Seven Ways to Bolster Marketing.

Threatened by competition? Your bank is not alone. One of the most effective ways to enhance your position is through more aggressive marketing.

Here are a few simple, direct ways to boost your efforts.

You can gauge your bank's current competitiveness by taking this short quiz. Answer the following questions honestly:

Are your bank's officers and employees salespeople rather than merely order-takers?

[] Yes [] No

Do they seek to determine their customer's needs?

[] Yes [] No

Are they encouraged to sell the services that will yield the best profit margins?

[] Yes [] No

Do they seek to establish long-lasting relationships with customers by promoting new products or cross-selling existing services? El Yes El No

If you gave affirmative answers to all these questions, your bank should do well in the years ahead. If not, your bank could be headed for trouble--faster than you may realize.

Times are changing. Competition is on the rise. This is especially true with the recent repeal of the Glass-Steagall Act and the passage of the Gramm, Leach, Bliley Act.

The bank industry has changed more in the past five years than it has in the prior 50 years combined, Many of these alterations have been brought about by evolving technology, such as the increased use of the computer and the Internet. Other changes have been caused by evolving lifestyles and heightened global competition.

How can a bank succeed in today's new, highly competitive world' The first thing that a bank-needs to do is to understand the new realities, particularly the altered techonological landscape. According to Bill Gates of Microsoft, some 43. million households now own personal computers. Probably about 40 to 50 percent of households are currently online.

Computers today are providing more processing power for less money. For example, in the early 1970s, Bank of the Southwest in Houston purchased the first third-generation computer mainframe used to process a bank. They paid $1.3 'million for that computer. Today, most laptop computers costing some two or three thousand dollars are more powerful than that state-of-the-art computer from the 1970s!

This is the information age. The improvements in connectivity through fiber optic cable led to over 10 million households with DSL (digital) technology in 1998. The Internet with its worldwide Web has changed and is changing the way Americans conduct their business. American lifestyles have shifted and so have the assumptions that banks used to make about their customers. Today, the customer expects to get things done instantly, efficiently and, in many instances, without human mediation. Such factors as distance and time are no longer viewed as obstacles to the service that customers demand.

When it comes to technology and banking, the market paradigm has been transformed. Today, banks have online banking unattended telephone balance response and automatic bill payment.

Bank consolidation is another reality. According to the Federal Deposit Insurance Corp., the number of banks declined to fewer than 9,500 last year from an industry high of 14,500. Banks that survive will be those that offer an array of products and services to meet the consuming public's needs, and--at the same time--pay attention to technology and service quality.

Once banks have an appreciation for the recent technological innovations, they need to start marketing themselves more aggressively. Many banks don't do a good enough job in this area. One study, for example, showed that the average bank board of directors spent only 3 percent of its time on marketing issues.

Here are seven suggestions for beefing up your bank's marketing efforts in light of the new competitive demands of tomorrow.

1. Use a team marketing approach.

To be most effective, banks must have the entire team--directors, officers as well as employees--involved in the marketing process. The effectiveness of team selling lies in the value of using different perspectives. Each group focuses on marketing from a different mind-set. It is even better if you can get the directors and senior management to share their ideas freely and dream their dreams each year at a retreat or strategic planning conference. As a group, the team needs to evaluate the community's perception of the bank. It needs to look at the value of the services provided from the customer's perspective. An overall review of the bank's marketing effort--both successes and failures-is valuable. As a reference point, make an objective evaluation of the competition's marketing. Last, but not least, the team should look at the quality of service being provided to customers.

2. Do extensive market research.

A bank must carefully study the market, making constant updates. Markets change over time, and sometimes, that evolution is not noticed by the people who live and work in that market area. In fact, outsiders often have a better grasp of the situation than those who have worked in an area for years.

A few of the market research elements might include:

* Population and age of the market.

* Income and spending of population.

* Product mix and growth.

The bank can gather the data from public records or purchase it from a number of sources.

3. Study the competition.

There is competition from other banks and any number of firms purporting to be in the financial services business. Therefore, bankers need to know what the competition is, both from within and from outside the banking industry. They need to realistically evaluate the competitors and determine what makes them better or worse.

Some key questions:

* What share of the market do they control?

* How have the more successful competitors gained market share?

* How have weaker competitors lost market share?

* What sets the competition apart?

4. Know your own bank.

Just as bankers need to know the competition, they need to know the strengths and weaknesses of their own bank. Objectivity is important when making this evaluation.

* What makes the bank better or worse than the competition?

* What share of the overall market does the bank have?

* What share of the targeted customer segments does the bank have?

* Did the bank gain or lose market share over the period in question?

* Does the bank have the staff, the physical facilities and the products to be successful?

One of the best ways to compare a bank to competition is to obtain peer information from the regulatory agencies or a private service. Then, examine the data on each competitor to see what makes them better or worse in each product area. A bank cannot market itself unless its staff and management can explain to customers and prospects why it's better than the competition. Banks have to know and believe in themselves before they can sell the bank to others. Likewise, bankers have to understand their competition to sell their bank effectively.

5. Know your customers and prospects.

Bankers need to know and maintain regular contact with their customers and prospects. Just because they call on their customers and prospects twice a year doesn't mean that they are maintaining the contact necessary to have customers feel that the bank is interested in them and their business. There are a number of questions that must be answered about customers and prospects. The best way to get the answers is to conduct surveys.

* Who is the customer/prospect?

* What are their wants and needs?

* Why would they choose this bank?

* How long have they been customers?

* What facilities do they use?

* How do they rate the bank's service?

* How often do they use the bank?

* Is this bank their primary institution?

* Which accounts do they have at this bank?

* Which accounts are at the competition?

* What new services would they like?

* How do they feel that this bank can improve its services?

* What is their age and ZIP code?

In surveying, banks can assume a response rate between 15 and 20 percent. If an incentive to return the survey, such as a drawing for a color television or a money prize, is provided, then it is likely that the response will almost double. Armed with the answers from the survey, the banker is in a position to make some valuable marketing decisions, such as:

* Which products should the bank provide that are not now being offered?

* What facilities do the customers use?

* What perceptions do the customers have concerning needed service improvements?

Depending upon the questions and structure of the survey, the banker can mine a substantial amount of useful data.

6. Carve out a market niche.

To avoid setting too many courses to follow, the bank must understand and be comfortable with the market niche or focus. How the bank establishes the market niche will be one of the key determinants in its success. In identifying a market niche, the following elements must be considered.

* What geographic area will the bank serve?

* Which segments are the most profitable?

* Does the bank have an expertise that lends itself toward a competitive advantage, such as medical/professional, agriculture or middle-line commercial?

Once the focus is established, the bank, regardless of size, must narrow its niche to three or four areas. Why? A bank can't be all things to all people. Sears is an example of a retailer that did a great job for years, but, as it expanded into banking, real estate, dental and so forth, the company lost its focus. Today, Sears is seriously threatened by competition from Wal-Mart and other retailers.

7. Deliver personalized, high-quality customer service.

While it is unsettling to see how rapidly customers demands are changing, one thing that has not altered is the need to give customers the services they want and to deliver them in such a way that it will be difficult for the competition to lure customers away. To provide the personal touch to go with the high tech, banks must know their customers by name and give them personalized service. That is what will set a bank apart from the competition.

The delivery of quality service is another important success element. Unfortunately, quality is like the weather: Everyone talks about it, but very few people do anything about it. Recall shortly after World War II the radios and other products coming out of Japan. They were cheap and unreliable. To compete, the Japanese dedicated themselves to a quality discipline. If banks are going to be equal to the challenge, they can accept nothing less than 100 percent accuracy. Why? Because most banks and companies are willing to accept errors and mistakes in the range of from 1 to 5 percent! Some banks and businesses regard a nominal error rate as routine.

Even 99.9 percent isn't good enough. Jeff Dewar, a researcher for Q.C.I. International, quality-improvement training firm, stated in USA Today, "As we face the future, 100 percent performance will become the predominant philosophy." To dramatize his point, here is what Dewar says would be the result if things were done right only 99.9 percent of the time:

* Two unsafe landings at Chicago O'Hare Airport every day.

* 16,000 lost pieces of mail per hour.

* 20,000 incorrectly filled drug prescriptions per year.

* 500 incorrect surgical procedures performed each week.

* 22,000 checks debited from wrong accounts per hour.

What about the future?

Jeanne Althouse, director, Future of Money Program for The Institute for the Future, located in Menlo Park, Calif., recently presented a program to a group of bankers and bank directors. She said the 2lSt century customer will be:

* College educated. The percentage of college graduates in the population will increase to 70 percent.

* Living in a household with an income of $50,000 by 2005, up from $40,000 currently.

* An online user, with 46 percent owning home computers.

* A consumer who seeks control, better information, interaction and convenience as opposed to the traditional customer who is seeking price, accessibility, convenience and quality.

* A person with many financial accounts, Twenty percent of new consumers and 42 percent of college graduates have four or more financial accounts.

* A person more likely to use electronic payments (with 18 percent using them).

* Information-comparison seekers, with over 40 percent using three or more sources.

Has your bank evaluated future needs? If not, it should look at the Internet, online banking and other new technology areas. Based on Althouse's information, it is clear that the banking public is changing.

To be competitive today, banks must create a climate for success. This climate consists of an excellent team relationship among the board, management and employees. They must work together to incorporate all of the new technology necessary to deliver a quality product. At the same time, they must remember that their customers and prospects have a choice about where to do their banking business. The way banks market their products and provide quality service to their customers will be the main element in separating the winners from the average or below-average performers.

There are many challenges to banking in the future, but there are also many opportunities for those, organizations flexible enough to adapt their marketing approaches to tomorrow's demands.

James B. Bexley is the chairholder of the Smith-Hutson Endowed Chair of Banking, and R. Dean Lewis is the dean of the College of Business Administration, both of Sam Houston State University, Huntsville, Texas. Bexley is a former bank president and CEO. Lewis is a former senior marketing officer in a mid-size bank.

Planning Points to Ponder

Some key questions that bankers need to ask them when planning their marketing strategies in the new millenium:

* What will banks look like in the future?

* Will bank asset size determine success or failure?

* What will banks have to do to ensure success?

* How will the "new competition" impact the individual bank?

* Can all of the banks make the "cut"? If so, will banks have a rising investment value? Will the banks be relevant to their customer/prospect base?

* Do banks want to make the "cut"? If they do, how will they position themselves to survive and prosper?