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MISTAKE NUMBER ONE: NARROWLY DEFINING "NEW" CUSTOMERS.
Marketing professionals have long recognized the semantic confusion over the concept of "new." One example of this confusion involves thinking about new products. To be classified as "new," does the product have to be "new to the world," or "new to our market," or "new to our company" or "new to our customer?" The answer is that "new" applies to all four situations.
Semantic confusion is also associated with the new in new bank customer acquisition programs. The question is, "What is a 'new' customer?"
The most frequent answer is that a new customer is someone "new" to the community. Individuals just moving into the community are important to the bank, and most retail bankers would like to capture as many of these new customers as possible. However, "new to the community" constitutes a narrow definition that leads many retail bankers to mistakenly underestimate the opportunity to attract new customers.
Demographic information about many communities suggests that the number of new households or individuals moving into markets is small. In some markets, the demographics may suggest that the community is losing population. With such information, it is easy for bank marketers to conclude that the opportunities a "new customer acquisition" strategy provides is small at best. As a result, the bank makes a token effort to capture those few new arrivals to the community. Not surprisingly, little marketing time, talent and resources are invested in customer acquisition programs.
A substantially broader definition of new is "new customer for the bank." Rather than limiting the definition to someone who has recently moved into the market, effective new customer acquisition programs recognize the importance of capturing new account relationships among individuals and households already in the market who need some type of new checking account and are not currently customers of the bank. It is important for the bank to capture a major share of both customers, "new to the community" as well as the "new accounts of existing residents" who are not currently customers of the bank.
MISTAKE NUMBER TWO: UNDERESTIMATING THE PROFITABILITY OF NEW ACCOUNTS.
Bankers have long argued that retail banking is an "expensive" business. Operating branches and performing all the retail banking functions carry a...