Naples, FL,  January 20, 2010:  Bob Singer, CEO of Financial Marketing Systems, Inc., has noticed a trend among financial institutions: a reluctance to promote low deposit rates.  This, Singer believes, could be a mistake.

Some bank marketing managers, reports Singer, have concluded that promotional success is rate driven and since rates are low there is no point in promoting rates.  But by doing nothing,institutions may actually be taking steps that could be costly in the long run.

Based on Singer's interviews with managers, those who are reluctant to court deposits at this time do so for a combination of reasons, including:

• Term deposit rates are near record lows.
• Some depository institutions do not need funds.
• Institutions have limited loan standards.

By not promoting deposit services, Singer argues, the sole communication from the bank to depositors in general, and larger-balance depositors in particular, is the CD renewal notice.  But the reality of most renewal notices is that they really serve as a reminder to the customer to shop for better rates.

In most cases, renewal notices state that rates have not yet been set for the coming month. So if the customer wants to know what the rates are currently, they are forced to call the bank.  Most renewal notices are computer-generated forms, impersonal and do not include any message tailored to the individual based upon predictive modeling.

Because some banks do not need deposits, they may be unconcerned if the certificate closes and goes to a competitor.  But losing a customer now, when rates are low, means that the institution will later pay premium rates to regain deposits when the rate environment eventually changes.  And history has shown that rates do and will change.

Financial Marketing Systems, Inc. specializes in creating highly personalized messages that banks may use to communicate to account holders.  When rates were higher, conjoint analysis suggested that the rate bonus necessary to entice people to move their funds from one bank to another was often 50, 70, and 100 basis points.  If your customer's CD was earning 7.00%, a bonus of 10 basis points could hardly be interesting. However, now that rates are in the 2% to 4% range, bonus offers of 10 to 15 basis points will attract attention. The most efficient method of communicating this bonus would be at the time your customer is most vulnerable….at the maturity of their CD.   Plus, it is a natural time to ask for them to consider consolidating other funds at your bank….and the numbers are with you; most customers have an average of 4.6 financial relationships.  It is the perfect time to ask for additional deposits.

Singer believes that it's easy to understand why the typical Certificate of Deposit customer prefers insured deposit products at their neighborhood bank: the customer is not ready to jump back into the risks of the fluctuating stock market.

“A personal letter reassuring the account holder that you appreciate their business is very well received and may be the most cost-effective means to grow deposits without raising rates,” states Singer.  “Remember that certificate investors can be turned-off by the impersonal nature of automation offered by many of the new electronic services,” Singer adds.  These are the customers that most appreciate personalized approach.”

Singer concludes that, “As bankers, we are often too focused on interest rates and price.  Personal service and a friendly letter have value, particularly to certificate investors.”

Financial Marketing Systems, Inc. (FMS), provides personalized, one-to-one database marketing solutions for the financial services industry.   Visit www.bankmktg.com or call (815) 398-2474.