Bank Director Magazine
Developing a successful strategy takes vision and leadership. Those who do it best have the involvement and support of the board as well as the entire leadership.
A CUSTOMER visiting South Umpqua Bank in Roseburg, Oregon won’t get charged for talking to a teller. What he will get is a cup or, heck, a pound of South Umpqua Blend coffee. He’ll get a stool at the computer cafe where he can check his bank account and surf the Net or a comfy chair in the rustic room where he can slouch down and watch financial news on the television. He’ll have access to a self-serve post office. He’ll get invited to come by for Monday night football.
While he’s there, he might see one of the more than 60 delegations of bank emissaries who have traveled from as far as South Africa and as high as Citibank to this rural town to witness this experimental marketing strategy for themselves, at a cost of $5,000 a pop. As the motto on its website says: “Pretty Cool for a Bank”
South Umpqua has created what every bank wants: One clear note that runs through every message, every employee, every transaction: This is who we are. This is why we are great.
Such a concerted effort requires huge collaboration: pulling the corporate strategy off the dusty shelf and putting it to hard use; wringing every drop of creative juice from the marketing executive; and molding the bank-from boardroom to back room, everything-into the bank’s choir. With the CEO holding the baton.Banks like South Umpqua that are good at this talk marketing and strategy at every board meeting. They empower their bustling marketing executives with access to the board. They have CEOs with both passion and vision, and savvy directors who poke and tweak and question and appreciate the bank’s marketing strategy as much as if it represented their own companies. In short, marketing becomes much more than the words associated with an ad slogan. It becomes the philosophy of. the business. And it becomes everyone’s business.
The following profiles focus on four banks that have made a concerted effort to effect a top-down approach to marketing. No matter what direction these banks have taken, one common thread runs through their stories: The strength of the marketing plan is intrinsically tied to the involvement of the bank’s leadership and the presence of a visionary-be it the CEO, the board members, or someone else-who understands the need for a change and the talent to bring it to fruition.
SOUTH UMPQUA BANK
Coffee, tea, or a CD?
Back in 1994, Raymond Davis had 10 years’ worth of ideas he’d collected as CEO of U.S. Banking Alliance, a consulting firm for community banks. He believed that a lot of customers were fed up with being shooed out of bank lobbies to use ATMs and personal computers. He had in mind a new kind of bank. A sort of Barnes and Noblebank. A store.
South Umpqua State Bank, as it was called at the time, was ripe for his ideas by the mere fact that it had run out its own ideas. A conservative, $135 million bank in a sleepy community of 20,000 people, South Umpqua was third in market share in Douglas County behind Wells Fargo and U.S. Bank. The CEO had retired. The board, while well educated at bank director school and diligent about attending seminars, wasn’t sure what direction to take the bank.
“I realized that I was not going to differentiate myself from the competition by throwing more money at more products,” Davis, now president and CEO of Umpqua Holdings Corp., says. “[Bigger banks] have got more money than I do, so forget that idea, that’s not going to work.” Instead he threw a lot more money into marketing. While most community banks spend perhaps one basis point in marketing, South Umpqua spends four or five.
One of the bank’s initial expenses was hiring Stern Marketing Group, a chic Berkeley, California company brought in to help mold the new bank’s image. Charlene Stern shocked Davis during their first interview with a bit of free advice: “Whatever you do, don’t change the name of this bank.”
Davis had thought changing the name was a given, though the board was fighting him on it. Now, like a salmon facing a stream of conventional wisdom, David finally gave up. “It was the best decision I ever didn’t make,” Davis says.
They did shave off the word “State” after Umpqua. The word “South” will go next, eventually leaving just Umpqua Bank.
Davis, Stern, and the board wrangled over the new marketing strategy. One of their most heated discussions was over the slightly crooked fir tree that now graces the logo, designed to look like a rough woodcut. “Ray bent the tree,” says Milton Herbert, former chairman of the board and a founding member of the bank. “The Douglas Fir grows straight, and Ray bent the tree.”
Today, the board glows over what it helped create. The company went public in 1998 and trades at about $8. Second quarter 2000 net income and diluted earnings grew 20% over the year before. Deposits, loans, and total assets all jumped about 25% in a year. Though the bank has invested millions in its stores, its return on assets and return on equity have stayed about average at 1.596 and 14% respectively.
Now converted to its current lobby-friendly atmosphere, director Herbert says banks that drive customers out of the lobby are missing an opportunity. “Where did [profitable customers] come from? They had to, at one time, open an account. They grow with you; you grow with them. To go out and buy them costs a lot of money. We’re still a small community bank. Just because somebody doesn’t have a million in the bank doesn’t mean he’s not a good person.”
Davis says the bank is now first in market share in the county and will have $800 million in assets when it doses its next acquisition in December. And it is developing a consulting arm to help other banks implement a retail culture.
Other progressive institutions are beginning to model their customer service programs after stores like The Gap. In South Umpqua’s case, all back room operations were shipped out. Employees in the bank understand they are there to serve. Each morning starts with a five-minute motivational moment in which the staff may hash out solutions to a particular problem or need.
The bank has a computer program that, Davis says, “spits out scores for every single department for every single branch every month. Each branch has to meet 90% of its objectives in terms of retention of customers and cross-sell ratios.” It’s all part of marketing and its aim to become, as its website motto says, “The World’s Greatest Bank.”
Says board member Lynn Herbert, “We’re trying to capture those things that have worked well, institutionalize them, put them in a bottle, and pass them around to employees so they can taste it. I don’t know how these people stay so excited all the time.” But it’s obvious the vision and enthusiasm start at the top. The board, Herbert says, has “great” strategy discussions at every meeting. “We want to keep the vision alive.”
FIRST TENNESSEE NATIONAL
All things financial
Across the continent is another bank, $18 billion First Tennessee National Corp., headquartered in Memphis, which also rolled out a strong, new identity: All Things Financial.
That’s the tag line. Granted it’s not really fresh or oozing with casual cool. But First Tennessee works hard to make sure that it is true. For years a leader in fee-income products, First Tennessee, with a second quarter ROE of 17.4% and ROA of 1.14, has always stood out in its ability to successfully provide products outside the traditional arena. Instead of leading with a snazzy ad campaign, says Suzanne Copeland, vice president and advertising director, they worked a long time to put the products in place first, so the message of All Things Financial would have legs to stand on. “Up until that point we were working on providing a full range of products,” says Copeland. “When you do a brand promise, you want it to be based on what you can do now, not on what you intend to do someday if you can figure it out.”
A business, agrees board member and marketing expert Robert Blattberg, can’t just “sing and dance a logo.” Blattberg, a professor of marketing for the Kellogg Graduate School of Management at Northwestern University in Chicago, maintains that companies have to understand the brand promise and whether they are delivering on that promise. “First Tennessee is a very, very good marketer. The CEO [Ralph Horn] understands it intuitively and understands from a business perspective why it is important. And he has at least two other people within the organization who have similar talents, says Blattberg, referring to Paul Harless, the executive vice president of marketing and strategy, and Ken Glass, president of retail financial services.
Early this year, for instance, the company unveiled a new financial planning service for customers. Staffed with certified financial planners-not stockbrokers-it sells advice, not products. The products can be obtained, though, from First Tennessee’s securities arm. When the financial planning services had been up and running only a few months, the bank discovered that half of its clients bought products from the securities arm of the bank and 11% bought insurance from the bank, according to Copeland. The cross sell appears to be working.
During all facets of rolling out their strategy, First Tennessee’s executive management leads the charge and the board, Copeland says, is very involved. “At every meeting we indirectly talk a lot about marketing,” says Blattberg. The same is true, he says of talking about strategy. Outside the board meeting, executives from the bank may pay Blattberg a visit and tap his expertise about marketing.
They similarly call on other directors. When the financial advisory service was launched, Copeland says, “a couple of the board members went through the process and kicked the tires on it.”
Focusing on Its roots
Two years ago, $12 billion Webster Bank in Hartford, Connecticut made a media splash by putting ads for its new campaign: “The Simpler, The Better” on the air during the Academy Awards. A very pricey time slot. The company created a Web page featuring a picture of a couple of baby boomers in black leather jackets smiling from a motorcycle. “That strategy came from consumers telling us that they needed to have greater simplicity in their lives,” says Jeffrey N. Brown, executive vice president of marketing and communications. “And banking is one area they’re looking to not spend a lot of time on.”
But recently, the bank decided to scrap that campaign and focus on the bank’s long history in Connecticut and the fact that the bank’s current chairman is the son of the bank’s founder. The new tag line is: Connecticut’s Webster Bank. The new website features old photos, Connecticut symbols, and links to just about anyplace a customer could want to go: shopping, for example, or to a chat room. And for advertising, the company had the luck or the foresight-or both-to sign up the coach of the University of Connecticut basketball team just months before his team won the national championship.
Why the change in strategy? The focus on their state heritage and identity, says Brown, emerged from many discussions between the CEO, Brown, and the board, with input from many others. “We had a number of meetings-not just with senior executives and senior officers-asking `What are the opportunities? What’s the right message? I think that everybody within the organization has a perspective that needs to be heard when trying to create a strategic plan for the company,” Brown says. It’s easy, Brown says, for companies to get too internally focused, and it’s the job of front-line workers and marketers to redirect attention to the customer.
Once everyone has had his say, Brown says, in Webster’s case, the executive management team chisels out a direction and then presents that to the board.
According to board member Anthony Giorgio, president and CEO of the Connecticut Capitol Region Growth Council, Webster’s executives presented their case well, by including plenty of information such as market research either electronically or on hard copy to directors.
“They come to us and say, `Here’s what we think makes sense. Here’s why it makes sense. Here’s what we set up to get the information. Here’s how we have tested the information….It’s well packaged, well thought-out, well documented. A lot of the credit goes to [CEO] Jim Smith and how he works with his directors. His presentations are first-class. They’re very succinct. Very focused.”
Not that it’s a slam dunk right away, says Georgio. The board usually has plenty of questions. “We might ask what’s the overall impact to shareholder value? How is that going to impact overall profitability of the bank? What’s the investment going to be? Are the systems in place to evaluate the efficacy of the campaign? Are there other examples among our peer groups to show whether this is a successful venture or not? Is there research to substantiate this versus some other decision?” Luckily, Georgio says, Webster’s executives anticipate 95% of the board’s questions, so the meeting can be spent in substantive discussion, not on minutiae.
How long should a company stick with a marketing plan to determine if it’s working? Generally, Brown says, most companies would like to find an identity and stick with it. But there are no set rules. Disney World, he notes, picks a different theme line every year while American Express has worn “Don’t leave home without it” for over a decade. It’s not an exact science.
A caring, private environment
Tamal is the name of the daughter of a chieftess of California’s Miwok tribe. Legend has it that she saved her people and that her profile is reflected in San Rafael’s Tamalpais Mountain. With a nod to its heritage, Tamalpais Bank aims to serve its customers-particularly women and families-in a way that differentiates it from the competition, thus carving out a potentially lucrative segment of its market.
Founded nine years ago, the group of investors that started the bank had one simple mission: make a lot of money by running a lean operation. They had only 20 employees. But a few years ago, the competitive realities began to hit. After talking with a consultant, setting up focus groups, and thoroughly discussing it with the board, the bank changed its focus to increasing deposits and sales of asset management and financial planning by targeting affluent women-a significant population within their San Rafael marketplace. “The board was immediately involved in the focus groups and consultant discussions,” says Kit Cole, CEO of $110 million Tamalpais Bank, “so that everybody was on the same page of the hymnbook.”
They decided to link Cole’s 30-year career as an investment adviser– specializing in financial advice to women-with the institution. “We had an advantage that bigger banks are trying to develop,” Cole says. “When you manage investments it’s a fee-based activity that helps the bank become less sensitive to interest rate swings. And it’s far more profitable than typical banking business. Also, there’s a higher multiple for stocks of those banks because investment advice is considered to be a premier product line.”
The added value of investment management helped ground their customers, Cole explains. “It gave them peace of mind. Calm. Confidence. They felt more clear about where they were going. That pushed us to move toward the advisory relationships. To position the firm so that people will think of the good outcomes they’ll have, as opposed to pricing.”
In early 1999, Tamalpais Bank was born. Stern Marketing provided the expertise to help management build a retail environment but Cole wanted to go beyond that. She wanted an environment where people felt that peace of mind and comfort about disclosing and discussing their financial situation.
Part of that environment includes an area where children can play with computers or a miniature bank cage. Most financial service firms, she says, don’t even consider the difficulty parents have just in coming in to talk with their banker or financial advisor. Cole, who raised 10 children and has five grandchildren, knows all about that. Tamalpais also has a training facility where the bank holds seminars on money management; a women’s center for with computers available for personal banking; a financial education center for kids; and many other resources. “A lot of financial institutions create a we-they environment,” Cole says. “We’re the smart people and you’re the paeans. You have to listen to us. The point is to try to create authority so they will listen to what you say. It’s built on fear and anxiety and you still won’t have the trust. … We want to build an environment that’s friendly and inviting.”
SIDEBARBACK TO BASICS
SIDEBARFirst you identify your customers. Next, you figure out what they want. Then you get it. Then you tell them about it. Finally, you deliver on it. Voila, marketing per
SIDEBARfection. So what’s the problem?
“I do think that an awful lot of small and midsized banks don’t try to sell the company as well as they should,” says Arnold G. Danielson, chairman of Danielson Associates Inc. of Rockville, Maryland. “People with marketing skills are not the ones who tend to gravitate to the top [in banking]. Executives hold planning meetings and the marketing person doesn’t even get invited to the meetings. Banks tend to he so division-head oriented as opposed to who might be best needed.”
SIDEBARThis is especially true in smaller banks, experts say.”Relatively few community banks have someone whose background is in sales and marketing,” says Alex Sheshunoff, president of Alex Sheshunoff Management Services in Austin, Texas.”They don’t know whether they can justify a full-time person. A really good marketer is $150,000-a-year person and you may only need a month of their time.” It is becoming more common, he says, to hire a professional marketer on a project basis.
On the other hand, many community banks may feel they don’t need to work at marketing because they are `known.’ George Freibert, president of Professional Bank Services of Louisville, Kentucky says that can be a mistake. Recently he headed
SIDEBARup a fundraising effort for a local school and called on banks for support. Most banks, he said, offered a small sum and said that they could increase it if the school would give that bank their business. One day the school called Freibert and told him that ‘someone’ from $45 billion Fifth Third Corp. of Cincinnati would be visiting the school. It turned out to be president and CEO George A. Schaefer Jr.
“He said he went to a high school like that in Cincinnati. Fifth Third gave a sixfigure donation and just blew all the other banks out of the water. And got the business.” That, Freibert says, is marketing.
SIDEBAR”Marketing is everything having to do with how you present your company to the public and whether that is effective or not,” Freibert says. “It’s no doubt led by the CEO and should be supported by the board… But the performance is the responsibility of the CEO.. he’s the visionary.”
Many banks “go off in all sorts of different directions,” says Cass Bettinger, president of Cass Bettinger & Associates of Salt Lake City, Utah. “And there’s no linkage between marketing and the strategic plan.” The focus is on sales, not on building relationship with the most profitable customers.
“They spend a bunch of money on advertising that basically says, `We’re the same as everybody else,”‘ Bettinger says. “What they need to be asking is, `Which group of customers and prospects are we interested in? Whose opinions out there do we really care about?’”
SIDEBARMoreover, while more and more banks accept that data warehousing is their ticket to profitable marketing, very few have a clue what to do with the information. “They’re gathering all the data because they have to have it, from a compliance standpoint,” says Jay Kassing, president of sales and marketing for the Centrax Group. His company sells software that integrates customer data into a usable form. “Once they get it they don’t do anything with it. It’s amazing how many times you get the data, look at it, ask the CEO `Who are you selling to? What are your most popular products?’ and what the data says is not even close to what the CEO is thinking. ”
Directors who are business owners, says Kassing, can often tell in a heartbeat who their most profitable customers are. But they don’t hold the bank to the same standard. That, says Sheshunoff, is going to change.
SIDEBAR”Over the next two years,” he says, “you’re going to see a lot more sophistication coming into bank marketing,” as banks use data warehousing to develop strategies, products and relationships.”Then they’re going to migrate to CRM [customer relationship management]and you’re going to be able to start predicting `What’s the next product that this customer will like…?’ And that’s where it starts to get exciting.”
But Freibert still boils it all down to three basic principles: “Do simple things well. Work very hard. Don’t make any dumb mistakes.”