Banking on Knowledge

Published on 29-Jul-2010

"First Tennessee promises our customers that we will be there for them, that we will power their dreams. One of the most exciting things for me is that Modeler allows us to understand our customers better than we ever did before and optimize our conversations with them in a way that’s a win-win...profitable for us and relevant for our customers." - Dan Marks, Chief Marketing Officer

Customer:
First Tennessee Bank

Industry:
Banking, Financial Markets

Deployment country:
United States

Solution:
BA - Business Analytics, BA - Business Intelligence, Customer Relationship Management, BA - Predictive Analytics, Smarter Planet, Business-to-Consumer

Smarter Planet:
Smarter Banking

Overview

First Tennessee Bank, a Memphis-based bank with more than $25 billion in assets, also suspected it was wasting money on inefficient marketing campaigns, which typically focused on products, not customers. “You could say we were throwing our messages away,” says Tanner Mueller, First Tennessee’s Direct Marketing Database Manager.

Business need:
First Tennessee Bank had an abundance of data but wasn’t using it to identify individual customer behaviors or devise marketing strategies tailored for individual preferences and buying patterns. The bank wanted to leverage its customer data to increase response rates and reduce costs for marketing campaigns.

Solution:
By using IBM SPSS Modeler to better target customers, First Tennessee’s marketers were able to decrease the quantity of pieces they mailed out while increasing the frequency. They also extended the planning cycle for campaigns and established a policy of targeting all products every month. To build on the success of its models, First Tennessee plans to incorporate elements of IBM’s Cognos Business Intelligence software into its IBM SPSS models.

Results:
Modeler allows the bank to understand its customers better than ever before and optimize conversations in ways that are relevant to the customers and profitable for the bank.

Benefits:
Gained significant customer insights, resulting in an increase in direct response rate to 3.1 percent; enabled the company to better match products to customers individual needs; eliminated the less effective, one-product-fits-all approach to marketing; lowered mailing costs by 20 percent.

Case Study

Tapping an abundance of data:

Unlike many businesses, First Tennessee never lacked data. Indeed, its
direct marketing staff assiduously collected more than 200 data
elements on every postal and e-mail campaign launched to promote
offerings and services for its four core consumer product areas:
checking accounts, savings accounts, certificates of deposit and home
equity lines of credit.

Yet amid this abundance of data, First Tennessee had a scarcity of
cohesive, actionable marketing insights. As a result, the success of its
marketing campaigns – whose budget sometimes reached $100,000 –
rose and fell on guesswork, the institutional memory of various
managers, and reliance on conventional formulas. “A lot of our
marketing decisions were driven by what our marketing managers had
seen work over time or by common sense,” Mueller says. “In banking,
there are about 10 or 15 segments that are tried and true. For example,
about 40 percent of the time when someone gets a checking account,
they get a savings account. But that’s not marketing intelligence.”

Mueller began pushing for the bank to adopt an approach that went
beyond traditional one-size-fits-all strategy for every customer. Instead,
Mueller advocated studying an individual customer’s behavior before
choosing a marketing strategy. This, he believed, would lead to smarter
expenditures of marketing dollars, higher customer response rates, and
better decision-making down the line.

“We were getting in a lot of data, but it was traditional, one-dimensional,
bucket-style segmenting,” he recalls. “We needed to be
able to take 30 to 40 data points and turn it into that intelligence we
can use and take action on.” Such analyses would give the bank a clearer
understanding of customer preferences and their propensity to buy new
products. Says Mueller: “How do we know if the customer we are
targeting for a CD is the right customer?”

Projecting future scenarios:
First Tennessee’s marketers wanted specific functionality from a
solution, including the freedom to create their own forecasting model
and then tweak it as needed. For this to work, the solution had to be
easy for the bank’s direct marketing staff to use, which made Modeler,
with its easy-to-master interface, a natural fit. What’s more, Mueller’s
staff had previous experience working with other IBM SPSS predictive
analytics solutions.

Once it settled on IBM SPSS software, First Tennessee built a model
that examined each customer’s monthly transactions and behavioral
data. To gain historical perspective, it had Modeler analyze two years’
worth of marketing ROI and customer response data. From this
analysis, First Tennessee was able to determine historically high-,
under-, and non-performing segments. This, in turn, helped the bank
develop new marketing campaigns designed to both enhance
revenue and reduce costs.

By using Modeler to better target customers, First Tennessee’s
marketers were able to decrease the quantity of pieces they mailed out
while increasing the frequency. They also extended the planning cycle
for campaigns and established a policy of targeting all products every
month. “Once you’re customer-centric, you can choose the right
channel,” Mueller says. “You can take steps forward because you can
make adjustments using modeling and switch your marketing strategies
when you need to.”

The new Modeler-driven campaigns showed positive results right from
the start: customer response rates rose to 3.1 percent and mail costs
declined 20 percent – equating to a 600 percent return on investment.
And because its forecasts are more accurate now, the staff has had to
hold fewer planning meetings. “We’ve reached the point now where
everyone knows we can get better results using Modeler versus
traditional segmentation approaches.”

To build on the success of its models, First Tennessee plans to
incorporate elements of IBM’s Cognos Business Intelligence software
into its IBM SPSS models. “Ultimately, we’d like to integrate Modeler
and Cognos,” Mueller says. “We’d like to keep our data warehouse at
the central point of what we do and connect all our tools to build one
unified, integrated platform.”

First Tennessee sees predictive analytics as a highly effective way to
bring the bank closer to its customers. “First Tennessee promises our
customers that we will be there for them, that we will power their
dreams,” says Dan Marks, chief marketing officer. “One of the most
exciting things for me is that Modeler allows us to understand our
customers better than we ever did before and optimize our
conversations with them in a way that’s a win-win...profitable for us
and relevant for our customers.”

Products and services used

IBM products and services that were used in this case study.

Software:
SPSS Modeler, SPSS Statistics Base

Legal Information

© Copyright IBM Corporation 2010 SPSS Inc., an IBM Company Headquarters, 233 S. Wacker Drive, 11th floor Chicago, Illinois 60606 SPSS is a registered trademark and the other SPSS products named are trademarks of SPSS Inc., an IBM Company. © 2010 SPSS Inc., an IBM Company. All Rights Reserved. IBM and the IBM logo are trademarks of International Business Machines Corporation in the United States, other countries or both. For a complete list of IBM trademarks, see www.ibm.com/legal/copytrade.shtml. IBM, the IBM logo, ibm.com, Smarter Planet and the Planet Icon (Western View) are trademarks or registered trademarks of International Business Machines Corporation in the United States, other countries, or both. These and other IBM trademarked terms are marked on their first occurrence in this information with the appropriate symbol (® or TM), indicating U.S. registered or common law trademarks owned by IBM at the time this information was published. Such trademarks may also be registered or common law trademarks in other countries. A current list of IBM trademarks is available on the Web at ibm.com/legal/copytrade.shtml Other company, product, or service names may be trademarks or service marks of others. This case study illustrates how one IBM customer uses IBM products. There is no guarantee of comparable results. References in this publication to IBM products or services do not imply that IBM intends to make them available in all countries in which IBM operates.