Marketers' priceless new bank role. (Cover Story).

Gone are the days when marketers were financial officers who inherited the job after an introductory training class. Today, practitioners tend to be experienced marketing professionals who offer strategic guidance to the bank's upper management and its ALCO.

Peggy Hudson knows what it's like to be unpopular. She's senior vice president of marketing for American Trust Bank, Dubuque, Iowa, a position that often leaves her standing alone on the front lines of change.

"Marketing has no peer in the bank," explains Hudson, "and it gets too difficult to champion causes because people perceive them as 'Another expensive idea from marketing.'"

For example, when a regional bank was acquired by another large bank in her community, Hudson saw opportunity. Her bank was one of the few not yet offering free checking, and she knew it was just the product needed to entice customers to make the switch. But her ideas met resistance by others fearful of bringing in the wrong sort of customer, of losing fee income, of change.

"It was hard to stand up because I was the only one advocating it," explains Hudson. 'They were looking at it operationally, not from a marketing perspective. We finally did it and it worked. It was the right thing to do, but it was very unpopular."

Second-place position

Let's face it, marketing suffers from an image problem. It's held a slippery second-place position for years in the hallowed halls of banking and, as Hudson puts it, "Some days it's difficult to be a professional." Much of that poor standing has to do with the old-fashioned practice of asking numbers-oriented financial people to do something creative-like marketing.

Richard C. Dorner, now president and CEO of Ann Arbor Commerce Bank in Ann Arbor, Michigan, was one of those staffers. He's spent half of his substantial banking career in marketing, but he got thrown into his first marketing job with almost no preparation.

"We used to take bankers and send them to marketing schools, and that's the way my career started," explains Dorner. "In December the new president said 'You rake over marketing January 2.' No direction, no market planning, no strategic planning-I didn't have the foggiest idea what I was doing."

It was a move that served him well, though, as he's now the president and CEO of a bank with $290 million in assets, a 22 percent return on equity and a 1.65 percent return on assets. He learned early on that bank marketers were at a disadvantage because of having to sell products that others dreamed up. This isn't the way marketing works in most other industries. He remembers having to report to the bank president on one new product that wasn't going to work due to competitive factors.

"I said 'I'm in kind of a dilemma here. I report to you and my sense is that if this new product doesn't fly, you're going to come back to me and say that marketing failed," explains Dorner. "So I had to tell him right then that that the product wouldn't fly."

The president concurred with Dorner's findings and told the product committee to improve the product.

"So he left and everyone looked at me and said, 'OK, what do you want? Obviously, if we don't do what you want, you're going to go to the president,"' explains Dorner. "It didn't leave me in a real comfortable position and that was just one of my introductions to the upward fight."

Dorner cites frank speaking with executives as one key to his success in dealing with marketing dilemmas. His advice to todays marketing professional is to do the same. Push especially hard to be a part of strategic planning, he says, because you need a hand in product development.

"We tried to make marketing people out of bank people but that didn't work," says Dorner, who admits to making that same mistake as a new CEO. "Of course my feeling now is that you need a person knowledgeable about marketing and about banking. You really have to make them a part of the decision-making and product development."

Outside help

Dorner's view corresponds to the findings on marketers' experience levels derived from a recent survey by the ABA Marketing Network. The results show a trend toward bringing in marketing people from outside the financial industry. Over 69 percent of those people who've worked in bank marketing for up to two years have marketing experience outside of banking, compared to only 35 percent of those who've worked in bank marketing for eight to 10 years.

"It's clearly saying that bankers are hiring people with marketing experience as opposed to training somebody in the bank," explains Brenda Marlin, associate director of the ABA Marketing Network, Washington, D.C. "These are seasoned marketing people who are being hired."

Those numbers also offer some evidence that top-level management is buying in to the value of marketing. Finally, marketing is being looked at more than just a drain on the bottom line.

"Marketers are going to continue to be looked at as specialists," claims Peggy Hudson. "We all have the same sophisticated products, so marketing needs to have a better understanding of what variables can be manipulated to achieve a competitive advantage."

Use your tools

So what does a marketer have to do to be taken seriously as a specialist? First of all, if you're in marketing, you should be a professional communicator, so use your tools. Here are three suggestions.

Learn the lingo.

If you're going to affect change, you need to understand how your organization measures change. It's imperative that marketers learn what the finance people are talking about and become more bottom-line focused. Although a foray to the finance department may seem as alien as taking a trip to the International Space Station, just remember your objective is to learn the language of your teammates and vice versa.

"If you can help translate marketing strategy into actionable terms and concepts that operations and finance people can understand, you have a much better chance of achieving the long-term goal," says Hudson.

Hudson credits her understanding to time spent at the ABA School Bank Marketing and Management. (See "All About ALCO" sidebar.) "(At the school) I got my first real taste of how marketing contributes to the success of a bank" explains Hudson. "That's where I was exposed to asset-liability management and other technical banking functions and began to understand the valuable role marketing plays."

Focus on ALCO.

With a master's degree in marketing from Loyola University, David M. Kreiman was used to working with a long-term vision for accomplishing marketing goals. But he says he never gained a true, long-term strategic vision of the bank until he went to the ABA School of Bank Marketing and Management.

"The asset-liability management class and the simulation week are pretty intense," says Kreiman, vice president and director of marketing for Glenview State Bank in Glenview, Ill., "but the best part is that it gets you thinking about how the bank really works, how they best utilize the funds when they're more liquid and the best way to get the funds when "they need to be more liquid."

Class instructors encourage students to get on their bank asset-liability management committees, known as ALCO, which Kreiman admits can be a difficult mission.

"It's such an individual thing, depending on your bank size and how marketing is perceived in the bank" he admits, "but I came back (from the school) and immediately asked to be included in the monthly meetings, and they were very receptive."

He attributes part of that success to his nonthreatening, "I'd like to just observe the meetings" approach. And he's the first to admit that he doesn't always understand what's going on.

"The discussions can be intimidating, as they're very statistical in nature at times," he laughs. "But I think that probably half of those on the committee are confused, too."

So don't be shy, he says, get on the AICO. It's worthwhile, especially combined with attendance at strategic-planning committee meetings.

"Marketing directors often find themselves trying to prepare for a campaign so that when they (AICO members) come to you, you have something ready," explains Kreiman. "If you get nothing else from ALCO, you're able to create your own long-term strategic plan for where the bank may want to sell products."

Bring numbers.

It took two years for Cheryl Keener, vice president of marketing at PeoplesBank, a Codorus Valley Company, in York, Pa., to get on her bank AICO. This was not due to any aversion to marketing, but because committee bylaws restricted the number of members. When a space opened up, she had already convinced both her boss, who is the bank president, and the chief financial officer (CFO) that she should be on it.

"Be persistent and be sure you have good information that you can feed to the committee," she advises marketers trying to get on ALCO. Know your market and your customer base, those can really be helpful in ALCO decisions."

It also helps that Keeners top management have what she calls 'marketing blood." For example, the GFO, Jann Allen Weaver, created an ALCO orientation booklet to ease the way for new members, (See sidebar.)

As for her contributions to ALCO, Keener says that she's a listener when the committee is talking about outside investments for the bank. But when it comes to maturing CDs and loans, she offers information from the MCIF. That type of accurate, technical data has helped get senior management to buy in to the value of the marketing department.

"It took a long time for the MCIF to be accepted here as accurate data. But they have more faith in it since we're now able to take the figures from our own profitability system and plug them into the MCIF for a truer picture, not an average of lots of banks," says Keener.

Perhaps the most important benefit of Keener's joining ALCO is her own insight into the bank's financial future.

"It's made me more aware of how I'm spending my marketing dollars," says Keener. 'Profitability is a real big issue here, and I've been trying to look at justifying my marketing dollars and that helps me understand what we do in ALCO, too."

Learn strategy.

According to consultant, and self-proclaimed "recovering CEO," Dennis McCuistion, marketing departments don't get the respect they deserve. They're often not trusted because a large part of what they do is difficult to measure. And they're expected to work with blinders on, asked to "deliver the goods" but being left out of the strategic planning. The best way, he says for marketers to get brought into the bank's big picture is to blow their own horn within the organization.

"Most of the bank people don't understand what marketing does," says McCuistion. "They just look at the budget. When times are tough, we quit training and cut marketing. Then we have less confident employees and less marketing, which makes no sense, but that's what we do."

He's advises a three-step strategy for marketers to become a part of strategic planning:

* Find the best way to engender confidence of the CEO. Do whatever it takes to give the CEO confidence in you and your abilities.

* Do your homework and find out what the banking business is all about, particularly what operations and loan officers are doing and what challenges they're up against. Marketers need to understand where the others in the process are coming from.

* Read a couple of books on strategy itself: It's not a glorified budgeting process. Start thinking in terms of what really differentiates the bank, who their customers are and what the bank strategy is.

"When your bank is in trouble, developing strategy is easy because you're focused on survival," says McCuistion on the role of the marketer. "Once you get through, you have to figure out how to compete--and that's a marketing issue."

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RELATED ARTICLE: Sidebar

Introduction to the Asset-Liability Management Committee (ALCO)

An effective asset-liability is the single most important ingredient for successful asset-liability management. To be effective, an ALCO needs responsibility and authority to ensure its directives are carried out. Its members are primarily senior officers with broad corporate perspective.

The ALCO process is a continuous assessment of internal business portfolios and the external environment that affects them. The acquisition of reliable and timely information is essential to this process.

At each meeting the ALCO will establish appropriate goals and strategies for the future based on a review of information, such as that listed below, which is not all inclusive:

* National and local business and economic conditions.

* Interest-rate forecasts.

* Cash flows (volume) of assets and liabilities.

* Pricing.

* New products.

* Sales and product focus.

* Current financial position, in relation to:

1. Asset-liability financial guidelines.

2. Goals established at a previous ALCO meeting.

3. Budget.

* Special reports and other information deemed pertinent. ALCO responsibilities:

* Supervises the asset-liability management process, to include monitoring compliance with all management policy and directives.

* Identifies and evaluates the potential effect of significant external economic factors, such as: health of the local economy, competition, interest rates, regulation, etc., and formulates strategies to take advantage of opportunities and avoid, or minimize, problems.

* Monitors actual financial performance compared with goals, identifies causes for variances, and determines actions needed to change performance.

* Develops an interest-rate forecast.

* Determines liquidity requirements and monitors the sources and use of liquidity.

* Periodically measures the bank's exposure to potential interest-rate changes and formulates strategies to minimize the risk of loss.

This is excerpted from the ALCO orientation booklet prepared by Jann Allen Weaver, CFO of PeoplesBank, a Codorus Valley Company, York, Pa.

All About ALCO

Want to get your CFO to throw a party for you? Just say this: "I'm working on my plan for next year. I need to know what kinds of deposits and liability products we need to put on the books for the next two or three years."

Not exactly scintillating dialog, but it would show your bank CFO or CEO that you understand asset-liability management. Asset-liability management in plain English, according to Paul Diesel, a former banker and current lecturer in marketing at Bentley College in Waltham, Mass., is all about simple arithmetic. It comes down to the difference between interest income and interest expense--otherwise known as the spread.

"The biggest contributor to the bottom line is spread," says Diesel. "It's five times all salaries and benefits. The preservation and growth of spread, therefore is really what drives the bank."

In other words, spread is the difference between what you pay on deposits and what you earn on assets. This is so critical to the bank, that a marketer who thinks and speaks in those terms will get the attention, and respect, of management.

"Management is interested in revenue and profit," claims Diesel, "so marketers need to ascertain management's priorities and position themselves as contributing to their attainment."

If you learn asset-liability management, you can contribute to the health of the bank's bottom line by marketing the right product at the right time. Where to learn it? Try the ABA School of Bank Marketing and Management in Boulder, Colo. Phil Rowley, an ABA instructor and president and CEO of Treasury Management Services in Vancouver, Wash., says that even after 20 years of teaching asset-liability management, he's still learning from students.

"The marketing people often have a very different perspective on a balance sheet risk factor," explains Rowley. "They can be a valuable resource to the asset-liability management people--who I'm not sure realize this."

Marketing people traditionally aren't numbers people, he says, but asset-liability management is not as analytical as one might think. It's simply the framework for how the bank is going to make money in the future. To start students off, he spends the first hour of class going line by line through a balance sheet, just to get to the dynamics of the item, not necessarily the accounting function.

"It's not a science, it's an art," says Rowley of asset-liability management." It's trying to understand the human nature of the balance sheet, like: When does someone decide to refinance a mortgage or withdraw a CD? As an asset-liability manager, I need to know that. As a marketing person, you might have the research to put me in the minds of those customers."

Career Training for Bank Marketers

To assist marketers in obtaining their highest and best level of professional development, the ABA Marketing Network has developed the following recommended professional development path:

Junior arid Entry-Level Marketers

Bank Marketing Diploma. Offered by: the American Institute of Banking (MB). Provides: a better level of understanding of the principals of bank marketing.

Experienced Marketers

ABA School of Bank Marketing and Management. Offered by: ABA. Provides: advanced marketing and management training.

Marketing Certification. Offered by: Institute of Certified Bankers (ICB). Provides: recognition for financial service marketers having the full scope of marketing expertise with knowledge of bank financial management.

ABA Marketing Colloquium. Offered by: ABA. Provides: the opportunity to work through critical marketing issues in a peer-group setting.

All Levels of Marketers

ABA Marketing Conference. Offered by: ABA. Provides: Up-to-date information on marketing trends and best practices.

For further information, access the ABA website at www.ata.com.

Janet Bigham Bernstel specializes in marketing and financial services industry issues. She writes from Jupiter, Fla.