Money market and ATM card | Bank
Once you’ve earmarked the special customer groups that you’d like to call your own, and you’ve learned what these people expect from a financial institution, you are ready for the next step — determining how you are going to deliver your products. This means you must decide on the most efficient way to make your products accessible to clients and potential clients.
As mentioned in Chapter 2, much of this is a matter of loca-tional convenience — you must deliver your product where it is convenient for the market you have targeted. This no longer necessitates that you locate brick-and-mortar outlets on every street corner.
With new technological aids, such as automated teller machines and computerized telephone services, you have much more flexibility in deciding the “Where” of product delivery. Canadian trust company, DirecTrust, for example, boasts of deposits of nearly $82 million just 14 months after setting up a direct response operation that allows Toronto customers to make financial transactions entirely over the phone.
The following stories illustrate how some other financial institutions have adapted the Where aspect into their marketing strategies.
BE WHERE YOUR CUSTOMERS ARE
A trip to a financial institution constitutes only one task on most people’s things-to-do list, and for today’s customers, time is considered of the essence. Hence the trend towards consolidating personal chores into as few steps as possible. To encourage a profitable turnover in their institutions, financial companies have to look towards locating outlets close to where potential customers are working, shopping, or playing.
NATIONAL COMMERCE BANCORPORATION
IN KROGER STORES WITH “MONEY MARKETS”
Where do financial institutions fit into this one-stop shopping rend? Somewhat out in left field, according to John LeCave, first vice president of Memphis-based National Commerce Ban-corporation. LeCave suggests that financial companies, particularly banks, like to see themselves as the center of every consumer’s universe. However, research shows that for NCBC’s target market — middle Americans earning approximately $20,000 to $30,000 a year — a trip to the bank is more of a nuisance than a highlight of their daily activities. These people spend most of their personal time in malls and supermarkets, and prefer it this way.
NCBC saw this proclivity as an opportunity to differentiate itself from the great mass of me-too financial firms. In 1983, in search of wider profit margins, the firm had decided to increase its share of the retail business but had reached an impasse. “We tried to do this for several years in the traditional way, through promotions and advertising, without success,” confesses Thomas Carrot, NCBC’s president. “We didn’t lose any of our customers, but neither did we get any of our competitors’ customers.”
The firm attributed this stagnation to customer loyalty. However, subsequent research revealed convenience was at the heart of customer choice, not loyalty. Further, it was learned that middle-income families shop more frequently at supermarkets than they do drugstores or general merchandise companies, suggesting that teaming up with a grocery chain might allow the bank to provide the kind of convenience its customers wanted.
In parallel with NCBC’s searchings, The Kroger Company, a U.S. grocery store chain with annual sales in excess of $18 billion, was researching ways to add value to its customers” shopping experience. Kroger’s research disclosed financial services as high on customers’ wish lists for supermarket additions. The two firms met, found their needs and resources to be complementary, and a deal was struck.
The idea of supermarket banking looked great on paper, given NCBC’s preliminary research, but the firm wanted more proof, so it tested its hunch on real customers before committing substantial funds to this convenience strategy. The response was overwhelming. Within two years, NCBC had placed 30 company-operated branch banks, or “Money Markets,” in Kroger stores across Tennessee, plus over 22 sub-licenses in areas elsewhere throughout the southeastern states (Fig. 3-1).
NCBC’s Money Markets are more than just 250 to 600 feet carved out of supermarket shelf space. They are a group of bright, verbal, attractive people (or BVAs as NCBC’s management has affectionately christened them) who are out in the store aisles, meeting the customers and reminding them of the convenience of the NCBC Money Market service. And that service is convenient. Locations are where people come to shop (on average eight to ten times per month versus a four- to six-time monthly pattern for banks) and hours of operation are more in tune with customer shopping patterns, with late night and Saturday openings.
This high-touch convenience strategy has paid off handsomely for NCBC, although there were a few start-up glitches. In intercept interviews and focus group sessions, supermarket customers indicated that their first reaction to the NCBC Money Market was to think of it as a convenient place to cash checks and to make deposits. To counter this perception, NCBC launched a concentrated promotional campaign. In-store message panels, public address system announcements, marketing literature racks plus ads in Kroger’s weekly tabloids finally opened customers’ eyes to the full-service potential of these new mini-bank branches.
NCBC’s initial monthly goal of 100 new accounts per store was met in six months, and growth has since accelerated, averaging 134 accounts per month. “We have been in business for 115 years and have opened 75,000 retail deposit accounts during that time,” says Garrott. “And now, in less than two years, we’ve added 45,000 new ones!” The bank has also been successful in moving closer to its target 50-50 split between commercial and retail loans. From a low of less than 10% retail in 1983, the firm’s ratio is now 30% retail versus 70% commercial. And the icing on the NCBC Money Market cake has been the reduction in branch development costs — only $100,000 to $120,000 for a full-service Kroger connection versus a price tag of up to $1.5 million for a traditional branch.
FIRST NATIONWIDE BANK IN K MART STORES
First Nationwide Bank has also adopted a low-cost, one-stop shopping strategy to financial services delivery. Its symbiotic arrangement is with the world’s third largest retail chain, K mart Corporation, a key shopping stop of First Nationwide’s middle-income customers. President Robert Lackovic notes that his firm did do pilot programs with another major U.S. retailer, J.C. Penny. “We went through a lot of iterations, different ways of going at things. That is what you do in pilot programs.” Ultimately, the K mart connection won out. Lackovic explains, “What we do in K marts is essentially what K mart itself does — namely, provide value for our customers’ money.”
Opening at an average rate of four convenience branches per month, the K mart/First Nationwide branch network of 164 outlets is able to provide middle-income families continuity in their banking relationships. With outlets spread across 11 states, it is conceivable that, wherever a customer may move, there will be a First Nationwide Bank branch available at the local K mart store. This element of convenience has obviously appealed to First Nationwide’s customers; the bank has seen its profit level consistently rise since the first K mart outlet was built in 1984.
RAINIER NATIONAL BANK
MORE ATMs IN CONVENIENT LOCATIONS
A high-tech approach to getting the bank out to the people is the modus operand! for Rainier National Bank. In the late 1970s, the bank conducted multiple focus group and intercept interviews with its customers. A clear pattern emerged. Rainier clients saw little difference among financial product offerings, leaving only the level of service provided as a way for them to judge the quality of a financial institution. A personal banking strategy coupled with extensive automation through automatic teller machines (ATMs) allowed Rainier to provide the personal service demanded by its customers, yet keep transactional costs to a minimum.
Historically, however, the bank’s ATMs had been set up as a side-kick operation to a traditional branch. This may have made a good deal of sense from an operational viewpoint, but was in some conflict with customer preference Focus group interviews with the prime ATM target — consumers with slightly higher-than-average incomes and educational backgrounds, and whose ages fell between 18 and 45 years — revealed a preference to have the machines close to where they worked and shopped. In short, these people wanted access to funds in places where the money was being spent.
Rainier responded in 1982 by first filling in the gaps at current branches, then striking out to malls, grocery stores, and major employment centers such as Hewlett-Packard plants in Seattle. A $2-million commitment and four years later, the Rainier ATM contingent sports 156 machines.
Given the substantial investment of resources in the automa-tive process, the bank has naturally been keen to get its machine usage rates up. Even though an ATM reminder appears on all Rainier promotional material, a continuing battle rages to get the majority of customers to do such routine transactions as cashing a check through the machines.
The company has used two research techniques to get at the mystery behind this resistance: traditional focus group sessions and a series of branch intercept interviews. In the latter, branch people approach individuals languishing in long teller lines and ask such questions as, ‘Do you know what an ATM is?’ or ‘If we gave you an ATM card, would you use it?’
These periodic customer surveys revealed a clue to the ATM usage barrier. Consumers unaccustomed to the machine were not willing to risk looking foolish when giving it a try. However, if someone were to show them how; well then, that would be different. In response to this attitude, the bank built up a pool of demonstrators, armed them with a complete manual, and set them forth.
Once in the branches, the demonstrators would approach people in teller lines, asking them why they were there, and, if their banking business could be handled as easily at the ATM they would pull them gently out of line and show them how to use the machine. This tactic, along with the rest of Rainier’s automated convenience and personal service strategy has worked in the bank’s favor.