George Hollister
The most frequently used term in financial service marketing in the past few years seems to have been “FREE”! Free Checking. No-Fee Credit Cards. No-Fee this. Free that.
I expect that will largely come to an end in 2011. Reg E, the Card Act, and the recent Fed decision on debit card transaction fees will all result in the end of “Free” in bank marketing. Totally free will evolve to “Free if,” or “Free with” this year. In other words, you can get free checking if you maintain a minimum balance, or with certain activity on your account. And it’s already started.
In July, Wells Fargo announced that it would no longer offer free checking, charging a maintenance fee unless a minimum monthly deposit is made or a minimum balance is maintained. Similarly, Fifth Third Bank stopped offering free checking to new customers unless a direct or automated deposit program is selected. This isn’t a new concept, but the requirements and minimums are getting higher and fees are being considered for products that, not too long ago, banks were incenting their customers to use. Can you say Debit Card transaction fee? I bet we’ll see it being instituted in some banks this year.
The impact on marketing will be significant as well. Saturation mailings in a branch trade area with a “Free Checking” message may go the way of the dinosaur. The goal of simply growing the number of accounts will give way to the need to grow the number of profitable customers. This implies that an understanding of the full picture of a customer’s relationship with the bank, or a prospect’s potential relationship with the bank, will become paramount—for both pricing and marketing purposes. This requires a marketing database and customer analytics to drive more effective segmentation and targeting. It requires integration of your customers’ on-line and off-line data to better understand and communicate with them. Integrating customer database analytics with web analytics is a start.
And, for some, it may require some changes to the organization of marketing departments within the institutions. Product marketing silos that restrict the ability of the bank to look across the entire customer relationship will be reconsidered in favor of customer relationship strategies and unified marketing efforts that maximize the value of the relationship — for the institution and for the customer.
What happens to all those customers brought in by the “Free” campaigns of the past few years? Financial providers will need to take a good look at those customers and determine which are valuable, to the future of the bank and which are, well, less valuable ,and manage them appropriately. After all, as explained by BofA in a recent Huffington Post article
“Customers never had free checking accounts,” Bank of America spokeswoman Anne Pace said. “They always paid for it in other ways, sometimes with penalty fees.”
Thoughts?
Resources:
Huffington Post – Free Checking is Disappearing
About the Author:
George Hollister is the Financial Services Practice Leader with SIGMA Marketing Group, a marketing analytics agency. Connect with George on LinkedIn or follow him on Twitter.
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