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Welcome aboard: everyone knows it's a good idea to greet new customers. But banks need to go a step further by creating a structured program to cross-sell these new people and lock them in--so that deposits don't go out the back door as fast as they come in the front.


With interest-rate spreads compressed, the primary objective today for most financial institutions is to increase core deposits. Unfortunately, marketing departments are faced with limited (or reduced) marketing budgets to accomplish the task of bringing in--and retaining--larger amounts of core deposits.

"Our prime objectives in establishing our on-boarding program," according to Thomas D. Woodbery, senior vice president and marketing director, Security Bank Corp. (assets: $2.5 billion), Macon, Ga. "were to build a systematic and consistent program with our new household accounts, and to extend the life of the household using additional services of Security Bank."

Most banks with a formal on-boarding program understand the dual purpose of communicating with new customers, both to recognize the new relationship and to expand upon it by adding other services.

According to Heather Anderson, vice president, direct channel marketing manager, Provident Bank (assets: $6 billion), Baltimore, the bank's objectives for the on-boarding program were "to welcome customers, ensure the account opening went smoothly, and inquire about additional products and services they may need."

According to a sample survey of banks nationwide, 80 percent of respondents said they had a regular "new customer welcome" program in place, while 20 percent did not. Reflecting the dual objectives of on-boarding, 60 percent reported their goal was the retention of customers while 40 percent were aimed at cross-selling additional products.

Improving retention

New customer attrition within the first three to six months can be up to 200 percent higher than annualized rates. And the simple act of calling or sending a letter to new customers to thank them for their business and explain the features of the product they just purchased can go a long way in ensuring their satisfaction.

Since the biggest contributor to customer attrition within the first six months is a product or service that does not live up to expectations, clearing that hurdle should be the first priority to help ensure a lasting relationship.

Because customers with two or more services are 33 percent less likely to leave the bank, cross-selling should a major objective of an on-boarding program. Research shows new customers are six times' more likely to open new accounts" when compared to prospects. And 75 percent of cross-sales from retail checking customers occur within 90 days of account opening.

The bar graph (page 20) shows the dramatic difference between marketing to raw prospects compared to existing customers. The benefit of already having the banking relationship and being happy with the product they have are the keys to adding to that relationship.


With this small window of opportunity, many financial institutions are implementing an intelligent on-boarding strategy and some report reducing new checking attrition by 50 percent.

Communication strategies

The traditional "note from the branch manager" has been replaced with a structured series of contacts from the bank. These contacts typically include some combination of personal phone calls and/or personalized letters from the bank president or the branch manager.

For example, Security Bank's on-boarding program is a series of three mailed contacts to all new customers:

* Mailing #1: "Thank you" note from the branch welcoming them to the bank.

* Mailing #2: Letter mailing with product-specific cross-sell offer.

* Mailing #3: Letter package with second product-specific cross-sell.

Since each customer will receive three "touches" in a typical bank's program, each month's mailings would have a total of three cells: customers receiving their first welcome letter, customers receiving the cross-sell letter (this segment received the welcome letter the previous month), and customers receiving the second cross-sell offer (this segment received the first cross-sell letter the previous month).

"Our branch personnel were reluctant at first, thinking it would be too impersonal," says Security's Woodbery. "But once they saw the program in action with the letter coming from the branch with their signature, they accept it as an organized courtesy."

Customers targeted by on-boarding tend to open more accounts, with higher deposits.

The program at Grand Bank & Trust of Florida (assets: $457 million), West Palm Beach, Fla., is a combination of welcome mailings, on-boarding to cross-sell the next-most-likely product, and then a cross-sell to selected customers across their whole database.


"Combining the on-boarding and the cross-sell programs is very cost effective and has streamlined the whole process from implementation to sales tracking," says Mark Silverstein, senior vice president of the bank.

"As an added bonus, we incorporated a mini new-customer survey in the welcome letters. We are hoping for some constructive feedback on our account opening process," he adds.

Rebecca B. Lutz, first vice president and marketing director of Capitol Federal Savings Bank (assets: $7.8 billion), Topeka, Kan., reports, "We want to create a variety of opportunities for our bank personnel to reach out to our new customers. These include interacting with new customers to facilitate their needs, fostering these new relationships through a personal approach, and identifying their needs for additional bank services."

The program incorporates mailed communications supplemented with personal calls from branch staff, she explains. "This continual complimentary process allows us to cross-sell products and services to new households while increasing retention and loyalty among these new customers. During the initial days of our new relationships, we want to demonstrate a higher level of personal banking." Whether offering customers nationwide access of the bank's Internet and debit card services, or through personal contact, the bank's goal is to live up to True Blue, which is the name of the bank's trademarked customer service program.

Creative considerations

"If we are going to position ourselves as the local bank," says Silverstein of Grand Bank & Trust, "our mailing program has to give the impression of a highly personalized communication from us to our valued customers." To that end, most bank on-boarding programs use a personalized letter format, with a signature from either the bank president or local branch manager.

Variables are typically also built into the letter copy that recognize what product the new customer opened, and then, on the cross-sell portion, copy can be varied to highlight the most likely next product for them to purchase. Laser variables are also used to indicate the local branch manager, their address and phone number.

Refining the mailing list

Because of the fragility of the new' relationship, care should be taken when selecting the customers for phone calls or mailings. It is important to identify the correct product opened in addition to other products the household may have opened.

This is necessary not only to explain the benefits of the current product but to ensure that banks don't try to cross-sell the customer something they already have. If the bank is unsure about the quality of house holding on their marketing customer information file (MCIF) or if the bank doesn't have an MCIE it is best to remain generic in the offerings or to outsource to a service provider.

To reduce mailing size and cost, it is also possible through the use of predictive modeling to identify new customers who are less likely to open more accounts. These customers can then be eliminated from the cross-sell portion.

A predictive model would look at the past history of new account openings and attempt to forecast which households would be nonresponsive to an additional product cross-sell at this time. This is practical if the savings from the reduction of mail is greater than the cost of the modeling. Generally, the break-even point is a bank with somewhere between 1,000 and 2,000 new customers per month.

Cost-benefit of on-boarding It is agreed by most banks that the ideal cross-sell takes place in the branch at the time of account opening. But most banks also recognize that time, environment and skills do not always make this a successful touch point, so a structured program ensures that the critical communications take place.

According to Provident Bank's Heather Anderson, "The reaction from our branch staff has been very positive. They see customers taking on additional services that were perhaps overlooked at account opening, and deepening our relationship very quickly by cross-selling these new households."

A common myth says, "Most new customers will open new accounts with us anyway." But control group studies have shown that while the average new-account opening rate fur new customers who were not on-boarded is 2.6 percent, those households will open twice as many new accounts when they are the target of a structured on-boarding program.

As an example of potential results, the grids (above) show a comparison of new accounts and additional deposits gained for a bank that has 500 new customers per month. It assumes an average balance on a mixture of deposit accounts of $3,900 and a normal attrition rate of 30 percent in the first year (without an on-boarding program).

A successful effort can increase accounts by over 1,000 for the year and bring in an additional $4 million in deposits.

The benefits on an on-boarding program can be as basic as goodwill and reduced attrition, but most bank marketers are looking for more. According to Provident Bank's Anderson, "We are getting a great response to our three-week service letters to new checking customers, adding services like Internet banking, debit card and direct deposit. And for our six-week letters, we are seeing a lot of interest in home equity especially, leading to applications and approvals."

The Three Objectives of an On-Boarding Program:

* Welcome all new customers.

* Cross-sell logical next product.

* Establish lasting relationship.

Christopher Wachtel is president of WordCom, a Connecticut-based intelligent target marketing company specializing in the banking industry for more than 25 years. Email:
Customers targeted by on-boarding
tend to open more accounts, with
higher deposits.

 Per Month Per year

Accounts Gained 88 1,056
Additional Deposits $ 343,200 $4,118,400

New customer who are targeted with an on-boarding
program have a lower attrition rate and open more

 Onboarding Onboarding

New accounts per month 500 500
Average balance $3,900 $3,900
Attrition rate for new customers 30% 15%
Cross-sell additional accounts 2.6% 5.2%
Net Accounts 359 447

New customers who receive a
cross-sell offer open twice as many
accounts compared to those who do
not receive an offer.

Open Rate--Additional Accounts

No Onboarding 2.6%
Onboarding 5.2%

Note: Table made from bar graph.
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Title Annotation:On-Boarding
Author:Wachtel, Christopher
Publication:ABA Bank Marketing
Date:Dec 1, 2007
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