In an effort to slash customer churn in the midst of their merger frenzy, some big-name banks are forgoing perfunctory form letters announcing their unions in favor of customized direct-mail packages that cross-sell.
“There are at least two uses a bank can get out of these mailings: let’s communicate the change and let’s kick-start the relationship-building process,” said Bob Wilcox, president of Wilcox and Associates Inc., New York, a wholly owned subsidiary of DIMAC Direct. “The mailing done for a merger could be one of the greatest marketing opportunities that you are ever going to have with customers. It’s like Will Rogers said — you have one chance to make a first impression.”
Banks, which are required to send information to their customers about the merger, traditionally mail out a package with a general introductory letter and product disclosure booklet. Customers often have to wade through pages of detailed information to discover how their accounts will be affected by the merger.
“There is a legal requirement for communications, but our notion has always been that we turn the compliance necessity into the opportunity to really sell and introduce the new product set,” said Hillary Kelbick, a managing director of Michaelson Kelbick Partners Inc., New York.
Kelbick and her partner, Susan Michaelson, are in the process of creating personalized mail packages for customers involved in the merger of First Union and CoreStates. This fall, First Union will mail the pieces to 1.9 million retail customers, 130,000 small businesses and 20,000 commercial clients. First Union will use the customized packets it created for its merger with Signet last year as the prototype.
The packets will list which accounts the individuals or companies have, including account names and numbers, and explain how they will be affected by the merger. The mailings will offer two of about a dozen different coupons, which could include a quarter percent bonus on the annual percentage yield of a time deposit, a quarter point off current rates for a home equity loan or daily business fax service free for a month. The coupons are for products and services that would likely interest customers based on their current portfolio.
“We don’t force the customer to go through a lot information that doesn’t have to do with them,” said Katherine Allen Kuleba, vice president of field and merger communications in First Union’s corporate marketing division. “We give them the customized information, but we also include a guide book of all the products and services that First Union offers so they can learn about them.”
First Union has merged with about five other banks in the past two years and retained about 80 percent of the customers in each merger, while the industry average ranges from 60 to 70 percent, according to Kuleba.
“Some banks think that they are buying a customer, but they are not. A customer is an individual who can make up their own mind,” Wilcox said. “When you buy a franchise in banking you are simply buying the opportunity to do business with the customer.”
Banks would be wise to treat that opportunity right, considering the average cost to acquire a retail customer through a merger is about $3,000, according to Wilcox. Since the average customer generates only $100 to $150 in income for the bank each year, banks could be looking at 15 to 20 years to recoup their investment unless they accelerate sales through marketing programs.
Wilcox currently is working on a communications strategy for NationsBank, which is acquiring Barnett. He won’t release details surrounding the required mailing, but he expects it to drop this fall. He cites the Chase Manhattan and Chemical merger, in which he helped create the required mailings, as a classic success story.
“Chase and Chemical did their market research and got a good sense of what consumers were thinking,” Wilcox said. “They also did their market intelligence and one of the things that they figured out was that every bank in New York was lining up to steal their customers.”
Despite the competitive landscape, Chase and Chemical experienced a low churn rate due in part to personalized mailings, according to Wilcox. The mailings detailed how a customer’s individual accounts would be affected and featured the benefits of new products and services.
