Friday, February 17, 2012

Banks and Credit Unions Focusing on Onboarding to Build Revenues

There has never been so much pressure on financial institutions to maximize the revenue and relationship potential of each customer. With government regulations reducing fee income, historically narrow interest rate spreads, and consumer satisfaction with many financial institutions wavering, there's a need to ensure that once a customer opens a new account, every effort is made to help the customer understand and use their account, expand their relationship, and increase loyalty to your organization.

While time and resources have been dedicated to new customer acquisition processes in the past, a majority of financial institutions are now working to implement or improve the communication process right after account opening and for several months into the relationship. And instead of a single welcome letter (or nothing at all), more and more organizations are using a series of well-timed, personalized communications leveraging multiple channels to improve effectiveness.

According to the recently completed 2012 Financial Services Marketing Survey done in partnership with The Financial Brand, both banks and credit unions indicated that onboarding would be one of the most important strategies for the next 12-24 months, with virtually no institutions stating that the importance of onboarding would be less.

2012 Financial Services Marketing Survey

This increased emphasis makes sense, since in an informal survey done at last year's BAI PaymentsConnect conference, significantly less than 50% of the attendees indicated that they had an onboarding program at their institution. In addition, with first year attrition rates ranging from 25% to 30% and even higher at most financial institutions, stemming this attrition provides a significant revenue opportunity. When you consider the cost of acquiring (or replacing) a new account, the revenue impact potential of that account, and the opportunity to expand the customer share of wallet, the rationale for a strong onboarding program is evident. (see previous BMS post The Business Case for Onboarding)

In a recent onboarding webinar conducted in conjunction with Forrester Research highlighting the results of a recent research report entitled, "A Strategic Approach to Onboarding Financial Service Consumers" , Brad Strothkamp highlighted the primary goals of most onboarding programs as improving activation, increasing usage, driving cross-selling and enhancing the overall customer experience, with the primary objective of stemming attrition. 

Onboarding Program Objectives (Forrester Research, 2012)

So where should banks and credit unions start as they build a new customer onboarding program? In a white paper I just completed entitled, "Ten Strategies for an Award Winning Onboarding Process", I provide what I have found to be the most important elements needed for a successful onboarding program. These include:

        1. Acquire the right account holder
        2. Provide relevant communication, early and often
        3. Use the right message, with the right channel(s) at the right time
        4. Know your audience
        5. Encourage usage and engagement before cross-selling
        6. Model for the right solution
        7. Personalize your message(s)
        8. View onboarding as a 'process' not a 'program'
        9. Measure results and adjust your program accordingly
        10. Have a single point of responsibility
The impact of following these ten steps can result in a significant improvement in retention and revenues based on an analysis conducted by Harland Clarke using their industry database. In my experience, the impact of a change of only 1% in retention can many times fund an entire onboarding initiative.

Source: Harland Clarke Marketing Services Industry Database, 2012

So, what are the hurdles that financial institutions face when trying to implement an effective onboarding program? According to Forrester's Strothkamp and supported by my experience in assisting organizations with onboarding programs over the past 7 years, the primary obstacles to success usually include:

      • Lack of a single owner: Since onboarding crosses over many product lines, uses multiple channels and impacts an assortment relationship building objectives (engagement, cross-selling, retention) it is important to have a single point of reference to ensure consistent communication from the customer's perspective. A single owner also helps to eliminate a focus on products as opposed to the customer.
      • Data availability: The success of an onboarding program hinges on the immediate availability of data. While most traditional marketing initiatives can leverage a weekly or month-end database build, best-in-class onboarding programs use daily data to drive the initial communication to the customer (usually an email thank you and/or appreciation call). Combining multiple data sources quickly also assists with later targeted communication around engagement and cross-selling.
      • Customer/Channel Blindness: Making assumptions around the customer's financial objectives or channel preferences can undermine the optimization of an onboarding process. By asking the new customers their financial goals, what financial products they are using elsewhere, who is the primary decision maker on the account, and what channel(s) he/she would like to be communicated with turbocharges an already effective process. These questions can be asked at the new account desk or can be part of the early customer communications.
      • Goal Alignment: The best onboarding goals usually are aligned around overarching customer metrics like retention, engagement and share of wallet as opposed to being focused on specific product sales goals. For organizations funding onboarding through product groups, this can be difficult. As a result, we usually recommend that onboarding be funded (and measured) on an enterprise basis.
In the onboarding webinar presented by Harland Clarke and Forrester and in Brad Strothkamp's research study, a POST methodology was presented to underscore the importance of understanding People, Objectives, Strategies and Technology to achieve the desired onboarding results. This methodology can set the foundation for a strong program with market leading results. If any of these steps are skipped or misaligned, the results of an onboarding program will not be optimized.

Forrester Research POST Methodology, 2012

One of the most successful onboarding programs in the country has been done with Zions Bank, where multiple channels and a series of several well-timed and highly customized communications has resulted in best-in-class results. Program metrics include a 6:1 return on investment, a retention rate exceeding 96% and deposit growth of more than $50 million during a seven month period.

This highly integrated multi-channel effort by Zions Bank, Harland Clarke and Zions Bank's interactive agency Richter7 earned them the 2011 Gold Award for Marketing Strategies from the National Center for Database Marketing (NCDM).

Does your organization have an onboarding program? How effectively is the program improving engagement, cross-selling and retention? What have you found to be either the hurdle that is the most difficult or your key to success? I would love to hear from you.

1 comment:

  1. Great Post! With the number of bank customers leaving their current banks at around 10% (JD Powers) there is a huge opportunity for Banks and credit unions to take advantage of this. The issue though is the Small/Midsize Banks and credit unions know little to nothing about the new member walking in the door. The most they have is their credit score or a basic demographically or survey based segmentation. Most don't even have this.

    Are you aware that you could actually know the total assets of a person walking into a branch/call center/online. All the top banks, brokerage, and insurance companies are part of a consortium but very few Small/Mid size banks and credit unions are a part of it.

    Equifax's IXI Services division can help!

    Sheldon Jones