vision 2014: how to turbo-charge growth of small business checking and lending

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How to turbocharge growth of small business checking and lending

Bob Tetenbaum First Manhattan Consulting Group

Laura DeSoto Experian

#vision2014

2 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Maximize profit from marketing spend

Typical goals for small business

► Maximize cross sell opportunities to current business and retail customers

► Add new accounts, balances – both loans and checking accounts from customers and prospects

► Achieve above-hurdle levels of return on marketing investment

► Develop and distribute high quality sales leads

► Increase effectiveness of field sales staff

Typical bank objectives


Full range of services are available:

1) Campaign test cell design

2) Competitive product suite analysis

3) Prospect list sourcing and integration with customer lists

4) Product-specific responder model file scoring

5) Target selection and mail file optimization

6) Creative development – typically 3+ versions – customized by segment

7) Direct mail production and on-site quality control

8) Campaign performance measurement – net of control

9) Targeting and creative optimization

The benefits of partnering

Result – minimal client workload


Approach to small business acquisition

Campaigns are designed to meet

client needs, e.g., grow business

lending or DDA accounts, etc.

Three distinct populations make up the file:

1) Existing small business customers

2) Retail customers that own a small

business but do not have a business

accounts with the bank

3) In-footprint small business prospects

Existing

13%

Retail

10%

Prospects

77%


Leveraging product-specific small business response models for both loans and deposits

Mailing proven creative packages that reflect the bank’s brand, value proposition, product specs, etc.

Providing ranked call lists for selective outbound phone follow-up

Measuring campaign results on net of control basis at a granular level

Additional keys to success


Prospect lists and firmographic data sourced from the largest business databases plus over 15 specialized data providers

High percentage tele-verification

Unparalleled accuracy and coverage

Allows for targeting specific objectives (e.g., identifying commercial mortgage loans likely to refinance)

Prospects pulled based on defined radius around each branch or sales office location

Business data sources


The core input:

15+ data sources, aggregated, de-duped, matched to customers and in-market prospects

Small business data resources

Business prospect

databases Firmographic

data

New to business

files

CRE and SBA loan holders

Import and

export data Other

specialty lists

Business owner

databases

UCC Filings

Business deposit

and loan balances

Business credit data

FMCG Direct small business

marketing database


Business credit data enhances targeting of customers and prospects

Credit usage data available on 60+% of businesses

Credit worthiness evaluated with Commercial Intelliscore®

Can identify known holders of commercial mortgages and SBA loans, businesses with active credit profiles (e.g., recent credit inquiries, UCC filings, etc.)

No requirement for firm offer of credit as business data does not fall under FCRA

Business credit data uses


Small business targeting models

Assess the risk level of each business

Determine the appropriate product offer and creative alignment

► Loan lead offer with deposits “backstop”

► Deposits lead offer with loan “backstop”

► Deposits offer only

Determine the propensity to respond

Generate the mail and follow-up phone files

Targeting and mail file selection


Built upon analysis of responses to millions of offers in hundreds of campaigns over the last 10 years

Are continuously optimized to:

► Incorporate insights from responses to creative tests, cash offers, rate specials on loans, etc.

► Reflect developments in the competitive environment

► Reflect data element improvements

Predict response to:

► Loan offers

► Deposit offers, including cash management and business services

Direct mail response models


Multiple offer versions reflect bank brand, value proposition, style guidelines, product specs, etc.

► Champion is upscale letter package with full color brochure; a business card can also be included

Direct mail creative



► Champion is upscale letter package with full color brochure; a business card can also be included

► Industry tailoring increases response among high priority segments




► Champion is upscale letter package with full color brochure; a business card can also be included.

► Industry tailoring increases response among high priority segments

► Champion / challenger creative testing optimizes response over time

● Outer envelope formats

● Messaging

● Imagery

● Call to action, etc.



Outbound calling the best leads enhances response, funded deposit and drawn loan balances and campaign profits

► Leads can be aligned to bank channels; e.g., branch managers, business banking officers, call centers

► Phone numbers are available for 80+% of prospect leads

► Phone lists have extensive information to aid in call preparation; e.g., industry type, number of employees, annual sales, UCC filings, credit quality, etc.

► Leads are ranked with response model scores to ensure optimal use of available resources

Follow-up phone calls


Verified phone

numbers and

owner/ principal

names






Business

addresses




Key attributes:

Annual sales $$

Deposit and loan potential $$

Distance to nearest branch

NAICS code and description


Direct mail impact can be precisely measured

Unmailed control cell – an exact “look-alike” to the mail population – is the baseline for BAU performance

Identical methods of tracking test and control are essential – matching responders, accounts, balances, etc.

Measurement includes both business and consumer accounts opened

► Many respondents will open both business and consumer accounts

► Some smaller businesses prefer to open consumer deposit and loan accounts vs. business accounts

Campaign measurement


Offers:

Business checking – free first order of checks

Business loans

► Prime plus 0.50% on business loans / lines of credit

► A preferred rate on owner-occupied real estate

Populations mailed:

Business customers

Consumer customer business owners

Prospects

Mail volume: 275,000 pieces

Client case study #1 Regional bank with ~650 branches


Net-of-control campaign results:

1,100 incremental business accounts plus 550 incremental consumer accounts

$80 million in business account balances; 45% deposits / 55% loans

$7.0 million in after cost profit (lifetime value based)

<3 month payback of campaign investment

1,700% return on marketing investment



Objective:

Acquire profitable business loans, checking, and savings. Use a tailored approach for the Medical, White Collar Professional Services and Wholesale segments

Offers:

Business banking bundle

A $400 cash bonus incentive tested in one region

Populations mailed:

Business customers

Consumer customer business owners

Prospects

Mail volume: 280,000 pieces



Net-of-control campaign results:

600 incremental business accounts plus 200 incremental consumer accounts

$67 million in business account balances: 55% deposits / 45% loans

>$6.0 million in after cost profit (lifetime value based)

<4 month payback of campaign investment

1,400% return on marketing investment (lifetime value based)



Client case study #3


Campaign insights

1 2 3 4 5 6 7 8 9 10 11

Ac

co

un

t re

sp

on

se

(g

ros

s)

Times mailed

Business-only impact Combined business and consumer impact

Additional mail touches over time increased conversion – there were no signs of marketing fatigue or “burn out”


Re

sp

on

se

ra

te

Sales band

Business account response

Net-of-control Gross

Campaign insights

$100,000 $25 million

Larger businesses generate correspondingly more attractive results

$100,000 $25 million

Ave

rag

e a

cc

ou

nt

ba

lan

ce

Average business account balance


Concept A Concept B Concept C Concept D

Net of control response Gross response

Campaign insights R

es

po

ns

e r

ate

250% differential between highest

and lowest performing concepts

Targeting is key to success – but creative alignment also matters


External and internal data on customers and prospects

Segmentation insights on the needs, attitudes, buying behaviors and financial product wallet potential of small businesses in your marketing footprint

Analytic skills and software that enable accurate matching of external segment attributes to customers and prospects

Response models to focus and align offers; models updated based on net of control analysis of campaign performance

Checklist of essential direct marketing skills/attributes


Multiple creative versions aligned to high response and high profit segments; champion/challenger testing by segment

Campaign test design with proper control groups and test cell size to ensure statistical validity of response measurement and cause/effect attribution

Sophisticated matching of responders to support accurate, net of control reporting on both targeted and non-targeted products boarded and funded during measurement window

Checklist of essential direct marketing skills/attributes


$1.5 million in incremental annual revenue and $1.2 million in incremental annual pretax profit run rate

► 4+ year revenue and income stream

► $335 thousand in one-time campaign costs, including incentives

► $3.5 million NPV of pretax profits

Payback of all marketing costs in less than six months for each campaign

Impact of small business direct marketing per $10 billion in assets


For additional information, please contact:

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