Sunday, February 19, 2012

Common Misperceptions: Community Banks are Beating the Behemoths

My firm constantly evaluates industry trends and happenings to formulate what we term our Industry Overview. Although a constant process involving hypothesis, research, and re-evaluation, we center our thinking annually to ensure we properly debate, debunk, and determine where our industry is moving.

As part of the process, our staff does a lot of research. Some of the research focuses on themes we hear multiple times over in client strategic planning sessions. One such theme was the right sizing of community banks' funding sources.

Since the dawn of the financial crisis in 2007, loan demand has fallen off of the cliff, and therefore community banks did not need their historically high amount of CD funding. As a result, we dropped rates to such a level that it wasn't attractive to traditional CD customers and they began parking money in liquid savings vehicles, such as the money market account.

Our deposit coffers swelled like a puffer fish. In many strategy sessions, senior management teams began to feel pretty good about their efforts in attracting core deposits, and how they are beating the big banks in deposit gathering.

Not so fast. As the chart below shows, although community FI deposit growth has been quite robust, with an emphasis on core deposit growth, the big banks (defined as top 25 US banks) are outpacing us. This is exemplified by Bank of New York/Mellon charging their largest depositors negative interest for the convenience of parking their cash in BNY's vaults.

Another theme we hear in community FI strategic planning sessions is how much better we are at serving small businesses. We provide access to decision makers, custom loan structures, and better service than our larger brethren, so the discussion goes.

But the chart below from recent Small Business Administration research, although using 2009 data, demonstrates a trend worth noting. In 2005, banks with greater than $50B in total assets accounted for 32% of small business loans, defined as loans less than $1 million. In 2009, that percent rose to 37%, although that is off 1% from the prior year.

All other asset sized FIs either held their market share or slightly declined. Does access to decision makers, custom loan structures, and better service result in more business? Intuitively it should. So why hasn't it?

How do we, as an industry, turn the competitive advantages we have over behemoth banks into real wins in the marketplace? I'd like to hear from you.

~ Jeff

Saturday, February 11, 2012

Best Book Ever on Word of Mouth and Direct Mail Marketing

I hope the title of this post compelled you to read its contents. If so, I suppose you are expecting me to offer my opinion on the most recent thought leadership on word-of-mouth and direct mail marketing. But I will not.

Instead, I will offer you my opinion on a book whose author is not 100% known, but thought to be a Syrian from Antioch named Luke. Recent? No. But would you be interested in a book that describes how to grow raving fans that span the globe from one poor person from a small town? Would you be interested in a book that doesn't only stand the test of decades, or even centuries, but millenia? How about a book that boasts adherents from about one-third of the world's population (see chart)?

I'm not talking about Facebook, whose founders are plotting as you read to turn their paper into big money. I'm talking about the biblical book Acts of the Apostles.

Now before you browse away because you may not be religious or not be a Christian, hold on. This is not a post about religion. It has been suggested to not discuss religion or politics in a business blog. But it's my blog! And ignoring how a tiny sect of Judaism, whose apostles feared for their lives and locked themselves in an upper room, grew to a religion followed by 33% of the earth's population is worth discussing.

How did the Apostles do it? The book of Acts tells the tale with a specific focus on two: Peter and Paul. Peter, as many of you know (perhaps a third of you), was appointed by Jesus to build his church after Jesus' death. Indeed, Peter is considered the very first pope.

After Jesus' death, the apostles weren't out canvassing the countryside preaching the faith. As I mentioned, they hid from possible persecution. Jesus had to appear to them several times after death to get them out of the room. Have you ever heard of a doubting Thomas? Biblically based. Jesus had to guide Thomas' hands into his wounds to convince him.

But convince him, and the rest of the apostles he did. They immediately began their ministry, teaching to mostly Jews, healing them, converting them. There was no Internet. No newspaper to take out ads. No postal service to send a direct-mail postcard. No PowerPoint deck. They only had each other and their words, that were inspired by the Holy Spirit, according to the Bible.

They also had a solid foundation of a legend, although it typically takes decades, sometimes longer, for legends to achieve legendary status. In a word-of-mouth world, legends were slow to come. But Jesus' ministry resulted, in part, for the making of a legend that was to attract followers like no other legend before, or since.

The apostles were selected by Jesus not because of their stellar standing within the community. Most were poor and some were in positions not well admired, such as tax collector (not sure their social status has improved much). Nobody knows what Jesus was thinking when he chose such a humble lot. But I surmise he knew what he was doing... such as selecting good men, with good presence, that he could teach/were teachable, and who could preach to the world.

Paul was a different story. Not an original apostle, he enters the picture in Acts as a persecutor of Christians... until his fateful ride to Damascus. According to Acts, he was struck down and blinded by Jesus, and sent off to seek counsel in the faith before his sight was restored. Lesson learned: to knock the cover off the ball in word-of-mouth marketing, convert your biggest critic, and make him/her your raving fan.

Acts ends with Paul's first imprisonment, as it was typical for Christians to be persecuted. Paul's ministry focused on the Gentiles from Asia Minor to Rome. When not spreading the word in person, Paul wrote many letters to various Christian leaders. Much like a political campaign, the lesson learned here is to appoint leadership in key geographies and communicate, teach, and encourage them often.

Lastly, Acts shows the beginnings of the organization of the Christian church (present day Catholic church, as Protestant faiths took root as a result of the Reformation in the 1500's). This organization lives to this day, 2,000 years after its first seeds were planted by a poor carpenter from Nazareth and a few followers that included fishermen and tax collectors.

In summary, my take on the lessons learned from the book of Acts of the Apostles for word-of-mouth and direct mail marketing:

1. Choose your first WOM marketers carefully, make them passionate followers, develop and train them, set them loose;

2.  Lay the building blocks to achieve legendary status;

3.  Develop an organization that is built to last with leaders in key geographies;

4.  Turn your greatest critic into your greatest apostle.

Wouldn't it be shortsighted to ignore these timeless and proven word-of-mouth marketing techniques because they are found in the Bible?

~ Jeff

Note: My fascination with Acts of the Apostles as a quintessential word-of-mouth marketing guide does not make me a Biblical scholar. As one of my favorite comedians, Kathleen Madigan quips, "I'm a Catholic, I don't read the Bible." :)

Sunday, February 05, 2012

Bank Super Bowl Ads 2012

First, check out this creative yet sleepy First Bank ad. If you need to go to the bathroom, feel free to do so:

Amarillo National Bank puts their CSRs through a workout. This, my friends, is a training program:

E*Trade, the gold standard for Super Bowl bank ads... speed dating. Awesome:

Would my marketing readers, being given the keys to the Super Bowl jumbo tron, offer this lack of creativity:

Not a 2012 commercial, but this is my favorite Super Bowl bank ad... E*Trade's milkoholic Lyndsey. This netted Lyndsay Lohan some coin, as she sued E*Trade because it was a little too close to home. May suffer from a broken link because E*Trade and Lyndsay must not like it advertised:

Lest we forget, here are the top 10 Super Bowl ads from 2011:

What was your favorite all time? Post the link!

~ Jeff