About 10 years ago, Umpqua Bank began to realize that younger bank customers thought they never needed to go into a bank branch. With online and ATMs, why bother walking into a branch?
However, banks still rely heavily on retail foot traffic to increase new accounts, cross-sell additional services to current customers and to build the kind of person-to-person relationships that can dramatically boost account lifetime. If you've met your bank branch reps in person a few times, you're less likely to switch elsewhere.
So, at a time when most banks were focusing on getting customers to do as much of their banking online and through automatic teller machines as possible, Umpqua was opening its first bank "store."
Only problem -- how to banking stores appealing to the younger generation?
"If Nordstrom started working like bankers, they'd move all inventory into a back room, put up posters and brochures, and hope for the best," says Lani Hayward, EVP Creative Strategies for Umpqua Bank. "We believed that if you put out your products in a way that can be browsed, people would browse and shop. But what does a checking account look like?"
Umpqua's first "next generation" bank stores had fewer desks and more associates on their feet, walking around talking to people. There were areas to read newspapers, computer kiosks for online access, and free special-blend coffee.
There were also retail-style product displays. For example, to illustrate a home equity loan, the bank had a display with a ladder, buckets of paint and paintbrushes to show that a home equity loan could be used to fund a new coat of paint for the house.
People flocked in, looked around to be certain they were in a bank, and browsed. Umpqua began adding stores like crazy and went public (NASDAQ:UMPQ) in 1998.
But, like any good retailer, the bank needed to evolve to keep the concept fresh. Focusing on the culture of the bank (customer service and a unique experience), Umpqua began to launch "Next Generation" stores in 2003 and continues to refine this Retail 2.0 concept in 2006.
The constant evolution has worked: Umpqua has grown from six stores and $150 million in assets in 1995 to 95 stores and $5 billion in assets today, and it was named Top Retail Bank by American Banker in 2005.
Hayward talked to us about the tactics the Next Generation team is using in order to continue to grow.Tactic #1. Unique store design
When Umpqua planned the first Next Generation store, the team considered three outside designers. One specialized in bank design, so was written off immediately. The other had a cookie-cutter approach. The winner of the account called out of the blue asking to work on the project.
Certain features from the original stores were important to keep, such as the Umpqua-blend coffee, internet access, free newspapers and magazines and the "un-bank" look and feel.
But they also wanted to create a cozier, more living-room feel to the bank. With that in mind, they hung the newspapers café-style and put the magazines on library racks.
Displays change often, as well. For example, the team has created a display of business books on bookcases (as in a bookstore). When people open business accounts, they get a shopping bag and their free gifts (a bag of coffee, a hat, etc.), and then they go browse at the shelves and choose a book to take along with them.Tactic #2. Focus on local community
"We needed to give people a reason to come in," says Hayward, and one way to do that is through community projects. "We have a commitment to being connected to the fabric of the communities we serve."
-> "Discover Local Music"
The team reviewed music of hundreds of local artists to find the best up-and-coming musicians from the Northwest, then worked with them to get recordings online at UmpquaMusic.com.
New customers, or existing customers opening new accounts, were given passwords that worked on the music-on-demand website. The customers could preview available tracks and choose their own custom mix of local music. The songs that they chose were put on a CD and sent within three business days. Customers could also create their own CDs at any time for $8.
A portion of the Discover Local Music proceeds benefit the Ethos Music Center, a multicultural nonprofit organization dedicated to promoting music and music-based education for Oregon's youth.
-> Use local merchandise as premiums
"We're finding people who are creating great products locally, good stuff that fits our environment," says Hayward. While most banks order from large distributors for their freebies, Hayward's team offers those locally made products as gifts and also sells them in the store.
-> Treat local employees better
When Umpqua acquired a northern Californian bank chain with about 30 locations in mostly smaller towns two years ago, lay-offs were inevitable. "It could have been devastating," says Hayward. But Umpqua made sure that everybody had jobs, either with the bank or elsewhere.
Because customer service is such a vital part of the community of the bank, Umpqua has employees professionally trained. "Obviously, the Ritz Carleton is known for attention to detail and customer service. We now have them come up to our locations and train each and every associate."Tactic #3. Not your normal bank advertising
Most banks, when they advertise, talk about rates and products. Umpqua underscores about the community aspect of the brand. (Link to ad samples below.)
When the bank does advertise products, it's done in an unusual way that encompasses cross-channel marketing. For example, last year when the team wanted to advertise basic checking accounts, they created a campaign for joint checking that included a man and woman, dressed in tux and wedding gown, driving through town in a convertible, waving and smiling. The sign on the car said, "We just got joint checking."
Simultaneous ads on the radio were created to sound like a man asking a woman to marry him; instead of marriage, he proposes joint checking.
Hallmark cards were also tipped into 'Portland Magazine'. When the magazine was opened, it was meant to look as though the reader's husband or wife left a card inside. The card read, "Will you join me in a joint checking account?"
"It was a big spoof; it got a lot of people laughing," says Hayward.Tactic #4. Neighborhood locations (instead of strip malls)
In heavily populated areas such as Portland and Sacramento, Umpqua has less than 2 percent market share. "In terms of being convenient and having the brand recognized on every corner, we have a ways to go," says Hayward.
But one way to further brand recognition in a short amount of time is to create smaller footprint stores in very specific metropolitan neighborhoods.
"We're putting in a 1500-square-foot store in an area where people are walking downtown for breakfast or dinner," Hayward explains. The bank is being embedded in the communities in a way that make them an identifiable part of a neighborhood. "We'll probably be in locations next to Whole Foods, Starbucks, chains that have a mystique about them. Not in strip malls with Burger Kings." Tactic #5. Word of mouth marketing stunts
When Umpqua acquired the banks in the Northern California communities and changed their names, the team wanted to generate positive buzz.
"We created an ice cream truck. It went around playing great music, not the normal stuff that drives you crazy." The truck drove through neighborhoods and work areas and handed out free ice cream for a couple of months. It was so successful that now, at every new opening, the truck comes to the area for a few days or weeks (depending on the size of the town).
Often, a loan officer at a local Starbucks will buy the coffee for everyone in line behind him, or will pick up somebody's tab at a restaurant. "That creates a lot of word of mouth, like, 'You wouldn't believe what happened today,'" Hayward says.Useful links related to this article:
Creative samples of Umpqua ads and store photos
Ziba Design, the design company that helped create the first Next Generation store:
Discover Local Music program: