6 Keys to Keeping Your Customers. A Systematic Approach to Onboarding

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CUSTOMER INTELLIGENCE. MARKETING RESULTS

6 Keys to Keeping Your Customers

A Systematic Approach to Onboarding

Adam Isler,

Client Services Director, PNT Marketing Services

John Purcell,

Marketing Director, ImageConnex

July, 2007

Industry: Financial Services

Segment: Consumer finance, retail banking, credit union Pub. No. 2007005

Tags: Onboarding, loyalty, customer retention, customer attrition, Isler, Purcell, PNT, PNT Marketing Services, ImageConnex, database marketing, customer communication, direct marketing

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Abstract

Almost a third of customers abandon new banking relationships within the first year; half within the first 90 days. Given the cost of new customer acquisition, financial service companies of all types and sizes are attempting to rectify the situation by getting closer to customers as soon as they “join,” typically with a series of communications, at pre-determined intervals, designed to draw the new customer in.

Our experience shows that simply sending customers welcome notes and cross-sell solicitations at regular intervals is not enough, and may even be counterproductive. Furthermore, all customers are not the same: they need different communications through different channels at different times. In this whitepaper, banking expert Adam Isler and Marketer John Purcell describe a systematic approach to reaching the right customers in the right ways at the right times for successful onboarding. The system starts with program planning and objectives, includes program execution, the actual stream of

outgoing communications and incoming communications, as well as robust

tracking, analysis and measurement, all underpinned by a flexible and scalable customer marketing database.

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Why “onboard”?

Customer attrition is a leading issue in retail banking, especially in this era of free checking which lowers the barriers to switching.

Studies have shown that customer attrition is double ordinary levels in the first 90 days following account opening and that 43% of all cross-selling occurs at the point of opening1_.

Given the cost of new customer acquisition financial service companies of all types and sizes are trying to meet this challenge. “We must do a better job of bringing new customers on board,” they agree – hence the term “onboarding” and many have devised programs that attempt to lock new customers in.

What are the strategies and tactics being used to accomplish this? Here are three popular approaches. They are not mutually

exclusive – they overlap somewhat and different companies pursue different combinations of their elements.

1. Loyalty and reward programs. These programs, copied from the travel industry, offer incentives to customers based on their usage of the bank’s products. Starting with credit cards, rewards points have now been extended to debit card usage and other behaviors.

2. Rewarding “sticky” behaviors that tend to raise the barriers to leaving. These include signing up for services like direct deposit, online banking and bill pay services which research shows bind customers more closely to their financial

institutions.

3. Communication-based onboarding programs. These typically include a range of communications to customers throughout the first 90 – 120 days of the relationship with a variety of welcome and cross sell messages.

While each of these approaches has its place and its value, this white paper will look at the components of successful

communications-based onboarding programs, as the critical beginning to building the long-term loyalty that is the goal of numbers one and two above. Here are some examples of basic communication programs we have seen:



 A “Thank You” postcard sent to customers of all new accounts

1_{Source: BAI:/Harte Hanks, quoted in Bank Systems & Technology, February 1, 2007:}

Customer attrition is

double normal levels

in the first 90 days

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 A follow-up survey on satisfaction with the account opening process either by phone, e-mail/web or mail



 Cross-selling communication through various channels and

media

For example, some institutions simply send out packages offering a range of their services under a

“Welcome to our Bank” banner. Or they may not even bother with the welcome message and simply start cross-selling. The old saw, “there’s no such thing as bad publicity,” doesn’t apply to customer communications. The types of generic communications listed above risk alienating the new customer for a number of reasons:



 The customer is annoyed to be receiving what they consider

junk mail or spam



 The customer wonders why they weren’t made these offers at the time they opened their account. “Did I get the right account for me?” they may ask themselves.



 The customer was offered these accounts and services at the

time of opening and rejected them. “Why are they being pushed at me again,” they wonder, “Didn’t they note my lack of interest in these things?”



 The generic, universal communication displays a lack of

knowledge about the customer leaving him or her apt to infer that the real concern is generating sales rather than caring for the customer.

The Key to Successful Onboarding Communications

It might seem obvious, but the key to successful communication is to know your customer in meaningful ways that go beyond the required KYC (Know Your Customer)

regulations. Whatever the medium, whether postal mail pieces or e-mail, reflecting back to the customer that you’ve heard what they’ve told you about themselves and their financial needs and that you

understand it is the key to engaging them in an ongoing dialogue that builds long term loyalty.

Unlike publicity, all

customer communications

are not necessarily good

communications

Know your customer is

the first commandment

of successful

communicators

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And what they’ve told you about themselves is far more than what they say explicitly at the account opening session. All of their choices about the use of their account, and their transactional behaviors from the moment they open the account, represent valuable information you can use to understand their preferences and anticipate their needs. For example, what are the following customers telling you about their preferences and needs?



 A customer who uses on-line bill pay weekly and ATMs for

deposits as well as cash withdrawals



 A customer who makes bi-weekly pay check deposits at a teller, has never registered with your online service and averages 1 ATM cash withdrawal per month



 A customer who calls customer service weekly to check their

balance but never uses your automated voice response system.



 A customer whose check-writing volume has dropped from 15 per month to 1 per month, whose monthly average checking balance has dropped from $800 to under $50 and whose linked savings account balance has dropped from $542.16 to $2.16

As these somewhat obvious examples show, these are very different customer types. It’s unlikely that e-mail will be the best way to communicate with the 2nd_{or 3}rd_{customer above, but will be}

for the first. The third customer is a good candidate for the phone channel, probably not the internet. And doesn’t it look like the last customer’s about to leave you? But to get to these judgments you need to be tracking this available information and able to pull it together meaningfully – you need a customer understanding and communication engine.

6 Components of the Communications Engine

Successful customer understanding and communications arise from a systematic approach. The 6 key components of that system are the following:



Program Design – have a clear strategic objective and plan for your onboarding program: who are you communicating with, what you hope to accomplish, and what is of interest to your new customer?



Customer Database Management – at the heart of the system is your customer database. The database allows you to understand how your customers use your services, what their communication preferences are and what’s changing in

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their relationship. It also provides the measurements and metrics for tracking success.



Program Execution – includes development of the creative marketing materials, message content and determines the proper communication channels. This is where the program determines who to contact, identifies the communication triggers and cycles and ensures the correct, relevant message is sent.



Outbound Communications – managing the flow of

communications, producing and mailing print pieces; e-mail creation, administration, and tracking.



Inbound Communications – making sure the multiple

channels of inbound customer communication are open, that customer responses and information are captured in

meaningful and useful ways to continuously improve the cycle of communication.



Reporting, Measurement and Analysis – Keeping track of the system and the onboarding effort are critical to refining and improving results; analysis tells you what’s working and why. Remember, you are what you measure.

The illustration below shows how these 6 components create a virtuous circle of success starting with design and closing the loop with measurement and analysis, all underpinned by robust

database management to provide customer data integration. Such a design provides you with a system that is constantly capturing new information and processing the feedback to make each client communica-tion more precise and relevant then the previous contact.

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Program Design

Each of these components involves several steps or processes themselves. For example, Program Design

includes not just the development of the strategy but also

establishes program goals, identifies the business rules that drive communications and the development of the creative plan. Customer Data Integration

At the heart of all the onboarding capabilities lies customer the data integration engine. The customer database should hold all the data

necessary to perform preliminary analysis for the Program Design, contain data for developing customer segments and create the logic used in the Program Execution stage. The database should also generate the outbound communication mailing and

calling lists, capture information from inbound customer contacts and provide the basis for all tracking, measurement and analysis. Most financial institutions possess customer database facilities to handle many of these functions. However, very few of them are able to integrate them effectively into the seamless, customer understanding and communication program we have outlined here.

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Therefore, the quickest way for many medium-sized branch banks and credit unions to implement their onboarding program is by outsourcing the database and print/e-mail management to expert 3rd_{party firms with this specific expertise. Stronger}

vendors with broad industry experience can leverage their work with multiple clients to provide best practice consulting and recommendations.

Program Execution involves all the business rules that determine which messages are sent to which

customers, when they are sent and how they are sent.

Some messages will occur on a basic

calendar, for example, greeting a new

customer and

welcoming them to your institution may be

scheduled to occur 5 –

10 days following account opening. Other communications may be triggered by something the customer does, regardless of when it occurs – for example a customer’s first use of online banking or a large deposit or withdrawal. The key to effectiveness is

communicating with the customer consistently and in a timely manner. Choosing how to send the message may be based on the customer’s explicitly declared opt-ins or opt-outs at the time of account opening or communication method may instead reflect preferences they display in the pattern of their communications with you.

Outbound Communications

Effective customer messaging is often dependent on using multiple

communication channels. Programs that limit their messaging to only one or two media channels risk missing

opportunities because they are unable to capture the customer’s attention long enough to communicate the message.

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By combining print, direct mail, web, email, text messaging, voice and in-branch conversations, you can optimize the opportunity to have your message “stick” with the customer.

According to the DMA’s “DM Consumer Response Study,” the number one reason given for not responding to direct marketing was lack of timeliness (over 24%); a close second was that the piece was not relevant and lack of personalization came third2_.

Success, then, requires that messages be delivered in the new customer’s preferred manner and that:

1. the message is timely, 2. it is relevant and

3. the message feels personal.

The actual execution of many of these components can profitably be outsourced to a vendor who has the experience in financial services and understands how to integrate their print management and e-mail management with your customer database applications or CRM program, and can do this while maintaining the quality levels to match the brand image.

Inbound Communications

There are two important things to remember about inbound communications.

The first is that not all of them are explicit customer attempts to communicate with you. But if you look through your customer data, at your transactional data and your channel data, you will see that your customers are telling you a tremendous amount about

themselves, their preferences and their needs. Ignore these silent, implicit communications and you risk missing a tremendous

opportunity.

The second lesson is to keep the channels open. Economist Albert Hirschman in his well known book, Exit, Voice and Loyalty3_,

documents how the failure to hear the customer’s voice, or even to provide open channels can lead to customer exit – so make sure you create the channels to capture customer responses to your

2 _{Timing Key for Consumers not Buying via DM: Study, Lisa Ca mpanelli, DMNe ws, June 20, 2007:}

3 _{Ca mbridge, MA,}

Harvard University Press, 1970. ISBN 0-674-27660-4

1.

Customer communications

are not always explicit

2.

Make sure the channels

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communications and are able to respond flexibly and appropriately. By using automation to enter these responses into the customer integration engine, a communication cycle is created that allows you to consistently improve your segmentation and improve your ability to deliver increasingly relevant messages in the future. Reporting, Measurement and Analysis

Measuring results creates a feedback loop for ongoing, continuous improvement of the program. Components include the

summarization of program results plus a range of other analytic possibilities.

Vintage analysis groups customers by the week or month they opened their accounts and measures the changes in these groups’

relationships over time in discrete intervals. This allows you to measure progress against typical onboarding goals like reducing attrition in the first 3 months, increasing cross-sell in the first year or increasing on-line enrollment penetration. From a business perspective it’s clear that measuring the ROI (Return on Investment) of the program itself will be critical to maintaining funding. To do so, requires that the appropriate metrics be selected and the right measurement methods be in place. Both the selection and type of metrics should have been clearly identified early in the process during the Program Design step.

Vendor Selection Criteria

Choosing a vendor to provide these services can be daunting, given the highly fragmented state of the industry and the

sensitivity of a program designed to manage the onboarding of your new customers. Be sure you select a partner or a firm that shares your customer values. Also, many firms offer just one or two of the

components listed above in isolation. They may do it well – but if that’s all they do and they’re not concerned with your overall onboarding and customer intelligence needs, you may have difficulty

Make sure to choose a

“partner” rather than a

commodity vendor of

point solutions

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implementing the type of comprehensive integrated program we’ve been advocating. Beware these “point solutions” and look, instead, for a partner who can add value to your whole program. Here are the types of firms you will find providing some or all of the components described in this paper:



 Large CRM and software vendors. Typically these vendors

will want to sell you expensive systems that promise to deliver on all of the above. Not only do these solutions typically require a large fiscal investment, but they also require skilled personnel to run and maintain. Be sure that you don’t accept a software solution without a clearly defined picture of what implementation will look and feel like for everyone in your business and your customers.



 Printers. Increasingly printers in the direct marketing space

are trying to increase their value and their sales by

expanding horizontally into some of the functions described above. If you’re looking at a partner whose core competency is printing, make sure you evaluate their ability to

incorporate other media such as voice, text messaging, and e-mail. Also be sure their offering capably creates and manages a database that intelligently drives unique

communications for each customer that are timely, relevant and desired.



 Integrated Marketing Solution Providers. These firms

truly offer customized, integrated solutions for programs like onboarding. The better firms have deep roots in customer data management, understand your strategic objectives and want to partner with you to craft a flexible program that meets your needs now and will change or scale to meet your needs in the future. Typically, they provide an agency-like approach, offering only those components you can’t already do better yourself. They shouldn’t try to sell you product, but instead will seek to foster a mutually beneficial long-term relationship that delivers real benefits to your firm and your customers.

No matter which type of company you decide to evaluate as a potential Onboarding partner, make sure to understand their experience in working with retail financial companies.

Databases become smarter over time with continued use. You are likely to find a longer journey to success, if your partner needs to learn your industry as well as your organization’s business.

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Summary and Conclusions

Onboarding is an important capability for retail financial services companies, because the industry suffers from falling barriers to customer exit and a highly commoditized product offering. By drawing customers into a personalized series of two-way

communications, it’s possible to develop the kind of relationship with a customer that fosters long-term loyalty.

Onboarding consists of more than simply sending out cross-sell messages at regular intervals. This white paper described a system of integrated processes that make onboarding successful and

measurable. The elements are:



Program Design



Customer Data Integration



Program Execution



Outbound Communications



Inbound Communications



Reporting, Measurement and Analysis

Few financial institutions are able to launch all of these components entirely with internal resources. Therefore, selecting an appropriate partner who can provide an integrated marketing solution will be an important part of many successful onboarding programs.

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ADAM ISLER

Adam Isler is a seasoned professional, with over 25 years’ banking experience. Before joining PNT as Client Services Director he worked in a wide variety of management positions in Citigroup’s consumer bank including sales and marketing, operations, small b usiness and b ranch

management. Sub sequently, he spent almost ten years as a consultant to b anks across the US and Canada. He holds degrees from Columbia University and the Cass Business School in London.

Contact:

JOHN PURCELL

John Purcell has 25 years of experience in printing. He earned his BA in Business Marketing from California State University, Fullerton and was instrumental in launching the ImageConnex division of Image Printing Solutions in 2002.

Contac

PNT Marketing Services

PNT Marketing Services is a leading provider of Customer Intelligence-based marketing services primarily, to the financial services industry since 1988 for clients b oth large and small. Our mission is to help companies know their customers b etter in order to grow more profitab le relationships.

PNT Marketing Services, Inc. 24-20 Jackson Avenue, Suite 203 Long Island City, NY 11101

1-888-PNT-2210 x202

ImageConnex

ImageConnex is an early leader in leveraging customer data to send multimedia messages that build loyalty. ImageConnex’ scalab le, full-service team can manage vital aspects of marketing campaigns, or partner with your team for expert help where you need it most. With on-demand resources, strategically driven solutions, and innovative ways to maximize your marketing investment – ImageConnex is an excellent partner for b uilding customer relationships.

ImageConnex 60 Bunsen Irvine, CA 92618