1.4 billion More Credit Card Mailers Hit the Recycle Bin

Junk_mailSome bad habits are harder to kick than others. In banking, the preapproved credit card mailing is apparently as addictive as nicotine. How else can you explain the record 1.4 billion solicitations mailed in Q1 2005 according to researcher Synovate? (">see previous article on 2004 mail volumes)

We can't speak for the economics of the recent mailings. On a macro level, things are going pretty well. Other than the sub-prime specialists, most credit card companies have weathered the economic slowdown of the past years admirably. However, we still think the online channel is vastly underused as a credit marketing vehicle.

Analysis
First, we'll crunch some numbers to compare traditional direct mail (DM) to online marketing (OM):

***DM***
1.5 billion pieces times $1 per piece = $1.5 billion in marketing
Fraud = 0.04% x 1.5 billion = 60,000 bad accounts x $2500 = $150 million
Teaser rate = 3% subsidy x $1.2 billion outstanding = $360,000 million
Total cost of program = $2 billion

===> Response = 0.4% times 1.5 billion = 600,000 good accounts

DM acquisition cost = $333 per good account

***OM***
30 million online banking households x $5 for 90-days of online credit offers = $150 million
Teaser rate = none
Fraud = 0.04% x 30 million =  12,000 bad accounts x $2500 = $30 million
Total cost of program = $180 million

===> Response = 30 million x 2% = 600,000 accounts

OM acquisition cost = $30 per good account

Implications
Depending on a multitude of factors, a credit card issuer can still make an account costing $333 profitable over its lifetime, but it's not going to be easy, especially with costly rewards programs demanded by most good customers these days.

Why not divert some of the direct mail budget to online marketing programs that eliminate the paper from the equation?

Every credit-worthy online banking customer should have preapproved credit available to them at all times. And it should be very visible when they are conducting activities that could indicate a potential need for extra cash, such as paying bills.

Alternatively, preapproved offers could be timed to appear at login when account balances dip below historical levels indicating potential cash flow difficulties for the consumer.

The beauty of this approach is that it's more about timing than price. Consumers needing $500 for the orthodontist today will be more concerned about a fast, convenient advance rather than playing the field to bag a 0% teaser rate and/or maximum rewards points.

The twin benefits of online credit marketing:

  • lower marketing expenses
  • less dependency on teaser rates and rewards programs

For an extended discussion of online credit card and loan originations, see:

Online Banking Report subscribers will receive updates to these reports this fall. 

JB

 

Phishing Awareness Less Than 30%

We’ve warned against using too many scare tactics on your website (see OBR 119, Marketing Security). Here’s data to support that argument.

The latest Pew Internet Project survey (PDF) found that more than 70% of Internet users had either never heard of the term Internet phishing (15%) or were unsure of its meaning (55%), leaving just 29% who said they had, "a pretty good idea of what the term meant." In comparison, 88% of Internet users had a pretty good idea of what Spam meant, 78% knew Firewall and also Spyware, while 68% understood Internet cookies, and even 52% knew Adware.

JB

Lockheed FCU’s Four Percent High Yield Savings Account

Just when you thought your new 3% APR money market account would wow your market, the word on the street, virtual street anyway, is that the 4% APR mark has been breached for the first time in several years.

Lockheed Federal Credit Union is culprit with a new account paying 4% on balances of $25,000 or more. It's so new, or so secret, you can't find it on their website. You must call to set up the account (800) 328-LFCU.

Lfcu_achieversAnd if think you're safe because your customers can't access this credit union special, think again. For $5, you can join Lockheed's Achievers Club, which qualifies you for credit union membership. You can join both in a single phone call.

JB

 

Making Saving a (Grocery) Game

Grocerygame_logoLast year the savings rate in the U.S. dropped to 1.3% of disposable income (personal income less taxes), slightly lower than 2003’s 1.4%, and the lowest since the depression (1934). This is far below the 10% or higher level that most personal finance experts recommend. The last time the U.S. as a whole saved 10% was 1984, and that was no anomaly. In the 15-year period from 1971 to 1985, the U.S. saving rate dipped below 9% on only one occasion (8.7% in 1977). Even without considering inflation, the total amount saved during 2003 and 2004, $113 billion/year, was the lowest total since 1974. (Source: U.S. Commerce Dept: Bureau of Economic Analysis)

Banks are in a great position to help improve this situation by making savings easier and more interesting. Online services can be used to automate saving and provide continual detailed feedback. In next month’s Online Banking Report (#120), we’ll outline a number of techniques.

One of the more novel approaches is to help coupon-clippers organize their assault on the grocery store by automating the process with online tools, tips, and links. Then as your customers chalk up savings at the grocery store, encourage them to deposit all or part of the windfall in a bank savings account. The growing balance will provide positive feedback for the disciplined approach to shopping.

Grocery_game_listFor inspiration, take a look at one of the more established coupon services called The Grocery Game. The Southern California-based online service provides a weekly list of advertised and unadvertised grocery specials married to a database of recently published coupons. The end result is an editable list of major grocery bargains priced at a 40% to 70% discount from retail (click on inset to see a sample).

The company’s stated goal is to save a family of four $1000 off their grocery bill during the first 12 weeks. Cost is $10 every eight weeks, after a $1 four-week trial.

The Grocery Game says it has 30,000 users in 43 states. Other sites with similar services include, Cairo, ShopLocal, Puget Sound Grocery Guide (Seattle), and Coupon Queen (Cleveland).

Financial Institution Opportunities
Banks could leverage The Grocery Game in several ways:

  • By simply linking directly to the service
  • By explaining the strategy with articles and advice, but not producing weekly shopping lists
  • By partnering with The Grocery Game or others to produce a co-branded or private-branded version at the bank’s website
  • By creating a simpler version in-house: After the initial programming, we estimate it would take only a few hours per week to enter the data from the grocery circulars and match it with items from the coupon database

But unlike The Grocery Game, which has no ongoing tracking mechanism, banks would want to program an area for user’s to document their grocery savings, and designate a portion of the grocery savings be deposited into a bank savings account. 

To encourage continued participation in "The Savings Game," customers could be rewarded with, what else, free groceries, when they hit savings milestones. Or rewards could be more interesting such as meals out or household items, something that would appeal to the coupon-clipping demographic.

For more info on The Grocery Game:

JB

3% High Yield Savings Account

Zions_bankrate_3offerToday's hot savings rate online is 3% or more. Many of the higher rates are from direct banks operating primarily online such as ING Direct, Bank of Internet, or Virtual Bank.

But increasingly, traditional brick and mortar financial institutions are experimenting with higher rate offerings. One of the most visible is Emigrant Direct, which has spent a small fortune this year advertising its high-rate offerings (see previous article). We also noticed Zions joining the game with this 3.3% offer to customers searching for a $10,000 savings account in California via BankRate.com (click on inset for more details). Zions also makes the account available to any customer visiting its website.

What's a bank to do?
If you are feeling pressured to step up to the 3% rate level online, you can do it with a special product that doesn't require repricing your entire savings account base.

Here are a few ways to try to separate your high-rate online account from regular savings accounts:

  • Give the account a separate name, such as Zions Bank's Internet Money Market Account
  • Require that it be opened online
  • Require that it be funded via ACH or wire transfer from another institution (aka new money)
  • Offer to match any rate found online, users would submit the URL of the competing offer in the application
  • Only promote it via special landing pages accessible through promotional advertisements, but not linked directly to your regular site
  • Require a promo code on the signup form

More 3% offers
Download this file shown below to see an analysis of the 3% offers from MyBankingDirect (NY Community Bank), ING Direct, Emigrant Direct, MetLife Bank and Western Financial. The first three earned grades of A, while MetLife and Western scored only Cs.

Download tour_of_banks_with_3apy.pdf

 

 

eBay Motors’ FOR SALE Sign Direct Mail

Ebaymotors_protectionsLooking for a way to boost your market share in direct vehicle lending? Consider setting up an online used car emporium either using eBay as the transactional platform (recommended) or programming the site yourself.

Even though you could do it yourself, it would be difficult to match the auction giant’s powerful set of FREE buyer protections including (click on inset) including:

  • Purchase Protection: Reimburses up to $20,000 for fraud and material misrepresentation after a $100 deductible
  • 30-day, 1000-mile Service Agreement: Provides a 30-day warranty on major breakdowns on most cars under nine years old after $500 deductible
  • Ebay Feedback Rating: Prospective buyers can review the seller’s track record via the eBay feedback system

In addition, users can review the vehicle’s history by searching Experian VIN # records via an online link. Cost is $7.99 for a single VIN # search, or $14.99 for up to 10 searches. Finally, buyers can order a pre-purchase inspection of the vehicle for $100.

Financial Institution Opportunities
Here’s how a financial institution virtual vehicle site could work:

  1. Using eBay programming tools (eg. APIs), create a website that aggregates local vehicles listed on eBay.
  2. Buyers would handle the transaction through normal eBay channels, but you would have the first chance to make the loan. In order to maximize the returns, it’s recommended that you allow buyers to make purchases from anyone. As you’ll see later, the eBay fraud protection programs mitigate much of your risk in making "person-to-person" auto loans.
  3. To further boost volume, consider helping sellers market their vehicles in any of the following ways:
  • create downloadable FOR SALE signs complete with purchase details and/or referring potential buyers to the online auction (see inset for a version recently distributed by eBay in a direct mail program)
  • provide a customizable template for users to create their online auto listing
  • integrate customer listings with your own inventory of repossessed autos for sale
  • provide "incentive financing" programs that sellers could use
  • offer a wide variety of loan options for cars sold through the site

Analysis
The virtual auto emporium would have several marketing and promotional benefits:

  1. Creates interest and publicity about your website
  2. Drives traffic to your lending area
  3. Increases vehicle loan volume
  4. Creates an interesting program that could be featured in website, statement, and direct marketing campaigns (see eBay DM samples below)

Addendum: Ebay Direct Mail
Here are close-up views of the recent eBay direct mail received in early July. We may have been targeted due to recent activity, our second eBay Motors vehicle purchase.

Ebay_4_sale_dmThis 9×12 inch cardboard sign looks very similar to a sign you might purchase at the local drugstore to stick inside the window to advertise a car for sale. The FOR SALE is in bright orange and includes references to the FREE $20,000 purchase protection and FREE 1,000 mile service agreement (not visible in this scan).

This eBay version is intended to be displayed within the car and highlights the eBay listing number for more information. The back of the sign (click on the image below for a close-up), lists the features and benefits of selling your car through the auction site. It also includes an offer to return the $40 listing fee if the vehicle doesn’t sell. Sellers also pay a $40 flat transaction fee ($80 in total) if the vehicle sells.

Ebay_4_sale_back_dmJB

Citibank Logout Screen Example

One neglected area of the online customer experience is logging out. Are you thanking your customer for banking online? Reinforcing that their secure session has safely ended? How about a little cross-promotion from time to time?

We’ve logged off more than a thousand times from dozens of financial institutions and it’s never been particularly noteworthy.

Citi_signoff_screen However, this week Citibank’s logoff screen caught our eye (click on inset for full screenshot). Not only did the bank thank us for our business, they posted an attractive promotion for its banking rewards program.

You may not have offer something quite as elaborate as the Citi program, but you can effectively use the logoff page to highlight service improvements, call attention to upcoming events, or highlight community involvement and volunteer opportunities.

JB

New Debit and Credit Card Activation

Usbank_atmcard_activationOur new Visa debit card arrived today from U.S. Bancorp. As we were reaching for the phone to activate it, we noticed a new URL on the holder <usbank.com/activate>.

Curious as to how the bank handled security on the process, we went online for activation. It turns out you must be enrolled for online banking. If so, you simply login, navigate to customer service, choose ATM/debit card options, type in your card number, security code on back, and expiration date (click on the inset to see the full screenshot). .

Analysis
This feature certainly falls into the "nice to have" category rather than "must have." The two-minutes it takes to phone in for ATM card activation once every two years is not on anyone’s pet-peeve list. And doing it online doesn’t even save much time, if any.

But, the bigger issue is making sure that all the routine customer service issues can be handled online, so customers think to go there first to manage their account. Overall, that behavior will save the bank money and if implemented well, improve customer satisfaction.

JB

Holiday Bank Marketing – Fourth of July

Before we head out for the long holiday weekend, we took a quick tour of the top 50 U.S. consumer banks and found only a handful taking advantage of Independence Day to give their website a patriotic theme.

Wamu_4thjuly_homepageWashington Mutual was the only mega-bank using the 4th of July in a homepage promotion, a clever "Home of the Free" pitch for its free checking account (click on the inset to view screenshot).

Other banks with patriotic window dressing included: Hudson City Bank, MBNA, USAA, and Zions Bank (click on thumbnails below to see full screenshot).

Hudson_4thjuly_graphics Mbna_4thjuly_promo Usaa_4thjuly_promo

Zions_4thjuly_promo_1 Analysis
Ing_4thjuly_logoFor U.S. banks, there couldn’t be a better holiday to associate with, "banking, apple pie, and the Fourth of July." As we mentioned in our original holiday marketing post, we think it shows savvy on your part to tweak your design around the holidays. However, it doesn’t have to be a huge undertaking. Just flying the flag, like ING Direct, shows you are actively managing your online presence.

Want more ideas for your holiday marketing? Check out the Interactive Financial Marketing Database from our sister publication, the Online Banking Report.

Debunking Search Marketing Myths in Banking

Contributed by Mike Bailey, Compete, Inc.

Compete_logo_1Every day millions of consumers use the internet to search for new deposit accounts, loans, and credit cards. As a financial marketer you understand connecting to the growing online demand for financial products and services is a competitive necessity.

But what is the most effective way to understand and even predict how a potential customer thinks and behaves online? What search strategies will be most effective to allow you to tap into an online community of potential customers?

To find the answers, Yahoo! Search Marketing sponsored a study, conducted by Compete, Inc., a predictive analytics firm specializing in the financial services industry. The results provide some surprising insights that can dramatically influence your success in attracting and retaining customers.

First let’s look at two of the search “myths” we uncovered:

Myth #1 – People searching for credit online are not good prospects

The first thing we discovered is that consumers who use search to research deposit, loan and credit card products are affluent, have great credit and have a higher likelihood of applying for the products they have searched for than consumers who use other channels for their research. With 49% having an average annual income of more than $60,000, these prospects are 67% more likely to start an application than a typical online shopper and loan searchers are 59% more likely to apply.

Myth #2 – Brand names are not relevant in search marketing because those searching for specific banking institutions must already be customers there

As it turns out, searchers who type in a specific retail bank name are not just looking to log in to their existing accounts. A full 30% are potential new customers researching new accounts. And of those 30%, about 80% are looking for an alternative financial institution. So in search marketing, your brand and the terms associated with it provide three opportunities:

  1. Service your own customers
  2. Acquire new customers looking for specific services
  3. Access competitors’ customers

Most financial institutions have worked hard and spent marketing dollars to build a brand with positive and credible attributes. The good news, as our study shows, is that consumers looking for deposit and loan services hold brands in high regard. Consumers searching for particular brands make more than two-thirds of the search-generated deposit applications in a typical month. And a hefty 80% of credit card shoppers start their online searches with brand names, including the highly advertised brand names that you would expect, as well as partner and affinity cards, such as “air miles card.”

So how do you achieve better results with your online marketing? We recommend three strategies:

  1. Establish a balanced portfolio of terms. We have seen that deposit and loan searchers balance the types of terms they use. Credit card searchers, on the other hand, are inclined to research brand-related terms, including partner cards and affinity relationships. As a marketer you will need to adjust your portfolio of keywords and terms to make sure you have as broad access as possible to all potential customers.
  2. Leverage brand terms to attract deposit customers. Consumers who look online for major retail bank brands are most interested in deposits and cards and least interested in loans. Create copy that reflects this insight and tailor your incentives toward what your customers want.
  3. Measure and reflect offline conversions in search marketing ROI calculations. Without measurement how will you know how effective your efforts are and how to make adjustments? At least 50% of conversion volume occurs offline at a branch or call center, but the bank, product or service was researched online first – so tie your offline transactions to search.

Online search is a powerful consumer tool allowing people to easily find the information they need to make decisions about banking and financial products. As a marketer, make sure to do the research and analysis so you can create the most effective multi-channel and measurable marketing programs.

Mike Bailey is Managing Director of the Financial Services Practice at Compete, Inc., headquartered in Boston

Summer Banking Sweepstakes

There's nothing like a good old sweepstakes to add a little life to your summertime marketing efforts.

We especially like the idea of contests tied to online usage, especially bill payment. Resource Bank is the latest we've spotted with a bill-pay sweeps. This homepage announcement sums it up:

Pay 3 bills online during the month of June and you will be automatically entered in the "Let Us Pay Your Bills" Sweepstakes. The winner will be reimbursed for all online payments made during the month, up to $300.

This three-month contest (June, July, August) is ultra low-budget — a total prize pool that maxes out at $900 ($300 times 3 months) — but it's still effective.

It would be even better if the bank spent a couple hundred bucks on professional graphics and boosted the monthly maximum payout to $1000 or more. If you are lucky, you won't have to pay out more than a few hundred dollars anyway, so why not make it sound better?

Pnc_scratch_game2On the other hand, we're not so sure about PNC Bank's latest, an online "scratch" card you take into the branch to check for a match. Matches are rewarded with the prize shown (iPod Shuffle, portable DVD, or digital cam).

We live outside the PNC footprint, so we can't check it out firsthand, but I'm guessing the branch is supposed to cross-sell like crazy when you show up to get the official "match card" to see if you are a winner. But more than likely the branch sales staff will be otherwise occupied during the lunchtime rush when most online users stop by, so sales impact will be low.

Also, it's too easy to win. With 5000 total prizes across 700,000 maximum entries, the overall odds are 1:141, pretty sweet for prizes worth $100 to $200 each. With such a rich prize pool, and relatively low hurdles to entry, the bank risks being overrun with repeat entrants. Granted, you can only enter once per day, but it would be hard to stop users from going to multiple branches. Even if everyone abides by the rules, the bank may see the same faces day after day, reducing sales opportunities and clogging the branch at busy times.

Doing the math: If the average number of entries is 10 per person, PNC will interact with just 70,000 unique customers. Assuming a 2% conversion rate, that's 1400 new product sales. Just considering the $700,000 prize pool alone, that's an acquisition cost of $500. That does not include other sweepstakes and marketing costs.

In comparison, it makes Resource Bank's $300 sweepstakes look pretty cost effective. Probably better would be something in-between, not so rich that you attract too many people out to game the system, but not so stingy that your customers wonder why you are even bothering. 

If you'd like access to more financial interactive marketing ideas, check out the Interactive Financial Marketing Database from our sister publication, the Online Banking Report.

Keeping Tabs on the Financial Blogosphere

Blogpulse_logo_1 Writing in The Wall Street Journal’s MarketPlace section, William Bulkeley discusses a new technique for tracking consumer opinions of products, companies, and other topics. The article, Marketers Scan Blogs for Insights, explains how marketers, PR departments, and brand consultants are using free and not-so-free tools to scan the so-called "blogosphere."

We tested Intelliseek’s BlogPulse on some security topics we’ve been researching and found it to be an effective tool. There were more blog citations than we found in a Google search, and they were better organized. Also, BlogPulse provides a trending tool to gauge the relative strength of a search term over the past 6 months.

Blog_plus_trendingHere we compared "phishing" to "online banking" and found similar activity levels for both terms (click on the inset for a better look).

While this tool won’t replace traditional market research, it may be worth checking out from time to time.

JB