Building A Best-In-Class Retail Banking Onboarding Process - Loyalty Through Engagement

Building a Best-in-Class Retail
Banking Onboarding Process

Loyalty Through Engagement
Author
Jim Marous
Editor
Brittany Reyes
breyes@fc-bi.com
Disclaimer
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FC Business Intelligence Inc. 2014
www.credit-risk-analytics-summit.com
Customer Analytics in Financial Services
Conference & Networking Event
New York, 15-16 September 2014
10+ C-level speakers conrmed,
including:
Kevin Moss, EVP, CRO, Wells Fargo
James Costa, EVP, CRO, TCF Bank
Joshua Bruton, CFO, United Texas Bank
Robert Thompson, CMO,
Old Florida National Bank
Howard Bruck, CIO, Hudson Valley Bank
Zahid Afzal, CIO/COO, Capital Bank
www.customer-analytics-in-nance.com/usa/
3
With reduced fee income, increased costs and a sluggish economy,
the need to retain and maximize the lifetime value of new custom-
ers has never been greater. New customer onboarding continues
to be one of the most eective data strategies for banks and credit
unions wanting to improve engagement, share of wallet, retention
and ultimately the value of a relationship.
According to the 2014 State of Marketing in Retail Banking study, 59.6%
of nancial institutions surveyed said that onboarding programs will be a
more important strategy in the coming year. This should not be a surprise in
an environment where it is harder than ever to acquire new customers and
where the payo on the cost of acquisition is more important than ever.
A new customer onboarding process is really nothing more than a tradi-
tional CRM process implemented at the beginning of a customers relation-
ship with your organization. The dierence is that, unlike a typical cross-sell
program, there is normally less internal insight available on the new
customer (especially behavioral and purchase data) and the focus is more
on engagement than selling new services.
Despite the lack of structured, internal data, the eectiveness of an
onboarding process is correlated with the degree of personalization
of communication that can be achieved. By communicating with the
customer early and often after they open their account using various media
that leverages insight collected at new account opening and thereafter,
you are more likely to foster a positive customer experience, dierentiating
your institution and building long lasting loyalty.
A successful onboarding program is not easy. It requires a strategy that
shows the customer you know them; that you will look out for their individ-
ual needs; and that you will ultimately reward them for their business. This
requires a focused eort on the collection of insight and the leveraging of
insight to meet these objectives.
Unlike many traditional cross-sell programs, onboarding is an ongoing
process. It is the communications gateway to what will hopefully become
a long-term relationship with additional communication moving the
customer from the engagement stage to the relationship and loyalty
stages of the customer lifecycle.
As powerful as a good onboarding strategy can be, it can also destroy trust
if not done correctly. Your mission is to ensure that insight is collected
wherever and whenever possible, enabling personalized communications
that will build upon each other, being relevant and reinforcing the decision
the customer made to open a new account at your institution.
4
A Meeting to Guide your New
Customer Analytics Strategies and
Capabilities within your Organization.
Onboarding is rst way of illustrating the type of customer experience that
can be expected at your organization. Done wrong, and trust is broken, and
in many cases, attrition occurs.
The First 90 Days
The banking industry usually denes the onboarding process as the initial
90 days of the new accountholders relationship. While the communication
and ability to personalize the messages dier, onboarding should be done
for both brand new customers as well as existing customers who open a
new account.
The reason why this period is so import-
ant is because numerous research
studies have found that the ability
to grow a new relationship (or lose
the customer) is highly weighted to
the front end of a relationship. The
customer is more open to hearing how
to maximize their relationship with their
nancial institution during this period,
and therefore is more open to oers.
BAI research found that: 1) 24% of total cross-sales occur during the initial
account opening; 2) 28% of total cross-sales occur within the rst 30 days;
and 3) 75% of cross-selling occurs in the rst 90 days. Conversely, many
organizations experience attrition rates of 25%, 30% and as high as 40%
with these new-to-the-bank customers in the rst year.
When new customer acquisition costs of $150 - $250 are combined with
the lost average lifetime value of a new customer of $100 - $250, the
negative impact of every lost customer is at least $400.
Eective onboarding helps stem attrition by enabling early, meaningful
dialogue with new customers. The key to success is to gather as much insight
as possible early in the relationship, since the opportunity for 1:1 engage-
ment many times ends immediately after the customer opens their account.
So how do data collection, analysis and application t into an onboarding
process?
New Customer Targeting Strategy
Successful new customer onboarding begins before the new customer
walks in the branch or opens their account digitally. It begins with acquir-
ing the right customer. The right customer diers from organization to
$400
Negative impact
of a new customer
who attrites.
5
organization based on the product portfolio, the competition, market
conditions and your brand positioning.
Separate from your onboarding strategy, it is imperative to develop an
acquisition strategy that optimizes the cost of acquisition and level of
attrition. For instance, while your organization may be eective at acquiring
the transitional Gen Y customer, these customers may also have the highest
level of attrition, netting a high incremental cost of acquisition.
Using internal and external data, building optimized acquisition models,
can provide the strongest foundation for an eective onboarding process.
Going beyond using just demographics, leading nancial organizations are
leveraging more digital, behavioral and social insight than ever to nd the
most responsive and loyal prospect.
Insight Collection
As mentioned, it is possible that the new account opening process may
be the only time your team ever meets the new customer face-to-face.
As online and mobile account opening processes have become more
customer friendly, there may not be a 1:1 human engagement at all.
Whether in-person or through digital channels, the time of new account
opening is the best time to collect insights beyond the basics. For instance,
research has shown that collecting the following basic information can be
highly valuable later in the onboarding process:
What is the customers primary nancial goal (cash ow needs,
savings, debt reduction, major event/purchase)?
Who is the primary manager of the new relationship?
What channel(s) does the new customer prefer for future
communications?
What types of accounts are held elsewhere?
Some organizations have utilized short needs analysis surveys or additional
account opening questions to provide insight for future communications.
The risk of trying to collect too much insight is that trust can be broken if
the customer believes the insight collected was not used for their benet.
Another strategy that is proving eective for some organizations is the use
of iPads to allow customers to complete their own new account form. The
rationale is that, while new accounts personnel are notoriously poor at
collecting personal insight, most customers psychologically want to make
sure all of their questions are answered.
6
Asking relevant needs-based questions as part of the new account opening
process improves satisfaction, serves as a dierentiator compared to other
organizations, and has the potential to build customer intimacy.
Increased Data Collection Higher Customer Intimacy
Early Communication
As the saying goes, You dont get a second chance to make a good rst
impression. This is especially true with an onboarding program whether
the new account opener is new to the bank or simply opening a new
account to expand their current relationship.
The objective of onboarding is to get out of the starting blocks as quickly
as possible so the customer realizes you appreciate their business. The
good news is that you have several options available for how to say thanks
immediately. The challenge is to make the communication as relevant as
possible.
While a great deal of insight can be collected as part of the new account
opening process, it may be dicult to leverage this insight in the rst few
days after account opening due to back oce processes. The key is to
balance what data can be used, with the importance of reaching the new
customer as soon as possible.
7
Impact of Early Communication on Sales and Satisfaction
Some institutions may simply have access to name, address and type of
account opened initially. If this is the case, the potential to use a person-
alized note handwritten and sent to the customer the same day they
opened the account may be the only option.
If your systems enable you to use insights such as cell phone number or
email address immediately, the impact of sending a simple text or email
a few minutes after the new customer leaves the oce to thank them for
their business is very impactful.
Some institutions have been able to personalize these communications to
highlight the person who assisted the customer, but this is not necessary.
Others have included a coupon from a local merchant as a great surprise
and delight.
The benet of an email is both speed and the ability to provide an embed-
ded link to a personalized new customer introduction microsite or even a
personalized welcome video (built for mobile consumption). This is where
the use of account type data and even opening balance can be eective.
The objective of this immediate communication is to thank the customer
as quickly as possible leveraging a personalized message that will highlight
the customers name, the type of account opened and what the customer
may expect next. Imagine this as the combination of account opening
receipt combined with personalized thank you.
8
Frequent Communication
One of the biggest misconceptions by nancial institutions is that new
customers dont want to get a sequence of messages after opening a new
account. According to J.D. Power & Associates, customer satisfaction and
cross-sell success both improve as the number of contacts are increased
up to 4 times, and is still eective if the customer is communicated with as
many as seven times during the rst 90 days.
What most banks and credit unions forget is that not every communication
intended to be sent to the new customer will be read or even delivered,
even if the organization has done their best to make the communication
both personalized and relevant. Therefore, the optimal number of messages
should probably be even higher than the J.D. Power study suggests.
Impact of Multiple Communications on Sales and Satisfaction
These early communications cant be standardized however. After the earli-
est messages during the rst few days, the application of customer-level
insight becomes even more important. In addition, the communication
path each customer takes will dier reecting the actions they have taken
during the onboarding period.
Much like a dating process, starting with a simple thank you and proceed-
ing in a non-aggressive manner to stages that encourage a deepening of
the relationship, the communication must get smarter over time.
As opposed to moving too fast to cross-selling, the majority of early
communication should focus on logical go with services, such as direct
deposit, bill pay, alert notications, online and mobile banking, mobile
deposit capture and actual usage of the account. Once trust is established
9
with highly personalized communication, the relationship can be expanded
using knowledge received.
During the sequence of communications, incentives can be provided to
encourage engagement. These incentives should be easy to receive and
can even support other programs at the bank such as a points program.
The key is to leverage real-time insight to deliver the right message, at the
right time using the best communication channel(s).
Wells Fargo Multichannel Early Onboarding Process
Source: Comperemedia
Multichannel Communication
An eective onboarding program does not need to be expensive. This
is because many of the touches can be done with channels that are not
expensive and may even be free.
Leveraging multiple channels (1:1, direct mail, email, phone, SMS, online,
mobile banking, digital, video, ATM, social) allows you to appeal to a
customers channel preferences while delivering a highly personalized
message that will positively impact results. Many organizations achieve lift
in results of 30 percent to 50 percent when combining multiple channels to
reinforce a single message.
For instance, a message encouraging the sign-up for online bill payment
on the 15th day after an account was opened could be done with email,
online banking banner messages, SMS and can be embedded in the mobile
banking application. In addition, each of these messages could be linked to
a short personalized online video or an interactive educational microsite for
increased eectiveness.
As the tenure of an onboarding communications process increases,
response and relationship growth data can be leveraged to determine the
optimal communication channel mix and channel attribution. This is by no
means an easy process due to the number of variables, but can decrease
marketing costs while improving eectiveness.
10
Multichannel Onboarding Roadmap
It is important to remember that the ability to use multiple channels is
contingent upon an eective data collection process at new account
opening. If mobile phone numbers and email addresses are not collected,
these channels cant be used. If mobile and online banking are not sold
during the new account process, these communication channels also cant
be used.
In other words, the foundation of an eective (and lower cost) onboarding
program is established on day 1 when customer insight is collected and the
initiation of the onboarding process begins.
Segmentation and Targeting
At the very least, nancial services organizations must be able to apply
basic segmentation based on accounts owned, size of relationship, geo-de-
mographic data and protability forecasting. If it is possible to perform
on a close to real-time basis, additional parameters can include behavior
segmentation, attitudinal segmentation, life stage segmentation, and life
change segmentation.
But most segmentation programs are not eective for the development
and implementation of highly personalized communication process like an
onboarding program. So, while segmentation may provide a broad catego-
rization of customers, an institution must drill down communication to the
lowest common denominator, and build messaging around specic solutions
for the customer at the appropriate time and using the best channel.
In addition, while it is recommended to include all new account openers
in the early stages of communication (since it is close to impossible to
11
correctly determine potential lifetime value of a brand new customer),
quick determination of prot potential will make for more eective alloca-
tion of resources in the future.
As with all business decisions related to client communications, the market-
ing investment decision is ultimately a prot/loss equation. Each messaging
should be based on potential response, value of that response and impact
on potential lifetime value.
Eventually, the goal is to mine the data on the customer to generate
automated marketing messages that are customer (as opposed to prole)
specic. This allows real-time adjustment to a customers segment or prole
based on purchase behavior, remembering the importance of engagement
before selling.
The Importance of Engagement Services
In any onboarding program, services that go with the initial account
opened build engagement, trust and the foundation for future sales. As
with any sale, the power of data analysis and application of the analysis can
greatly improve results.
Dierent engagement services have dierent values with regard to making
attrition less likely, but selling some of these services (such as bill pay) are
harder than others. Therefore response and utilization models must be built
that provide the optimal targeting for each communication.
Beyond traditional engagement services, product enhancements such
as alert notications, privacy protection and even mobile banking have
proven to be eective recommendations to stem potential attrition. The
chart below illustrates what some of the largest banks in the country
promote early in the relationship.
12
Engagement Services Promoted During Onboarding Process
Chase Bank Engagement Communication Flow
Test, Learn and Measure
There is no one size ts all onboarding program for every nancial institu-
tion. Not only do product sets dier, so do new account opening processes,
the ability to leverage dierent communication channels, the support team
in place, etc. Therefore, it is important to test, learn and measure results for
maximum eectiveness and ongoing support of the onboarding initiative.
The good news is that virtually no nancial institution has stopped an
onboarding program once they have initiated the process. This is because
the return on investment (even in the worst case scenario) is always
positive, and many times has a return of 5:1,10:1 and even 20:1 or higher.
The key is to test messages, timing, oers and channels to optimize your
specic program from both the customer and organizations perspective.
13
While multivariate testing may seem daunting to many, less scientic
thumbs up/thumbs-down directional insight many times is a better time/
value trade-o.
In other words, did adding an email or SMS message to a direct mail
communication stream improve the ROI as opposed to needing to measure
the exact degree of improvement?
If a robust process of testing new combinations of channels, messages and
oers is done, an organization may also nd ways to improve new account
opening processes.
The beauty of measuring the results of an onboarding process is the ability
to share the results with product and segment managers who also have
bottom line accountability. By sharing successes (and shortfalls) many
database and marketing managers have seen funding of onboarding
increase signicantly as product or segment marketing dollars are reallo-
cated or increased for this more eective process.
Power of Leveraging Data in an Onboarding Process
If the onboarding process is done well (from the customers perspective),
there will be time for cross-selling additional services since trust will be
established and you will have set your institution apart from others who
only care for the new customer on the day they open their account.
Industry research shows that the rate of attrition and inactivity of new
account openers at banks and credit unions often exceeds 25-35% during
the rst year of a relationship. This high attrition rate is often hidden by
future new customer acquisitions or combined with other attriters so the
impact seems less.
But, with the cost of a lost retail banking customer approaching $400 and
being more than $700 for a small business customer (when acquisition
costs and lost relationship revenues are taken into account), the cost of not
having an eective onboarding program is unacceptable.
If your institution currently has an onboarding program, do you have
enough touches and are you leveraging all available channels? How well
are you integrating structured and unstructured data for improved person-
alization and eective oer development?
If you dont have a program, there is no better time to build a strategy using
the foundation provided here and the learnings of others before you. There
are few, if any, programs that will generate such a high ROI over time.
14
FC Business Intelligences second annual Customer Analytics
in Financial Services conference and exhibition takes place the
15-16 September 2014 at the New Yorker, New York. The event
draws together thought leaders from banks, credit unions,
insurers, credit card companies, payment services, data services
and software services to ignite discussion on critical issues
around big data and customer analytics in the fnancial services
sector.
To register, visit our website www.customer-analytics-
in-nance.com/usa/ and quote REPORT100 to get an
additional $100 o of our current listed prices.

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