Database marketing: the next phase

Financial institutions are

maximizing the marketing weapon that databases provide

Several years ago, when on a trip to Vancouver, I found myself short of cash (cash machines did not exist at the time.)

I went into the local branch of my bank to request it cash a cheque.

The teller advised she would have to call my branch in Toronto to make sure the balance in my account would cover the amount of my cheque.

Worldwide network

Today, I can go anywhere in the world with my Visa or MasterCard and have access through a worldwide network of cash machines to as much cash as I need.

The difference is that, with time, financial institutions are becoming more and more sophisticated in dealing with customers and using the powerful marketing weapon that their databases provide.

Opportunities

Database marketing provides exceptional opportunities to use available information to communicate one-on-one with one’s customers and to market to that specific customer.

The next phase is the creation of valuable enhancements to the customer – things such as discount insurance rates and flexible mortgages – items that will make it worthwhile for the customer to use more and more of the financial institution’s services.

But rather than offering these items ‘en masse,’ they will be tailored to specific customers, addressing their specific needs.

We are already seeing the offering of non-financial enhancements such as travel and car discounts through affinity credit card relationships as a means of attracting and retaining customers, and this type of sophisticated marketing will be adopted in other financial service areas.

And now that financial institutions have mastered mass direct marketing, we are now seeing a process that marries this marketing savvy with the extraordinary technological innovations available.

And that is where database marketing comes into play.

‘Mass’ basis

Most financial institutions are using direct marketing on a ‘mass’ basis. In other words, all mailings to Visa cardholders are virtually identical.

The same applies to mailings to rrsp and mortgage customers. Currently, customers using two or more services may receive the same mailing two or three times.

As more financial institutions discover the power of database marketing, they will find ways to increase their portfolios at significantly reduced costs because it is much less expensive to convert or upsell existing customers than to attract new customers.

For example, database marketing techniques allow the financial institution to segment its files into numerous different categories. This allows them to focus market rather than mass market.

For instance, customers with an rrsp portfolio in the $200,000 range require different services than customers with $50,000 rrsps.

And all of these services can be provided to customers much more easily and simply, because there is no need to complete tiresome forms, since all the personal and financial data pertaining to each customer is already in his/her file.

So, among other benefits, database marketing will make dealing with the financial institution a more enjoyable and less time-consuming experience.

We will even see the day when a lot of services will be available on automated teller machines.

Press the button

You need a $5,000 loan for an rrsp? Just press the button and push in $5,000.

You want to buy mutual funds? Press another button and all of the mutual funds available will appear on the screen and you can select the one you want.

Interestingly, financial institutions at present have all the information they need on their customers but, unfortunately, not in the same file.

Search manually

For instance, if I go to a bank and ask for my savings account number, they will probably have to search for it manually.

If I conduct a chequing account transaction, chances are they also will not know what other services I am using. That will change quickly.

However, if all of my information were gathered in one file, there would be an incredible opportunity to segment files and market to various categories of customers.

Loyalty marketing programs are a proven method of increasing business. One has to look no further than at Club Z, Air Miles, or any of the new affinity credit card programs (i