Customer acquisition can be a resource and budget intensive proposition. In the financial services industry, customer acquisition can be especially challenging. Institutions are competing to provide commodity products to technologically savvy, time-constrained consumers.
Those same consumers expect fast, personalized service, and without that kind of experience they’re willing to take their business elsewhere. How can a financial institution (FI) win customers and improve acquisition costs in this kind of environment?
Acquisition the Old-Fashioned Way?
In many respects, FIs are still bastions of traditionalism. When it comes to managing and protecting consumer deposits, that is a great way to operate – but when it comes to customer acquisition, that traditional mindset can be costly and inefficient.
For many FIs, acquisition efforts still center on a process known as batch prescreening. This approach focuses on identifying broad customer segments that share specific criteria (physical location, credit score thresholds and more). Once an FI has the batch of potential customers identified, it will run a prescreen process on the batch and send direct mail credit card offers to individuals that pass the decision hurdles.
Presenting a new credit card offer through the mail has worked for decades, and continues to work today. But is it the best approach to generating new customers?
Direct mail response rates are relatively low, with 1-6% of consumers responding to offers they receive in the mailbox. While that is substantially higher than offers through digital channels like email and website, acquisition costs can be more than $250 per customer and, an acceptance rate of roughly 0.5%, direct mail is by no means an efficient way to bring new clients to the organization.
Nor is direct mail an environmentally friendly approach; marketers send more than 121 billion pieces of direct mail to US households annually. Of those pieces sent, nearly 10 billion are from financial services companies, and 44% of all mail recipients throw away their “junk mail” without even reading it.
The one-two punch of low response rate and very low acceptance rate, combined with the high cost of campaign execution, makes batch prescreen with direct mail offers less than appealing. But what options do FIs have for customer acquisition?
Prescreen-Of-One: Capitalizing on the Micro-Moment
One of the most effective and complementary approaches for FIs to implement is Prescreen-of-One. Also known as instant prescreen or real time prescreen, this is a departure from the “spray and pray” approach of batch prescreen.
With Prescreen-of-One, the FI can effectively and efficiently engage with customers when they are already conducting business in a branch, over the phone, on the website or using a mobile application. An instant prescreen approach helps companies capitalize on the “micro-moment” – the specific time and channel when a customer is paying attention to that organization. (For more thoughts on micro-moments, please watch my recent interview with Bank Director)
Rather than trying to capture attention through a crowded channel like direct mail, FIs that use Prescreen-of-One can present relevant offers when a customer is more likely to listen and respond. When combined with data about a customer, an instant prescreen offer can present personalized, valuable products and services that resonate with the individual.
Not only does an instant prescreen offer improve the customer experience, it is a cost-effective way to get the right offers in front of the right customers. Without the overhead of printing and mailing, instant prescreen lets FIs present offers for significantly less cost.
And Prescreen-of-One has significantly higher acceptance rates than batch/direct mail offers. FIs that present prescreen product offers at the point of interaction with a customer routinely see offer acceptance rates above 20%, with approval rates that outstrip batch prescreen as well.
The Secret Weapon for High-Growth Companies
Prescreen-of-One has concrete advantages over batch prescreen when it comes to efficient customer acquisition. It is cheaper, happens in real time and takes place when a consumer is most likely to listen and respond.
Leading FIs are increasingly turning to instant prescreen to capture new customers and grow wallet share with existing customers. When combined with in-house and third party data, Prescreen-of-One can be the “secret weapon” that enables an organization to get the best customers in the quickest way possible.