Cover Story: Taking Care of Business
Though banks took the blame for it, the 2007/2008 "financial crisis" was not easy on any financial firms, including the First Horizon National Corp. in Memphis, Tenn., parent company of First Tennessee Bank. After selling off its national mortgage business when the financial crisis hit and shuffling management, the company began to refocus on one of its core strengths: serving commercial customers.
Under the guidance of D. Bryan Jordan, who came on board as CEO in 2008, First Tennessee is now actively courting businesses not only in its current markets, but across the Southeast. The aim is to attract new commercial customers, but also to cross-sell more products and services to existing customers.
"Commercial banking is profitable," says Dan Marks, First Tennessee's CMO. "Businesses need deposits, cash management and loans, so we are able to provide them with a full range of services. It's better for the customer and it's also more profitable for the bank. It's a leverage point to get a greater share of wallet."
Within that refocusing strategy, target marketing is "especially important for [reaching] commercial customers," says Marks.
"The buying cycle is longer, so it becomes that much more important to be very relevant and tailor the message to meet the needs of the particular industry of that customer or their specific company," he says. "It goes back to the importance of having a really good foundation with a CRM system and aligning marketing initiatives very closely with the sales force."
The State of the Industry
The idea of target marketing is still fairly new to the banking industry, according to Robert Tetenbaum, co-founder and executive vice president of the financial services-focused First Manhattan Consulting Group Inc. in New York City. As the profitability pressures on banks intensify in the post-crisis era, he says direct marketing has become imperative.
"Compounding the pressure to improve marketing effectiveness are the enormous profitability pressures caused by low interest rates and new regulations restricting interchange and overdraft fees," Tetenbaum explains. "Further, because of online banking, mobile banking and remote deposits, fewer customers and prospects are entering traditional branches for interactions."
As such, Tetenbaum says banks must maximize their marketing effectiveness to stimulate traffic so every interaction—whether it's at the call center, website or the occasional visit to a branch—yields more awareness of the products, advice and services that match the needs, attitudes and expectations of that customer.
However, few banks are really good at target marketing, according to Tetenbaum. Banks that have significant credit card operations with sophisticated targeting methods tend to be good at it. But, he says, the rest of the industry hasn't been as aggressive with direct marketing other products.
"Most banks lack the full range of skills to apply their internal and external data and build effective targeting models." For example, Tetenbaum says, "lookalike modeling is not effective in gauging needs and attitudes" of banking customers, because it relies on matching up behavioral attributes common to customers who have taken the action desired. But, he says, such "behaviors among customers are not predictive of needs and attitudes—we know this from our surveys of 10,000 consumers by financial category (deposits survey, credit card surveys, etc.) Hence, the predictive accuracy is weak, and yields low lift in marketing relative to survey-based models that define common needs, attitudes and behaviors."
Data and Personalization
Bruce Livesay, First Tennessee's chief information officer, believes the bank has a leg up on its competitors through analytics and target marketing.
"Banks have more information about customers than a lot of other industries," he says, "but a big differentiator for us is that so many banks don't use that information effectively—they fail to make those crucial connections between what a customer needs and the products and services a bank offers."
A good example is a critical event in the life of a commercial customer—choosing a new channel, entering a new market, etc. Livesay says First Tennessee needs to understand when those moments occur and turn them into a "win-win" for both the bank and the customer.
"Information management is a huge component for all of this," he says. "The concept is making good use of all of the information that you have and connecting the dots between what customers need and what the bank offers. Even seemingly simple things—such as knowing a customer's email address or contact preferences, or the primary relationship manager for that customer—can be challenging. Having all that information with a very easy way to access it in one place is harder than you would think."
Livesay and his team solved that problem by building a "shared-services layer."
Using part of the proceeds from the sale of First Horizon's national mortgage company, the bank invested $100 million to upgrade all of its core operating systems, including its deposit and loan transaction systems, and then built a second shared-services layer. This layer is a repository of data from all of its various operating systems and channels, such as the branch, online banking, mobile banking, automated teller machines and call centers. The information from all of these sources is aggregated into a centralized master customer file, which can then be retrieved by any of the systems and channels in real time.
"We have the ability to bring it all together in a common place to redistribute back out," Livesay says. "That gives us a real advantage."
To make analytics and other IT functions work most effectively for the organization, Livesay's IT team members are "embedded" within each department. In the marketing department, an IT member works side-by-side with Marks and his team to analyze customer information as a foundation for certain marketing campaigns. Marks' team then uses that information along with additional analytics to develop and execute campaigns.
For example, to generate an offer to small business customers, the IT embed uses advanced tools from the Unica (now part of the new Enterprise Marketing Management group at IBM) suite of campaign management tools to help segment and match the right offer to the right customer at the right time. In this scenario, the selected customers would either get a letter in the mail or an email, with an offer of a cash bonus if they opened a new small business savings account.
"We are performing analytics to gain an understanding of what our business customers want, trying to get a 360-degree view of their activity," Marks says. "Then we have a thoughtful approach on how we create push content in emails and also our Web content. We want them to match how the customers think about who we are and how we can help them."
First Tennessee segments its sales and services for businesses primarily based on size, Marks says. The bank has a small business segment for business customers with revenues of less than $2 million and a medium-sized business segment, which is then subdivided into segments of customers who have a specialized focus with unique characteristics and banking needs, such as hospitals and other medical corporations.
"This level of segmentation has a number of important implications for our sales coverage and marketing messages," says Marks. "We align our messages very closely with the type of business."
One advantage First Tennessee leverages is banks typically have more customer information than other types of industries. Marks says every transaction using a debit or credit card, check, or electronic debit is recorded, including the type of establishment where the customer made the purchase. Such detail provides rich analytics for analyzing customer behaviors and predicting future purchases.
"We have a greater amount of data, but we also have a greater amount of responsibility to use that data responsibly," he says. "In the banking industry, the trust [of] and relevance to our customers are our two most precious things. We have to take very great pains to first think about the security and privacy of our customers. That's our first hurdle. Then, to the extent we can use analytics and personalized messages to enhance relevance to our customers, we do that."
First Tennessee's sales and marketing process has been greatly aided by the 2010 implementation of the cloud-based sales and customer relationship management tool from San Francisco-based Salesforce.com.
Each commercial customer is assigned a relationship manager who enters information into the tool about what kinds of products and services the customer currently uses and any recent activity. Marks says that activity could include the manager's phone calls or visits to the customer's place of business; or the customer's calls and visits to the manager, branch or call center; or any interaction the bank has with the customer.
For example, Marks says, the bank regularly emails a survey to each business customer to get the "true voice of that customer." The surveys ask both about their experiences and future needs. The customer responses then trigger very personalized messages for follow-up, and the relationship manager can see the response on the sales and CRM tool to help tailor ongoing personal interactions and marketing messages.
In one case, a business customer's survey might indicate a need for better ways to manage cash flow. The relationship manager would be alerted about that via an email and could check on all aspects of the client's relationship, including recent interactions on Salesforce either via Web browser or mobile device.
"The survey helps prompt the relationship manager to call and gives some intelligence to help in call preparation, but we take great pains to make sure the actual call is very personalized and not pushy," Marks explains. "The focus is on the client's needs and discovering which services would be most appropriate to help address those needs."
First Tennessee requires Salesforce—like all of its vendors—to use the centralized customer information from the bank's shared-services layer, Livesay says. That way, each business unit can be alerted to any updated information—such as when a business customer indicates an interest in wealth management services on an email survey or a phone call with relationship managers. Then a private banker can call that customer to learn more about particular needs.
Marks says First Tennessee has also been experimenting with inserting other triggers into the tool to alert relationship managers based on certain behaviors and certain communications from the customer.
"For example," he says, "if a customer just opened its business checking account, we might send the customer a survey asking about the account setup experience to ensure that they got all the documents about the account and to ask about their needs."
Another major initiative has been to send customized quarterly email newsletters to corporate business customers featuring articles pertinent to that customer's industry or niche.
For example, for an email newsletter to a healthcare provider client, First Tennessee might have an article about the differences between a healthcare lockbox and a traditional lockbox for most industries, and how a healthcare lockbox could optimize business, according to Marks. If a healthcare client clicked on that article, that would trigger a call to action in Salesforce and the relationship manager would be alerted via email.
"When the relationship manager calls that client," Marks says, "he would never say he was alerted that the client clicked on that article, but he would say that he was aware that the bank recently sent the client a newsletter about the importance of having a healthcare lockbox, and then talk to the client about its particular need and interest for one. Since the relationship manager in reality already knows the client is interested, there's a pretty good chance the client might buy the product."
Email vs. Direct Mail
For First Tennessee, targeted emails to business customers tend to produce similar results to direct mail campaigns, according to Marks, but at significantly lower costs—about 20 percent to 50 percent lower. The bank has seen a rise in clickthrough rates since it began personalizing content.
"For example, we send out a regular weekly and/or monthly report by our chief economist, and when we began to personalize the emails by putting the name of the customer's assigned relationship manager in the 'from' line, the open rate increased about 10 percent," he says. "We also personalize these emails to analyze which marketing tactics are prompting better response rates."
Typically, the response/conversion rates are 10 percent higher for personalized messages than for non-targeted or non-personalized messages, says Marks. In 2011, IBM conducted a study on First Tennessee's target marketing and found the return on investment for the tools that enable highly personalized experience in some cases reached 600 percent.
"I think how well banks can do this depends on a lot of variables, including the size of the institution," Marks says. "A very large institution has the ability to do more personalization based on analytics and automated targeted messaging, but a very small bank might just personalize messages the old-fashioned way—by picking up the phone and talking to their customers."
In the end, Marks points to 13 recent awards from the financial industry research firm Greenwich Associates for excellence in commercial banking based on client experiences (bit.ly/ftgawards). He says the awards demonstrate customer needs are being met, in large part due to the bank's targeted marketing efforts to achieve additional cross-sales.
"The value proposition we deliver really resonates with those segments, and we're ramping up what has been successful," says Marks. "We think the personal service and expertise we provide to the commercial segment is better than the competition, which says something in a category with over 8,000 competitors."
Katie Kuehner-Hebert is a California-based journalist who has written for American Banker, HRO Today, Benefits Selling and many other business publications.