Arriving home from work, you open your mailbox and remove today's delivery. Bill. Bill. Ad. Credit card offer. Coupons. Catalog. Same as usual, a couple of bills, some ads and something from a big bank.

You think to yourself, "seems like I get a lot of credit card offers. Who's sending this one? Chase? Citibank?"

Curious about what does get sent to a typical bank customer, I began saving each bank solicitation and credit card offer sent to me. The actual volume astonished me—almost 1,000 pieces of mail within three years—yet the pattern of the mailings offered interesting insights into direct mail strategies and tactics. My suburban, high home-value community meant that marketers may perceive my address as belonging to potentially a higher income, and therefore attractive, prospect.  Because I have a separate business address, I also might receive more direct mail offers than the average consumer.  Nonetheless, the volume I experienced could be representative of an upscale market segment.

In other words, what I found in my mailbox may be typical of what at least some of your customers find in their mailbox.

Each letter, postcard or package offering a financial product I received was dated, numbered and inventoried into a database.  The data told me that the volume of delivered bank mail increased each year.  2006 brought a 31% increase over 2005, for instance.  In total, 980 items were delivered to my mailbox at home and at the office over three years from 63 different financial institutions. 

Of the 63 institutions, 16 sent me at least ten letters, and 35 mailed to me at least three times, in three years.  This meant that 28 banks, mortgage companies or other lenders only made essentially a single effort for my business.  Among this latter group of infrequent mailers were six local banks. 

Familiar names led the list of the most frequent mailers:  JPMorgan Chase (200 items, including affinity credit cards); Capital One (115); Citibank (104); American Express (103); and Bank of America (64).  Other repeat mailers, sending at least one letter per quarter on average, include Washington Mutual (58 items in three years); MBNA (43, prior to the Bank of America acquisition); Discover (36); Advanta (32); BankOne (25 items not included with the Chase total); and AmeriQuest (17). 

Also in my list of frequent mailers was Lake Forest Bank, a community bank owned by $7 billion Wintrust Financial, a regional holding company operating in Illinois and Wisconsin.  The 20 mailings I received from Lake Forest Bank, which were primarily full-color postcards, are notable for their frequency of contact.  No other locally controlled bank attempted to contact me more than once.  As a result of the mailings, I gained the impression that Lake Forest offered better rates and checking services that met my needs.  I know much less about other local institutions. 

Above: The first two years worth of mail arranged by institution.

The use of multiple mailings suggests that at least some marketers believe that direct mail no longer means single, isolated or occasional mail drops.  It's reasonable to assume that at least the largest nationals, such as Chase and Citibank, carefully measure response and conclude that frequency contributes positively to return on investment. 

The quantity of mail I received suggests that a saturation strategy is generally used by the high volume mailers.  Yet the most frequent mailers, while sending mail each month, appeared to be most active during January, August and October (see Chart One, below). 

Chart One

Monthly Distribution of Mail Received

These peak volumes months may be associated with anticipated higher levels of consumer loan demand.  In January, financial marketers may find more consumers needing debt consolidation.  August brings a peak for back to school needs and summer vacation debt.  October, on the other hand, is just prior to the start of the next holiday spending season.

About 60% of the mail I received came in the last half of the month with 35% arriving on the 24^th or later.  This past December, the volume dropped off in the weeks leading up to Christmas Day; of the 41 letters I received, 16 arrived prior to December 10^th, and 16 arrived after December 25^th. 

Table One below shows the mix of product offers I received by year.

Table One

Product Offers by Year

 

Credit card offers aside, I received three times more loan products offers in the mailings than deposit services.  Local institutions, however, almost always asked for checking and various other deposits relationships, while out-of-market institutions wanted my loan business.  If my mailbox is at all representative, then using direct mail to prospect for loans must be a successful strategy if you are able to cast the net widely.  I tend to believe that bank customers will borrow from anybody, but they like to see (as in a brick and mortar office) who is keeping their money.  If local institutions need loans, they may be losing opportunities simply because they ask their prospects for deposit relationships and not loans. 

Should the credit card mailers really be considered as somehow competition for my local banks?  After all, few community and regional banks even offer their own branded credit card products these days.  I think the answer is definitely yes.  The most prolific credit card marketer mailing to me was Chase, which operates five branch offices within four miles of my home.  In addition to sending me 191 credit card letters over three years, Chase also mailed to me offers for their auto loans, business and personal checking accounts, and insurance services. 

Bank of America provides 6 offices within 10 miles of my home.  They sent me 53 credit card offers, as well as letters featuring checking accounts, mortgages and personal loans.  Citibank and Washington Mutual, also frequent credit card marketers, maintain local offices as well.  Because these national credit card marketers also hold a neighborhood presence, every time I received their card offers—whether I opened the envelope or not—I thought about their familiar brand and their offices just down the road.

Bank of America's local branches may gain from the brand awareness that the credit card mailings generate, but their card business is profitable by itself.  Bank of America's fourth-quarter 2006 earning report indicated that the holding company's net income rose 47%, driven primarily by growth in card income. 

American Express Co., the fourth-largest U.S.  credit-card issuer, also reported improved profits in the fourth-quarter 2006.  Profit at the credit company rose 23% as defaults declined and holiday spending by card holders set a record. 

JB Morgan Chase, the institution that sent me 200 letters in the past three years, recently over took Bank of America as the nation's leading card issuer.  Bank of America may have lost the lead by being a less aggressive marketer:  My mailbox only received 64 letters from Bank of America in the past 36 months.

How can these high volume mailers afford the postage?  Many don't pay the same rates as most banks.  Capital One was the first mailer to reach a "negotiated service agreement" with the U.S.  Postal Service, beginning in September 2003.  Their agreement provides pricing incentives based upon increased mail volume and the use of technology to improve efficiency.  Similar agreements are also held between USPS and Discover, as well as with BankOne prior to their merger with J.P.  Morgan Chase & Co., among others. 

If my mailbox is like your mailbox, then we both must conclude that direct mail remains a key strategy for the largest, most capable financial institutions.  And they are aggressive in how they use the media. 

So how can the smaller institution compete?

First, recognize that next to face-to-face and telephone sales, direct mail provides the most personal form of communication available to financial marketers.  So keep your letters personal.  Consider a short, friendly note with a product recommendation and a request to call or visit the local branch.  A personal letter likely would be noticeably different from the expensive, mass produced and impersonal packaging that fills mailboxes each day. 

If you save on design and production costs, then more of your direct mail budget may be directed towards frequency.  Because few institutions can afford to send out dozens of letters annually to each prospect and customer, the volume must be controlled.  Begin by targeting new customer households and those with the potential for adding specific products with higher balances. 

Rather than spreading your mailings out over the course of the year, consider sending out a series of mailings with each drop separated by four or five weeks. 

Finally, gain efficiencies through technology.  Charity Dennison, AVP Marketing, Machias Savings, ME, stays in touch with key customer segments using Matrix Mail (Automate Your Marketing, ABA Bank Marketing Magazine, November 2006).  "Communicating to our customers provides opportunities for cross-sell.  It's also showing courtesy by letting customers know we're thinking of them and ways we can help," said Dennison. 

What's in my mailbox today?  A credit card offer, some ads and a catalog.  Oh.  Here's a letter from the Bank.  I think I'll open that. 

Mark Rodrigues is the president of The Biltmore Group, a database marketing company headquartered in Lincolnshire, IL.  He may be reached at 847-276-2676, or comment on this Blog entry.  Regular mail, especially personal notes, is always welcome.