FEATURE
ARTICLE
Event+Message
Can Equal Effectiveness
BY REBECCA KUCHAR
Knowing
when to interact with a customer, based
on preset triggers, can lead to improved
cross-selling and stronger customer relationships.
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SYNOPSIS | Banks
are learning how to use event-based
marketing to successfully sell products
and retain valued customers. While
it’s proving to be an effective
practice for many, event-based marketing
presents certain IT and organizational
challenges, particularly as it evolves
from its outbound marketing campaign
roots to a more customer-centric inbound
model.
Event-based marketing,
as applied by retail banks, is not a trivial
pursuit. The challenge is to identify customers’ most
significant financial activities and life
events and then engage those individuals
just as the significant activity or event
is occurring. The benefit of such timely
and relevant interactions? This is where
the banks’ thoughtful work and significant
technology commitment pays off: Event-based
marketers report greater sales of products
and services as well as strengthened relationships
and increased retention — all of
which maximize the customer’s lifetime
value to the bank.
It’s an ambitious
undertaking, the first step of which is
to apply technology to analyze the customer
base and identify key events. In some cases,
staff members must be trained to work with
new systems, updating and synthesizing
information as they interact with customers.
Interactions must be handled wisely. Customers
could feel alienated if they are being
pursued too aggressively or if the timing
just isn’t right for a seemingly
relevant sales offer. In the wrong hands,
event-based marketing could do more harm
than good.
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Event-based marketing
may be difficult to get right, but managers
of several major institutions affirm
that it’s worth the effort. Some
of the prerequisites to success include:
- A commitment to a
more customer-centric sales and service
model;
- Being able to measure
the significance and relevance of an
event at the individual customer’s
level;
- The ability of front-line
staff to gather inbound information in
the course of interactions with customers;
- Coordination with
other marketing programs the organization
may have aimed at a particular client
relationship to avoid confusion or message
clutter;
- Responding to sales
opportunities with offers that support
the bank’s strategic direction.
A
New Twist on an Old Strategy
Conventional event-based
marketing has focused on outbound messaging
to specific consumers often identified
in rented mailing lists or filtered out
of proprietary databases. Today, in addition
to pushing their marketing messages outward,
banks are seeing increasingly impressive
results by being responsive to inbound
signals via multiple channels. A certain
transaction, steadily diminishing account
balance or other database-altering occurrence
like a change of address could indicate
a need for new or enhanced financial services.
For the purposes of
this article, an “event” is
defined as a change experienced or initiated
by a consumer. It could be anything from
reaching college age or retirement age,
to making a withdrawal, to calling in with
a question about IRAs, to performing a
search for mortgages on a bank’s
Web site. In short, an event is a consumer-based
occurrence that an institution might want
to notice and respond to.
Gareth Herschel, a marketing
campaign management and customer analytics
specialist with Stamford, Conn.-based Gartner,
Inc., reports that event-driven campaigns
can be expected to produce response rates
approximately five times higher than are
experienced with less selective outbound
methods.
In other words, if a
traditional direct mail marketing campaign
nets a 1% response from those solicited,
one could expect to see a 5% response from
an equivalent campaign that is driven by
event-based marketing methods. Going one
step further, marketing focused on real-time
inbound interactions can increase response
rates by tenfold, he says (see chart on
next page). Herschel’s data was gathered
in the course of his studies of approximately
a dozen of the world’s largest organizations
across a variety of industries.
The principles of event-based
marketing are as old as commerce itself — identify
the consumer’s needs and fulfill
those needs before someone else does. On
a large scale, this means having to automate
some of the classic relationship management
and sales tasks that can more easily occur
on a small scale without the aid of technology.
However, while systems
can analyze data and automate multiple
processes, much of the event-based marketing
battle must still be fought on the front
lines. A live customer interaction could
lead to the discovery of some new or changing
data that needs to be captured and acted
upon. Also critical is the human ability
to evaluate and guide the situation. If
an angry customer comes to the branch to
resolve a problem, this may not be the
opportune moment to suggest a new product,
even if the system indicates it is.
Improving
Leads
What can event-based
marketing do to enhance efforts within
the retail banking environment? Sam Gragg,
assistant vice president and marketing
director of customer management solutions
at Dayton, Ohio-based Teradata, a division
of NCR Corp., offers a few measures. According
to Gragg, a bank can expect to see:
- Improvements in its
conversion rate, commonly by a factor
of two to four times, because leads are
more personalized and relevant. The conversion
rate reflects the number of responses
that are considered “successful” in
demonstrating the desired behavior, such
as signing on for a new product.
- An estimated improvement
of approximately 20% in lead value due
to relevancy.
- The ability to launch
a greater number of more carefully targeted
campaigns, typically from three to 10
times more than had been previously launched,
Gragg says. (For a single event-based
marketing campaign, a bank may have fewer
leads, but a larger number of them will
be considered high quality. This translates
to improved effectiveness of marketing
spend. It doesn’t necessarily translate
to lower costs, however, if the time
savings are applied to initiating additional
campaigns.)
In Gragg’s experience,
the payback period for an event-based marketing
solution is typically less than 12 months,
and is accompanied by significant annuity
streams.
ING Direct of Wilmington,
Del., saw more than $5 million in incremental
profits in the first year it implemented
a real-time inbound interaction system,
according to Pradeep Amladi, director of
industry solutions for San Mateo, Calif.-based
Epiphany, Inc., and a recent press release
produced in collaboration with ING Direct.
Deploying a solution
within ING Direct’s contact centers
and Web site resulted in a payback period
of three months and a 400% return on investment
in the first year. An average of 2.4 million
online visitors and 100,000 callers per
month receive personalized offers generated
by the analytic solution, according to
the company statement. An ING Direct official
confirmed the savings but declined to provide
additional comment about the program. ING
Direct is the operating name of ING Bank,
FSB. While the bank has bricks and mortar “cafés” located
in a few select U.S. cities, it does business
primarily via the Web, phone and mail.
“We are seeing
similar results for more traditional banks,
as well — HBOS, PLC in the U.K.,
HSBC, S.A. de C.V. in Mexico, Wells Fargo & Co. and Washington Mutual Inc. here in the
U.S.,” says Amladi. He confirms that
a number of banks are deploying event-based
marketing systems with inbound functionality
on a very large scale.
Banks with credit card
subsidiaries appear to be among the more
sophisticated in their efforts. Amladi
says one of the largest U.S.-based credit
card issuing companies has implemented
such a solution across 14 call centers
with more than 7,000 service representatives,
as well as on the Web, where it makes three
to four million offers a day.
Measuring
Significance
One of the finer points
of event-based marketing is accurately
separating the significant events from
the not-so-significant. “There must
be some relevance in the customer’s
life. And the event needs to signify, from
a business perspective, a good selling
or relationship opportunity for the bank,” says
Gragg.
The fact that someone
makes a deposit could be a trigger, but
the bank needs to put that in the context
of the relationship and the customer’s
lifestyle characteristics to determine
whether it’s a significant event,
how significant it is relative to other
events, and therefore how to prioritize.
As an example of how
that should work, Gragg cites a Teradata client. The client had an elderly female
customer who made a deposit that was out
of character given her past transaction
history. Within the client’s event-based
marketing system, the transaction event
automatically triggered a message for a
service representative to follow up. The
rep learned the woman was moving money
from an investment and getting prepared
to make a down payment on a house as a
wedding present for her daughter. Thanks
to the actions of the service representative,
not only did the bank earn the elderly
woman’s business, it was able to
acquire the daughter and her husband as
new account holders, Gragg says.
Some banks are indeed
obtaining basic trigger information, he
adds, but are not taking their programs
to the next level by measuring significance.
Failing to consider significance can ultimately
overwhelm customer service channels, says
Gragg. The goal, he says, is to optimize,
perhaps paring down millions of leads to
the 100,000 leads that are actually valuable.
Charlotte-based Wachovia
Corp. is employing some event-based marketing
programs, but integrating them with more
traditional efforts, so prioritization
of leads and optimization of the customer
relationship are paramount, according to
Bob DeAngelis, managing director of customer
analysis, research and targeting. He says
that Wachovia has learned over the past
few years that part of the challenge with
event-based marketing is to determine how
to align event leads with all of the other
marketing programs an organization may
have aimed at a particular client relationship.
It’s important not to add to the
efforts of multiple sales forces, multiple
branches and call center representatives
with too many leads that will soon go stale,
which is particularly true of event-based
leads.
“We need to know
whether a lead generated overnight because
of a $50,000 deposit is better than a lead
we might have been working on for three
or four months as part of our overall marketing
strategy,” DeAngelis says. “To
ensure that the right individual is receiving
the right offer at the right time, we’re
looking at event-triggered leads in the
context of a larger customer contact optimization
program to help play out a strategy that
has a high return for the company and the
customer.”
Timing,
Relevance and People Skills
If a bank can make its
pitch during that small window of time
a consumer is undergoing change, it has
a higher probability of capturing his or
her interest and business.
One of Teradata’s
international clients conducted a study
of how quickly it could follow up on consumer-triggered
events. For a certain class of offer, there
was a 60% to 70% conversion rate of leads
into successful behaviors if the bank could
respond to its customers within 24 hours.
If it waited from 24 to 48 hours, the conversion
rate dropped to less than 40%. If 10 days
passed, the conversion rate plummeted to
5%, according to sources at Teradata.
With some of today’s
more advanced event-based marketing systems,
a service representative can gather pertinent
customer information in the course of a
live conversation, input that data, and
then, while still engaged with the customer,
cross-sell based on relevant offers generated
in real time by the system.
Banks must also whittle
down the number of marketing offers they
have and determine which one is the most
relevant for the individual and likely
to elicit a positive response at that moment.
The challenge for very large banks is that
they could have more than a dozen lines
of business. This raises a number of issues,
including which division “owns” the
customer at any given time and who is controlling
the marketing messages.
In days gone by, if
a bank had the budget, there might be no
limit to how many messages were presented
to customers and little or no internal
competition with other campaigns that might
be judged to be more timely or appropriate.
With event-based marketing’s more
centralized, customer-centric vision, effectiveness
hinges on some careful thought about which
offers a bank presents to customers, how
frequently, etc.
Banks also need to be
mindful of privacy and opt-out issues. “Any
event-triggered action must be respectful
of privacy guidelines,” says DeAngelis. “One
of our top six corporate strategies is
to build customer loyalty and to integrate
this into everything we do. You don’t
want to antagonize your client.”
Ideally, an event-based
marketing system would be able to take
these matters into consideration, arbitrate
across divisions and make the appropriate
selections. Amladi notes that a system
should also determine the likelihood of
acceptance for each of its offers and present
them to the service representative accordingly.
Strategic planning considerations
might include which offer will have the
highest impact on customer lifetime value,
which has the highest net present value
for the bank, which will be of greatest
benefit to the customer, etc. Such strategies
often vary by customer segment, geography,
channel and, over time, an event-based
marketing system needs to have the flexibility
to adapt. According to Amladi, the result
should be twofold: the customer should
receive the optimal retention message or
cross-selling offer — and the frontline
staff should be able to manage customer
relationships that are consistent with
the bank’s strategies.
Mastering
the IT and Organizational Complexities
Event-based marketing
requires an IT infrastructure that maps
back to a bank’s overall size and
strategy. According to Gartner and other
industry experts, some banks are partnering
with software providers. Some are buying
off-the-shelf solutions. Others are opting
to go it alone, developing in-house applications
and maintaining a tight grip on their
proprietary approaches. Amladi confirms
that in support of event-based marketing
and other initiatives, some banks are
facing extreme challenges today in combining
multiple legacy systems and centralizing
their data stores. Others are maintaining
disparate databases and integrating on
the front end. Regardless of strategy
here, quick access to data is important.
“A bank’s
database structure could be slowing down
its ability to respond in a timely way.
If you have multiple databases and it
takes too long to retrieve results, it
may be too late to engage the customer,” Gragg
says.
So, what kind
of financial investment does it take
to get an event-based marketing solution
off the ground? Gragg says the level
of investment depends on sophistication,
scope and the degree of business transformation
a bank is seeking. He estimates that
an entry-level platform and implementation
would cost a bank less than $500,000
and notes that this could also be provided
on an ASP (application service provider)
basis. A more advanced solution built
from the ground up could run into several
million dollars, depending on the volume
of data and the complexity of events
being tracked. An average solution would
be in the area of $1.5 million, he says.
Total cost of
ownership will vary from bank to bank,
of course. Customization costs will depend
on the level of business change desired.
Training might be required for customer-facing
employees. And technology infrastructure
costs will certainly come into play.
Financial Insights,
an IDC company based in Framingham, Mass.,
tracks the progression of the top 10
strategic initiatives in banking today.
With its inherent complexity and reliance
on technology, event-based marketing
straddles several of the initiatives “on
the doorstep” of full industry
deployment, including dynamic IT, which
takes the number one ranking. Integrated
multi-channel delivery (ranked 7th) and
intelligent interaction management (ranked
10th) are also integral to event-based
marketing.
Banking and technology
experts agree that institutions that
can master the technology hurdles will
have competitive advantage over those
that can’t. Speed in responding,
appropriateness of messaging and ease
of use for service representatives will
make all the difference in how a customer
perceives an interaction and an offer.
Amladi adds that a bank has an opportunity
to not only do an excellent job of servicing
the customer’s immediate need,
but to provide relevant messages and
offers to deepen the relationship, cross-sell
or up-sell.
While providers
of software solutions might argue about
the best database platform or warehousing
strategy, most would agree that event-based
marketing is a complicated endeavor and
one that requires considerable planning
and top-down support.
“Technology
is necessary, but not sufficient,” DeAngelis
says. “The challenge is how you
integrate customer events into your marketing
programs in a way that will line up with
your business strategy.”
Key players within
the organization need to take the lead
and press for initiatives. The appropriate
divisions and resources must be on board.
And hierarchies must be established to
determine relative importance of events
and how the bank wants to respond to
each. While it would be ideal to move
to a completely customer-centric business
model, some may find it hard to relinquish
more product-focused tactics, particularly
if they have proved successful in the
past. Some banks, such as Wachovia and
Bank of America Corp., are apparently
taking a more moderate, blended approach.
Questions
or comments about this article? Post
them at the Banking
Strategies blog.
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