t have good data and it’s not all in one place (see Issue #4). Banks also struggle with the question of how much cross selling they should be doing – and what is the risk of offending customers when a teller pushes current mortgage product of the month at them. (A recent Forrest survey of 7,300 consumers found that 29% hesitate to switch banks because their bank does not push them to buy unnecessary products.)
“Banks are becoming smarter at cross selling,” says John Lewis, Principal of Campbell Lewis Communications, a Washington D.C. based consulting firm. However, getting tellers on board and turning them into “salespeople,” aka bringing CRM to the branches, means people have to change the way they work, always a difficult proposition.
According to a 2004 CIO Magazine survey, 63% of respondents said introducing CRM required a major cultural change in their sales, service and marketing organizations. For banks, that means turning tellers into sales people, a move that many would probably resist.
Issue #4. Information silos / 360° view of customer
CRM spending among banks will continued to grow, according to TowerGroup, with sales projected to reach 2.66 billion dollars by 2008. However, banks are still dealing with information silos and still don’t have a full 360° view of the customer. Typical problems include not being able to link information via household: for example, if credit card, savings, checking and other information resides in silos, it’s difficult to understand who the customer is, if she’s married or has a family, and then effectively cross sell home loans or investment products – to her or her husband.
Banks are also focusing on “behavioral targeting” – that is, how people behave online. According to Legorburu, banks are acquiring more accounts online (ING Direct, for example, only offers online accounts) and are looking for the next generation of technology to help them measure online behavior – without compromising privacy concerns, a big issue for banks and other financial services companies.
Legorburu gives the example of a big name credit card company being the first to use an online advertiser’s behavioral targeting product. A pixel was added to the company’s online ads to see which of the bank’s customers clicked on them. The problem, says Legorburu, is now the online advertising company has that aggregated information and can turn around and sell it to other advertisers, “which is why we steer our clients away from using third parties.”
Bottom line: The technology exists and it’s robust but companies are still working out the kinks.
Issue #5. Systems integration
Depending on their needs, banks either build IT systems from scratch or buy “best of breed.” Systems are also inherited via mergers and acquisitions, legacy systems are still in use, and software is becoming increasingly more complex. What this means is bank IT departments struggle to integrate all the pieces.
To install a new system is generally a major undertaking for a bank. The system has to be customized to integrate with each of the bank’s existing systems – a process that can take months and cost tens of thousands of dollars (or more) in IT consulting fees and lost productivity.
Hence, the industry is turning to a new type of information technology infrastructure, known as service-oriented architecture or SOA. The attraction of an SOA system is it allows a new application to run on a single piece of hardware while remaining available system-wide. With SOA, banks can cost effectively install core systems or upgrades without disrupting business.Top 10 Tips for Marketing to Banks
Companies selling technology products and services to banks need to understand their messages are not getting across. Says Lewis, “Companies do nothing to differentiate themselves, they focus on product capabilities versus customer benefits, and they make claims that can’t pass the ‘giggle test’ or that can’t be substantiated.”
Niall Budds, VP Marketing Effectiveness for Quaero Corporation, a technology and marketing consulting firm, and a fifteen-year industry veteran, concurs. “Banks are conservative and numbers oriented. Experience has taught them to be wary of investing in broad projects without being able to demonstrate tangible and quantifiable ROI.”
So how can marketers (and sales people) market successfully to this industry?
Marketing Tip #1. Marketing and sales must work together
Marketing has to understand what their sales people are facing when it comes to selling IT products to banks. Sales people must deal with very long sales cycles, various constituencies (ie: IT, marketing, risk management, end users, and the C-levels), and the wariness that comes with having been over-marketed to in terms of too much hype and broken promises.
Marketing and sales, therefore, must work together in order to strategize on messaging that focuses on banks’ real pains. Marketers will also need to educate themselves on industry issues and be hip to banking lingo, how banks work, and basic financial metrics. Says Budds, “Banks want to see language such as ‘revenue stream,’ ‘EBITDA,’ and ‘bottom line’. They especially want to see numbers and ROI models. Marketing and sales people really need to understand these concepts.”
And, because the sales cycle is long, marketing needs to develop materials specific to where prospects are within it. Says Budds, “You can’t just write generic collateral at the front end and then forget about it.” Developing custom and generic collateral for each prospect at each point in the sales cycle is a very good idea.
Marketing Tip #2. Market solutions, not products
“Companies have to talk about real business benefits,” says Legorburu. “And you have to talk in a bank’s language. Banks want to know about cross selling, tracking customer behavior, and acquiring new customers. How is your product going to help a bank do that, how much is it going to cost, and how do you prove it?”
States Lydon, “Marketers and sales people really need to understand my pain points. I can tell right away when they haven’t done their homework because they have no idea what my job entails. If big banks have facing a problem industry-wide, then I probably am, too.”
“Solution selling is a somewhat clichéd phrase,” says Budds, “but it’s the only way to market to banks. Sales and marketing people need to go the extra mile to understand the totality of what banks need, and they have to be specific about the benefits and scope of impact of their proposed solution. Remember, after significant investments in CRM and other enterprise technologies, banks are quite wary of ‘enterprise’ solutions that claim to solve multiple cross-functional problems.”
Adds Legorburu, “It also helps to speak in terms of technology enabled marketing. Marketing departments are working much more closely with IT departments and want to bridge the gap between the two. These days, you really have to build technology with marketing in mind – because banks are very focused on increasing revenue.”
Marketing Tip #3. Study your competition and then differentiate your company from the pack
The experts consulted for this article agreed – companies are saying the same thing when it comes to pitching their IT products and services. Says Lewis, “Pick up any trade publication and you’ll see that many companies are tied up on what the product does versus focusing on customer benefits. The ads and the companies themselves all look the same and they speak in generalities.”
“What I want,” says Lydon, “is for companies to show me they understand my issues and pain points. It doesn’t take too much effort to read industry publications or attend a conference to get a sense of what I’m facing every day.” [Editor: He’s right.]
A practical/tactical tip: If you manage direct mail campaigns, start collecting what your competitors are mailing. Says Lydon, “I get so much mail every day and almost all of it screams ‘junk mail.’ It all looks the same and none of it addresses a real need.”
Marketing Tip #4. Carefully prepare new customers for case studies
Case studies packed with credible ROI models and quantifiable results are one of the most important methods in selling software and IT to banks. However, most companies wait until a project is completed before asking a customer to participate in a case study, at which point banking personnel say no due to proprietary or privacy issues.
Budds advises marketers to work with sales and the client to set up measurements before and after implementation. He also suggests making the case study and references part of the sales proposal.
Marketing Tip #5. Case studies must be high-level
Don’t think you can dash off a case study that gives a generic overview of problem/solution/results. Again, bankers want to see real numbers and quantifiable results written in their language. The want to know you’ve worked with other banks, that you understand the challenges of regulatory and privacy constraints (ie: Sarbanes-Oxley), and that your product minimizes overhead – meaning it is easy to support and maintain.
Marketing Tip #6. PR, advertising, and awards are key
People within the industry read banking publications, including bylined articles, which go a long way in positioning your company as an industry leader. Print ads also work in helping to establish your presence – just be sure they focus on real customer needs versus being a laundry list of capabilities. And, says Lewis, don’t over look awards programs. Having your software win an award as “best in something” goes far in establishing credibility.
Marketing Tip #7. Work to get endorsements from analysts
The way to reach executives, advises Lewis, is to get endorsements or recommendations from key industry analysts in their reports. It’s these reports that reach executive desks.
Marketing Tip #8. Prepare collateral for various constituencies
Remember, sales people have to sell to various people within the bank, including IT, risk management, accounting, marketing, procurement, and the C-suite. Generally, marketing or IT then becomes the “champion” or “sponsor” of the product and “bubbles it up,” to use Lydon’s descriptive phrase. Marketers need to work closely with sales to develop collateral and events for each group. Says Lewis,
Marketing Tip #9. Use direct mail as part of an integrated marketing campaign
Direct mail can work at some levels – but it’s best when used as part of an integrated marketing campaign. Sending a piece of mail from an unknown company is just like making a high-pressure cold call (which is ineffective at all levels). “It’s better to do three-six months of ads in conjunction with PR,” says Lewis, “then send out that mail piece. You’ll get more traction.”
Marketing Tip #10. Do *both* Webinars and real-world events
“A webinar is best for tech people but a no-no for executives, who are better served with an executive breakfast addressing a high-level industry issue,” explains Lewis. This means webinars are not a cost-savings replacement for your road show budget. Instead these are two completely separate tactics that should be budgeted and wielded separately in your marketing plan. Specific Tips on Marketing to Credit Unions
“Credit Unions are a completely different animal” says Laura Enock, CEO of CUVA, a consulting firm that works specifically with credit unions.
Remember: a credit union, unlike a bank, is a member-owned, not-for-profit institution. Its CEO answers to a board of directors whose focus is on improving member services, not the bottom line.
The number of American credit unions hovers at just under 10,000. They are becoming larger in both members and assets. They are also offering the same services as banks, including investment services and mortgages.
In terms of IT spending as it benefits members, “credit unions are ahead of themselves” states Enock, “but they’ve been very slow in terms of using IT to market themselves.” In other words, a credit union can have a state-of-the-art online banking system but still not know how to send out an email explaining the new benefit to members. And like banks, credit unions struggle with internal fraud, online fraud, and identity theft.
Marketing to credit unions isn’t easy. “They’re a tough nut to crack,” says Enock. “It’s a very small community and everything is done word-of-mouth. Getting into their district events and meetings, if you’re an outsider, is extremely difficult.” Once you make a sale to a credit union (and show success), you’re golden, but in the meantime, count on PR and bylined articles to help get your company name out there. Enock also advises marketing and sales people to network. Credit unions are usually active in their communities and attend Chamber functions and the like.
“Marketing to credit unions is definitely a one-to-one endeavor,” sums up Enock, “and marketing to credit unions should be credit union specific, because there's a pride in not being a bank. I wish I could say, ‘Do this or do that’ but the reality is, until a credit union knows your company and starts talking it up at meetings, it really is very difficult to get an ‘in’ with this tight-knit community.”Useful links related to this article
American Banker Online http://www.americanbanker.com
Campbell Lewis Communications http://www.campbelllewis.com
Quaero Corporation http://www.quaero.com
Planning Group International http://www.planninggroup.com
The Provident Bank http://www.theprovidentbank.com