Originally published March 2000 in ABA Bank Marketing
by John J. Coffey and Gene Palm

Why do you need an MCIF (Marketing Customer Information File)?  What does an MCIF do?  How do you cost justify this purchase?

Why do you need your brain?  Think about it (or think with it)!  Without your brain, you wouldn’t be able to combine the information from your five senses into a holistic perspective of the world around you.  And, you wouldn’t be able to react to influences outside yourself.

Just like your brain, your bank needs a way to combine information from multiple sources to produce a holistic perspective on its customers.  In addition, it needs some way to use this information to react to external market pressures.  The MCIF can do these things – and much more!

The capability of an MCIF to combine or “household” data makes the MCIF a very unique system in your bank.  MCIFs use a sophisticated algorithm to household customer data.  Among other things, the algorithm is based on account data, which may include the customer's name, taxpayer identification number and street address.  The householding routine generates a unique number at the account level.  Then, if the numbers match exactly, the accounts are "linked" by the householding key to create a household.  Of course, it does the same thing to create customer-level data as well.

The household and customer-level data created by this process can be augmented with demographic data.  Customer and household profitability can be accumulated from account and transaction-level assumptions.  Other systems within your bank such as general ledger and cost accounting systems are not designed to household data and therefore are not well suited for marketing purposes.

General ledgers are mission critical systems for identifying bank revenues and expenses as well as exception reporting for budget variance analysis.  However, they are not well suited to analyzing product lines or customer relationships.

Cost accounting systems are becoming more popular within banks.  They can be used to determine the costs incurred throughout the organization.  They are excellent at determining unit costs and transaction unit costs for each of the bank’s products.  However, they are not useful for analyzing customer relationships without a large degree of human intervention.

As you can imagine, a system that performs all of these functions can be rather expensive.  Depending on the size of your bank, an MCIF could cost $25,000 to well over $100,000.  Still, there are ways for the expense of an MCIF to be justified.

·        Increasing sales profitably.  Understanding the most profitable combination of products is key to this.  For instance, you may discover that the average profitability of your checking–home equity loan customer is far greater than the average profitability of your single service checking customer.  You can use your MCIF to market home equity products to single service checking customers who own a home but don’t have a mortgage with you.  If you mailed 5,000 letters out and only 0.75% of them responded to your offer, you could probably pay for a significant cost of your MCIF.

·        Decreasing Operations Costs.  MCIFs can have zip+4 data appended to the households.  The post office gives businesses a better rate when they use zip+4 data rather than the regular five-digit zip code.  By uploading this Zip+4 data to your data provider, you will provide significant savings on your bank’s postal costs each year.  In addition, if the bank needs to send a mailing out to all of its customers, you can use the MCIF to generate a household list so the bank doesn’t have to mail a letter for every account.  Again, the savings in postage is significant.

If you want to market smarter you need two things – your brain, and an MCIF!

John J. Coffey and Gene Palm are the principals of Profit Resources, a consulting company that specializes in MCIF technologies www.profitres.com.   © Profit Resources 2006