Today's marketplace is complicated by significant changes in the business; new products, better informed customers, changes in communication, intense international competition, an increasingly restrictive regulatory environment, and advancements in analytics.  With the complexity of these challenges, we forget the simple rules that can set you apart from your competition:

• Listening to your customer
• Knowing your customer
• Promoting your brand
• Developing consistent treatments
• Having a best customer unit
• Maximizing every touch-point
• Monitoring the competition
• Considering the economy

Today, card companies are operating in an unprecedented environment.  The economy is contracting, new regulations are in place, and consumers are retrenching.   Today’s customers expect greater product variety and customization, more sophisticated product features, and better service.  Many companies are cutting their new account marketing budgets and increasingly turning their attention toward their existing customers and organic growth.  Mass marketing is giving way to a more targeted approach.  Transaction marketing, which focuses on the profitability of single transactions, is giving way to relationship marketing, which emphasizes long-term profitability over the life of a customer and across all product relationships.

Rule #1:  Listening To Your Customer

Customers are the lifeblood of any company.  Listening to your customer is critical to understanding their needs and growing your business.  It can make the difference between having a successful business and failure.
There are many ways we “hear” from our customers; customer complaints, spikes in customer attrition, investigative news programs, and complaints to regulatory agencies.  For every customer that shares their worries, concerns, or complaints, there are even more that express their dissatisfaction by simply moving to the competition.  Therefore, it is important for companies to have a “voice of the customer” program to capture customer feedback via reactive and proactive measures.

Reactive measures include direct customer contact (like phone calls, letters, emails, and instant message sessions) or observation of customer behaviors though monitoring customer transactions, changes in balance, attrition (forced, voluntary, and silent), and  “indirect “ observation of online behaviors such as blogs, social networks, and emails. 
Proactive Measures include interviews, surveys, customer service representatives, customer listening, and mystery shopping.  Interviews provide good qualitative insights (via open-ended questions), while surveys provide quantitative insights into product usage and customer interactions with the company.  Active dialog with customer-facing personnel (service, sales, account management, and collections representatives) about their observations can provide additional insight into customer behavior.  Likewise, customer listening, which requires management taking an active role in understanding the customer by listening into customer contact calls or taking phone calls; teaches empathy and allows for an excellent understanding of the business and challenges the customer may be experiencing.  Finally, the use of mystery shoppers - which involves role playing the customer experience, or requiring employees to candidly report on their own customer experiences, can provide some of the most direct feedback on company actions.

Communication is critical to resolving customer complaints.  Listen to the customer’s problem, communicate a plan to address the problem, and provide a timetable for resolution.  Providing a time table will help manage the customer's expectations.  Once the problem is resolved, communicate the resolution and thank the customer for bringing the issue to your attention.

Resolving customer complaints builds customer loyalty.  While counter intuitive; quickly addressing a problem can be better than never having had a problem.  Legendary customer satisfaction reputations are almost always based on a company’s consistent and quick resolution of problems.  Customers that feel you responded will often become an advocate for your business.

Track consumer complaints and watch for insightful patterns.  There is a number of useful software tools, much of it originally developed for spy agencies, which can assist in identifying problems through pattern recognition.  Look at your systems or procedures for items that are slipping through the cracks, as business processes are constantly evolving. Take a close look at critical systems and make sure that changes are not having unintended consequences. 
A review of closure reasons (if captured) can also be a good problem identifier.  After a complaint is resolved, conduct a post-mortem, take a close look at the procedures and systems, and implement changes to prevent a similar issue from recurring. 

Rule #2:  Knowing Your Customer

Changes in analytic tools, data sources, and use of segmentation allow more sophisticated issuers to answer a multitude of questions about their customers: who are they, where do they live, what do they do for a living, where do they shop, what do they buy, how much do they spend, how do they like to communicate, what interests them, what products do they use, or how profitable are they or could they be?
The goal of “knowing your customer” is to ultimately decide how to effectively communicate with them, determine what products they need, and identify what level of service they like.  Knowing the customer allows you to get the right products with the right pricing to the right person at the right time – critical for product usage and loyalty.  As such, it’s important to communicate with customers on an “individual” level while considering the customer’s total relationship.

Advancements in technology and analytics are supporting many of these changes:  online and wireless systems provide rich forms to communicate complex product features and support knowledge-intensive two-way exchanges (email and SMS) between the customer and issuer, customized marketing enables us to communicate with “individual customers” in highly personalized ways, and companies gather significant volumes of data on customers and their buying habits.
Advanced database software helps companies merge data from separate sources, yielding new information about customer attitudes and preferences, while advancements in computing power and new analytical tools help marketers use that information to develop a deeper understanding of trends in consumer behavior.

Rule #3:  Promoting Your Brand

Your brand should immediately convey your unique standing in the marketplace.  The American Marketing Association defines a brand as a "name, term, sign, symbol or design, or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of other sellers”.

Branding seeks to develop or align the expectations behind the brand experience, creating the impression that a brand associated with a product or service has certain qualities or characteristics that make it special or unique.  This requires some thought as to what characteristics you want to have associated with your brand.  Some of the most successful brands typically have only one or two characteristics associated with them.   For example: Louis Vuitton = Luxury, Wal-Mart = Inexpensive. 

This rule also applies to financial companies.  Do you want to be known for customer service, price, security, or depth of product offerings?  Of course the answer is “yes” to all of these characteristics, but being a leader in all areas is difficult, if not impossible. Thus, you should focus your branding strategy on the one or two qualities that will draw the attention of your potential customers.  If you can identify only one distinct quality of your business, your work is done. 

Branding typically includes developing a logo and a memorable tag line, and then promotion. Your logo should be simple and easy to remember and the tag line should immediately communicate what you do for your customers.
Branding is one of the keys to growing your business and communicating your product or service to the consumers.  The goals of a good brand are: deliver your message clearly, confirm your credibility, connect to your target prospects emotionally, motivate the buyer, and solidify user loyalty.

Once you have your brand established, the focus should be on promotion.  Promoting your brand is not that difficult.
You just need to follow the right branding strategy and your brand promotion is sure to be successful. 

When developing your branding strategy you should focus on the following:

• What products and/or services do you offer? Define the qualities of these services and/or products.
• What are the core values of your products and services? What are the core values of your company?
• What is the mission of your company?
• What does your company specialize in?
• Who is your target market? Who do your products and services attract?
• What is the tagline of your company? What message does your tagline send to your prospects?

Your branding strategy should be able to clearly answer all of the above questions.  A careful brand strategy, supported by a cleverly crafted advertising campaign, will be highly successful in convincing consumers to pay “premium” prices for products and services.  This concept is known as “creating value.”  It essentially consists of manipulating the projected image of the product by building a “value proposition” beyond what your competitors have to offer.

A good brand strategy, properly promoted and advertised, will:

• Increase loyalty and sales
• Create desired “value” for your products
• Improve your image in the marketplace - retain and improve your reputation

A strong brand is valuable in gaining market share and it's important to spend time investing in researching, defining, and building your brand.  After all, your brand is the source of a promise to your consumer.  It's the foundation of your marketing communication and one you do not want to be without.

Rule #4:  Developing Consistent Treatments

Consider the quaint vision of a customer in a small bank where the bank manager knows the customer by name, his or her family, employer, salary, banking needs and current products.  This customer will likely get consistent treatment on any number of bank products, regardless of whether business is conducted in person or on the phone.  Why?  The bank employees personally know that this individual has $75K in deposits, is a business owner, respected member of their community, and is not a credit risk – even if the customer is a couple days late on an installment loan.  No late fee will be assessed, nor is the customer’s deposit balance at any risk of attrition because of poor customer service.  This customer will likely continue to bank at this small bank because of the individual attention provided and relevancy of the products and services offered.

However, today’s banking environment has millions of customers, complex product offerings, multiple channels, and more often than not lacks a personal connection.  How do you utilize the vast amount of available information to market to, and communicate with customers as if you know them personally?  How do you make relevant marketing offers while continuing to nurture the existing relationship, all the while managing risk?

Fortunately, new tools and techniques exist that allow you to do exactly this.  Segmentation (also known as clustering) is a statistical approach that determines unique sub-groups of people with common likes and dislikes within a customer population.  Segmentation results from the observation that all potential users of a product are not alike, and that the same general appeal will not interest all prospects.

Segmentation allows you to better target customers by understanding their needs, communicating consistently and effectively, and providing them with relevant and timely products; leading to better activation rates, increased loyalty, and higher profits.  Segmentation creates the vital insights necessary for you to focus on your most profitable customer segments, and helps provide insights guiding the allocation of your company’s resources to maximizing ROI. 

There are 4 types of segmentation approaches:

Behavior  Based - product usage, brand loyalty, profitability

• Demographic Based - age, income, occupation, home ownership
• Psychographic Based - lifestyle, attitudes, beliefs, values, personality, buying motives, and product usage
• Geographic Based - region, country, province/state, top markets, and density (urban, semi-urban, rural)

Proper segmentation gives marketers precise insights into their customer base, improves targeting, allows consistent customer treatments to be developed, and allows the user to achieve successful strategies.

Rule #5:  Having a Best Customer Unit

It is critical that companies have “Best Customer” units and strategies focused on their most “valuable” customers.
Customers will generally fall into one of three groups (profitable, unprofitable, and those that are neither profitable nor unprofitable), and the proportion of each group varies across a financial institution.  For most card issuers, 20% of your customers produce 80-90% of your profit.

Focusing on your most profitable customers, those on the margins, and those that appear to be exhibiting profitable behavior elsewhere, is an effective strategy to make sure you protect those customers that drive the bulk of your profits and increase your share of wallet (SOW).

A strategy utilizing actual past profitability and predicted profitability will make sure you focus on the right customers; those that made you money and those that could make you money (controlling for expected losses, changes in pricing and account usage).

Rule #6:  Maximizing Every Touch Point

Marketing materials, call centers, product offers, and statements are just some of the many ways that financial institutions connect with their customers.  All of these contacts should be considered an opportunity to sell new products, gain additional insights, or build loyalty. 

Examples include:

Marketing materials, anything where the customer replies with a response; including applications, enrollment in various programs, credit line requests, and written communications are opportunities to gather a more complete picture of the customer.

Product offering enrollment, or lack thereof, tells you about the customer’s product preference.  A solicitation history database can be invaluable in understanding various customer segment product preferences.

Channels provide insights into customer communication preferences (e.g. younger customers prefer online channels).

Website visits, SMS, online chat sessions, etc.  can be an opportunity to update Stability, Ability, and Willingness to pay for information. For example, income, employer status, renting or own, length of employment or residence.

Voice Response Units (VRUs); the path taken within the VRU can provide insights into the desire for credit.

Statements can be an opportunity to sell merchandise; marketing to authorized users and providing disclosures.

Affinity relationships or partner marketing programs can provide valuable attitudinal insights.

Customer Service is a great opportunity to update customer information.  Too often these calls are simply one-way communications.

Collections information gathered when the customer is under financial stress can be used once the temporary situation is resolved.  Once in collections, too many issuers give up on the customer’s long-term relationship.  Showing an interest in the customer and a willingness to help can provide long-term relationships.
 

Finally, any information gathering efforts should be focused on moving towards establishing a deep understanding of the customer’s total relationship and the establishment of customer level profitability and lifetime value metrics.

Rule #7:  Monitoring the Competition

There are a lot of good sources for competitive data:

• Third parties subscription or fee services like Forrester, BAI, Aite Group, SNL Financial, Corporate Research International, etc., offer research based papers.
• Your own employees are a great source for competitive information.  Progressive companies establish libraries of new offers, disclosures, and other marketing materials and dedicate resources to fully utilize this information.
• Information on competitive offers, especially ones that may be targeted by your competitors directly at you, can be gleaned from customers that are calling to close their account.   Progressive companies not only capture close reasons like “competitor offer,” but also capture the details of the offer.
• Often innovative programs hit mainstream media and certainly industry trade publications.  Management should be encouraged to keep up with the latest offerings and encouraged to bring innovative ideas forward.
• Some companies use sophisticated software to monitor Blogs and online space for not just stories about them, but stories about their competition.

Rule #8:  Considering the Economy

In today’s environment, changes in the economy are critical to our business; impacting what products our customers’ desire, their general credit worthiness, and our ability to securitize and fund our business.  There are many good sources for economic data and it’s important to have at least a cursory understanding of economics.  In addition, considerations need to be given to identify economic indicators and leading or lagging indicators.

Keys to Success

Getting back to the basics can be an effective means to improve portfolio performance and certainly the effectiveness of your marketing efforts.  If you get the fundamentals right, everything else will fall into place.  However, to be successful, make sure you have senior management commitment, sponsorship, and involvement.  Align resources and budget so that, at a minimum, you are accomplishing these eight steps.  If necessary, empower a team with the right functions represented (including outside help if necessary) to get back to the basics. Don’t forget to develop an internal communication plan to get employees on board and to disseminate results and setup the proper feedback mechanisms for tracking progress.