Royal bank of Canada & USA

In the past, most financial institutions selected their customers quite simply — they were the people who walked in the front door. However, in today’s competitive environment, waiting for the people to come to you is no longer good enough.

With only so many customers to go around and more and more financial institutions out there hustling, the power has shifted to the customers. This translates into one basic criteria in their choice of financial institution: “Show me what you can do for me that the bank or brokerage firm down the street can’t do.”

In this era of specialization, you must accept that you can’t be all things to all people. Instead, you need to be many things to only some people, to focus your attentions on those groups of consumers whose needs you are going to be the best at fulfilling.

Consumers will choose the financial companies they frequent or the financial products they use based on what they perceive as being valuable. And, as the following stories show, not everyone agrees on what is of value. Upscale patrons, for example, at the Royal Bank of Canada, Canada’s largest commercial bank, responded to a bit of special treatment and a consolidated account for all their needs.

In contrast, the more moderately endowed clientele of San Francisco-based First Nationwide Bank was content to settle for a little respect from bank employees.
So, if different groups of consumers are seeking different things from their financial institutions, how do you isolate those who could take advantage of your company’s offerings?

Royal Bank of Canada
Chartered in 1869, The Royal Bank of Canada is Canada’s largest bank, with assets at the end of fiscal 1987 of $102.2 billion. Two fundamental goals have always been paramount: excellence in financial service across Canada and vigorous participation in selected international financial markets.

The Royal Bank’s extensive network of branches, subsidiaries and affiliates comprise more than 1,600 operating units in 39 countries. One of the world’s largest retail banks, the Royal is also North America’s sixth largest bank overall. Corporate head office is in Montreal, with headquarters functions located in Montreal, Toronto, Winnipeg and Calgary.

The bank’s domestic operations include 1,336 Personal Touch Banking machines and a network of 1,467 branches serving individuals, businesses and communities across the country. Global coverage is provided by more than 135 corporate banking, investment banking, treasury and retail operating units outside Canada and through 5,300 correspondent banking relationships in nearly every country in the world. The bank’s international operations account for approximately a third of its assets.

Royal Bank management believes that success is best achieved by providing the highest quality banking and financial services where clients need them. To that end, the bank focuses on the selection, training and development of its staff and puts a heavy premium upon responsiveness, innovation, skill and knowledge, as well as judgment, integrity, and the highest standards of ethics and social responsibility.

The Royal Bank of Canada knew through experience that marketing to a target group of consumers could result in sub substantial rewards. Its private banking centers, catering to the top one percent of the Canadian population, each turn over $1 million in revenue annually. For those fortunate few who earn an annual income in excess of $100,000, a senior banking specialist attends to their every banking whim in plush, private quarters, segregated from the bank’s other facilities.

Because federal tax statistics indicate that more and more Canadians are approaching this realm of affluence, the Royal’s management reasoned that they could snatch a larger piece of this prosperous pie by applying the lessons learned from their private banking program to the next level down the income pyramid. But, how was this to be done at a profit?

“It is not a matter of what you think or what I think; it’s whether or not this information (on what the target market wants) is valid.”
Linda Kanner, division executive. Bank of :Boston Corporation.
Revenue, volume and cost limitations precluded the use of the highly customized private banking approach. Yet, the bank’s regular research project, a series of random personal interviews every three years with between 2,500 and 4,200 Canadians, clearly indicated that affluence (defined as a minimum personal income of $60,000) dramatically altered an individual’s financial needs and concerns. To better service those Canadians whose incomes fell within the range of $60,000 to $100,000 and to keep ahead of competitive offerings to these people, the Royal had to find a way to cater to their unique requirements.

The answer was a mass upscale account, “Royal VIP Service,” a multiple-service package aimed at the upper echelons of Canada’s wage earners. For a flat monthly fee of $18, this unique product consolidates virtually all of a customer’s basic banking needs into a single account relationship, and includes special personal credit lines, a host of no-fee services such as traveler’s checks and mortgage renewals, access to reduced commission charges for securities transactions, overdraft protection, a premier credit card, and most importantly, a personal account manager.

Sold on the key role of market research, the Royal first armed itself with research on exactly who its affluent customers were and what financial products or services they wanted. Focus group interviews with target customers aided in the development of the Royal VIP package design, advertising presentations, pricing and even the name of the service (Fig. 1-1).

In brainstorming sessions pre-product launch, field personnel punctuated the need for in-depth staff training including the development of an explanatory video. Bank employees were introduced to the Royal VIP Service package in mid November 1985. A direct mail drop to existing target clients took place in December. The full product inauguration, complete with targeted print and direct mail programs, was held back until Spring 1986.

This allowed customer service reps the time to personally contact their key customers before any public announcements were made.
Initially sales drooped due to several small, but irritating problems — for example, the distinctive gold varnish on the Royal VIP Visa cards delaminated, and the quality of the first batch of VIP checks left a great deal to be desired.

Quips Jim Walker, marketing and sales vice president of Personal Banking, “Everything that could go wrong did go wrong.” Within a year, however, over 6,200 VIP accounts had been opened. Today, these prestigious accounts are being added at the rate of about 2,000 per month.

Bank of Boston Corporation has also focused its marketing efforts on the upscale market. Four years ago, members of the bank’s retail management team found themselves in the throes of designing an aggressive new plan for growing their Massachusetts franchise. Statewide penetration had been achieved through the acquisition of eight smaller players. The team grappled with the next step, that of implementing a strategy to target the right products and promotion to the right audiences. Newly hired head of Product Management and Marketing, Linda Kanner, set to work on this task.

As the largest bank in the New England region, Bank of Boston could not afford to simply turn its back on less affluent customers and concentrate all marketing efforts on the upscalers. Kanner explains, “Many of our customers want simple, low-cost solutions to their financial needs. We give them that — with our automated teller machine (ATM) networks, for example. However, as their income grows, so will their need for more complex products and services; and, if we’re not on the ball at this point, we’ll lose them to our more creative competitors.”

“Senior management has to be willing to try various things and
have them fail.” Linda Kanner division executive, Bank of Boston.
At the same time, the bank’s profitability then and now rests with building stronger relationships with its moneyed clientele. Kanner puts this strategy into concrete terms: “To become the financial services institution of choice for all affluent customers and businesses in Massachusetts; to be the preeminent and most profitable bank by being the predominant player in these targeted segments.” She continues, “Although we intend to remain an active player in the mass market, we want the consumer who has more complex and extensive financial needs to say that Bank of Boston is the bank for people like me.”

Through a series of in-house telephone surveys, the purchase of some outside research data, and on-file account demographics. Kanner’s people generated financial and lifestyle profiles of the bank’s customers.

Keying in on the most affluent clients, those earning over $50,000 per year, they discovered some distinctive differences between the upscale market and its flipside, the downscale group of consumers, “For downscale people, money is a problem; it is something they worry about.” says Kanner.

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