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FOR IMMEDIATE RELEASE
Contact: Jeannette Weiland, BAI
(312) 683-2319

NEW BAI RESEARCH BREAKS FRESH GROUND
ON BANKS’ RETAIL DEPOSIT CUSTOMER RELATIONSHIPS

CHICAGO, January 29 – Recently completed research from BAI indicates that banks and other financial services providers must apply a selective, multiple-front strategy in pursuing retail deposit customers, capitalizing on unique capabilities to develop relationships while still recognizing the importance of a customer segment-oriented product packaging and pricing approaches.

Eight major financial companies participated in the private, syndicated BAI Research study, “The Quest for Deposits,” which was designed to provide quickly actionable performance tools and, for the first-time ever, a set of more than fifty common deposit performance metrics for the organizations involved.

BAI is launching a major benchmarking project based on those metrics, Deposit Performance Benchmarking, in February with the participation of more than 15 large banks, and is planning to further broaden the base of participants that will be included in the benchmarking effort. For more specific information on participating in this project, interested parties can call Jeff Hartney at (800) 323-8552 or jhartney@bai.org.

“A principal challenge facing banks is to achieve a strategic duality between serving the mass market and specific higher-value customer segments,” said BAI president and chief executive officer Thomas P. Johnson, Jr., in discussing the summary findings of “The Quest for Deposits.” “The results clearly display that there is not an ‘average’ deposit customer, and that banks that continue to approach the deposit marketplace in a non-segmented fashion are destined to achieve only ‘average’ results.”

Johnson described the major recommendation suggested by the study – a relationship approach targeted at specific deposit customer segments, supported by a variety of activities that build on organic strengths that banks possess.

“BAI’s nationally representative survey of over 4,200 U.S. households revealed six distinct segments of consumer demand for deposit services,” Johnson said, “and these six customer segments vary significantly in terms of their attitudes towards deposits providers, the functional characteristics they desire from deposit services and their pricing preferences.”

“Banks must shift their emphasis from transactions to relationships and from products to packages,” Johnson said. “Those packages should be based on the needs of the targeted customer segments, and these research findings validate the imperative for banks to deploy relationship-based customer profiling and relationship anchoring activities. The right product packages can be delivered to the right customers and pricing can be based on a more precise understanding of the value of those relationships.”

The study also indicated that incentives for front-line employees must be aligned with developing customer relationships in order to reinforce the importance of the window of opportunity that banks have during the first few months after attracting a new customer.

As detailed in a feature story in the November/December 2003 issue of BAI’s Banking Strategies magazine, “The Quest for Deposits” found that 73 percent of cross-sales of additional products are achieved within the first 90 days of a new retail checking account customer joining the bank.

“The old adage of not getting a second chance to make a good first impression is obviously important for banks, too,” Johnson said. “It may become essential for banks to reallocate capital and resources to these formative days of a new customer relationship, especially given the increased importance many organizations are placing on their cross-selling efforts.”

“The Quest for Deposits” was completed with the involvement of five research partners, each of which contributed significant intellectual capital toward the recommendations embedded in the study. These research partners, and their roles, included:

• Novantas, with extensive experience in addressing retail customer and product management issues at retail banks, drove the detailed segmentation and analysis of the factors impacting consumer demand for deposit products based on a national survey of 4,200 customers.
• MarkeTech Systems International, with expertise in providing channel planning, customer relationship management and branch revenue enhancement solutions, is spearheading the Deposit Performance Benchmarking component of the project, an ongoing effort to generate deep, benchmarked metrics based on analysis of customer and transactional data from nearly 16 million consumer households provided by the sponsoring banks.
• McGuire Performance Solutions, a firm specializing in quantitative analyses of core deposit cash flow and pricing behaviors, asset-liability management (ALM) model verifications and other creative ALM solutions, conducted an industry study of best practices associated with core deposit treatment in Funds Transfer Pricing.
• Demos Solutions, a firm that is focused on the performance and efficiency of people, processes and technology, led the components of the project that generated management programs to achieve deposit sales and service goals within branches and contact centers.
• Xerox Global Services, a leading provider of customized communications and document management solutions, is a corporate sponsor of the research project and contributed to the formation of strategic marketing recommendations to improve deposit customer cross-sell, satisfaction and retention.

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BAI, founded in 1924, is the financial services industry’s leading professional organization focused on enhancing employee and organizational performance. Through events, industry and employee research, publishing and training, BAI reaches thousands of financial services professionals each year to deliver content designed to address critical business needs and to facilitate connections among financial services professionals, industry experts and solutions providers.

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