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Market research, analysis helps banks and credit unions hit their target

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Competing successfully in today's financial services industry can be challenging for banks and credit unions. The globalization of financial markets, increasing market penetration in the face of high customer churn, and the need to offer new products and services as a way of attracting and retaining customers often require an extra edge that can launch them into long-term profitability. Oftentimes, that edge can result from efficient and effective marketing.

"Today, it's really all about maximum impact for the investment," according to Jim Tindaro, CEO of San Diego-based AM-Strategies. "It's essential to have a brand campaign that distinguishes your organization from the rest of the herd, but you also have to be able to turn your image into profitability through marketing efficiency."

More and more, Tindaro says, banks and credit unions have to think and act like marketing organizations to continue doing business profitably in this increasingly competitive industry.

"Financial institutions must have a clear understanding that they offer a bundle of products and services, some of which are more profitable than others," Tindaro said. "To have a deep understanding of those products and a profile of the people who use those products, is absolutely critical. By segmenting their database, we can draw profiles of their various customers who use this suite of products and services, specifically target their most profitable type of customer and then tailor the message and the medium to them."

Tindaro says his agency's approach to marketing financial institutions is really no different than that of any other retail consumer product or service in terms of research, strategy and execution. They employ the same marketing disciplines used by major consumer product manufacturers like Proctor & Gamble (NYSE: PG) or Ford Motor Co. (NYSE: F) to develop products and target their messages to potential buyers. The technologies they've developed and the processes they use for consumer marketing are directly relatable and transferable to the financial services industry.

The agency's approach also involves applying the basic advertising and marketing principles of trial, frequency and average transaction.

"Everything we do boils down to those three elements," Tindaro said. "You get a customer to try a product, you get them to try it more frequently, and then you move them into other products that are more profitable to increase the average transaction amount."

To accomplish that seemingly simple yet lofty objective, Tindaro says the agency needs critical data, and they obtain it through their own research or through the institution's own database. They then segment the database to build profiles of current customers that are used to locate the same types of customers wherever else they may exist in the region. It's a process called geodemographic lifestyle segmentation analysis and it helps the financial institution target new members who are just like the ones they already have.

"We peel back each layer of the onion skin and carefully look at all the nuances of market segments to see where the best opportunities lie," Tindaro said. "With tight budgets and profit squeezes, you have to be able to wring out every bit of efficiency that you can, not only through pinpoint targeting but also through media accountability and auditing."

AM-Strategies president Kathy Cunningham pointed out that credit unions in particular, by virtue of their nonprofit status, have a fiduciary responsibility to members to manage their money responsibly and efficiently.

"One of the things we do with our media buying for our financial clients is to make sure that we are the most efficient with their dollars as we can possibly be," Cunningham said. "We have techniques and strategies that measure audience response and ensure that every spot the credit union pays for runs in the correct position, at the right time and features the right ad."

SMART, an acronym for Strategic Media Auditing for Radio and TV, is a new real-time media verification and auditing tool used by the agency to determine whether clients are receiving the impressions and rating points they purchased when they negotiated their contract.

Research has shown that up to 80 percent of electronic media schedules run incorrectly. A client can now know within hours, instead of months, if they got what they paid for. With so much competition for consumers' attention, it is more important than ever to make sure a client's spot reaches the right people at the right time, Cunningham explained.

"Whether the client has a $10,000 or a $10 million budget, they still want maximum impact and return on investment for their marketing dollars," she added. "There is increasingly higher demand for agencies that understand and use the technology needed to speed the reporting process."

The agency has also developed a marketing-driven media program that allows them to use market segmentation and analysis as a way of more efficiently purchasing broadcast media.

"We're the only ones who have this tool and this capability," Cunningham said. "We can conduct our research and develop profiles that provide age and qualitative data, enter that information into our proprietary media buying software, and that will allow us to identify broadcast media that are more likely to attract those types and numbers of people."

Not only can they determine radio or TV stations that fit a certain demographic, they can identify the actual programs on those stations that are consistent with a specific profile.

Cunningham said that, once again, it's all about efficiency when it comes to spending clients' advertising and marketing dollars.

"We can look at all three evening news programs, and although they have the same demographics, each one has a different lifestyle segment that is more prone to watch that program," she explained. "So even though each program may cost the same in terms of buying and running spots, one of them may be a much more efficient buy if it attracts people who resemble the target profile you're client is trying to reach."

Tindaro explains that effective marketing means beginning with the end in mind; that is, first determining your goals, your budget and your risk tolerance before doing anything else. He adds that it's important to focus marketing efforts on those people who are most likely to purchase your product -- that is your best customer. The information that helps determine who your best customer is can be found in various places throughout a business, but the best source is usually the customer himself. This can be accomplished rather inexpensively through comment cards, surveys and the like. Once you know who your best customers are, concentrate efforts on obtaining more of them.

Savvy marketing is also about more than simple demographics. That's a great first step, he says, but to effectively reach your best customer, a business has to go well beyond the basic demographics to how and where their customers live. In essence, the solution to effectively marketing them is often found in their lifestyle and the attitudes and perceptions that form the foundation of choice.

In such a highly competitive industry, banks and credit unions must be models of efficiency when it comes to marketing. They require advanced research capabilities to efficiently target customers and identify the most effective medium to deliver their message, as well as diligent monitoring to ensure that their dollars are being wisely spent and not wasted. Their opportunities for success are greatly improved when they concentrate on their business and place these more sophisticated marketing efforts in the capable hands of the experts who do it every day.

Barrett is a writer at Beck Ellman Heald.

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