When the Internet first became a viable marketing medium, most companies looked at it primarily as an acquisition tool. The key question was, “How do we get people to come to our website and sell them stuff?” Today, websites are seen primarily as a tool for brand building, retention, and cross-selling. The goal is less to attract “visitors” than to provide a service to current customers. Content on the Web serves diverse ends, depending on the company’s goals, competitive pressures, and the needs of the target markets. The following discussion outlines seven functions online content can serve.
The term “brochure-ware” was coined to denigrate sites with nothing but informational copy. Early Web enthusiasts maintained that a website had to be interactive to be engaging, but brochure-ware serves a purpose. Many companies simply reproduce their print brochures on the Web, and such a use of the Web may be appropriate. For example, brochure-ware can be an improvement over a print brochure by providing useful background information for institutional salespeople and client decision makers. It is easier and cheaper to update than a printed piece. It can also save the salesperson time—instead of mailing a brochure to prospects, the salesperson can refer them to the company website. That institutional buyers do go online for information is confirmed in a 2002 survey among treasury and finance professionals. It found that bank sites were the most popular online source of finance-related news and research, with 56 percent reporting at least a weekly visit.
On the consumer side, some type of brand-specific information is almost always included on the site. This is important, because numerous studies have shown that most consumers use the Web for gathering information about financial products and services. A survey by Harris Research in 2002 showed the Internet ranked as the top media source used by retail banking customers to obtain information about financial products.7 The website should bear a close family resemblance to the company’s other graphics to ensure brand recognition. In the Citibank example, the “Welcome to Citibank” headline uses the same design style as the company’s advertising campaign. Even though many banks have similar-looking websites, this one is clearly Citibank’s.
Brochure-ware is primarily about the company and its products. Educational information includes general service articles, like those found in magazines; interactive tools, such as retirement planners; real-time stock quotes; and other useful data. Unfortunately, many sites have exactly the same types of information, which diminishes the differential advantages of providing extensive (and expensive) resources. But clever marketers have found ways to differentiate their sites and attract qualified prospects.
For example, Chubb has created a separate site at Chubbcollectors.com that contains articles by specialists on topics of interest to collectors, such as oriental rugs, stamps, and cars. What is clever about this site as a marketing tool is that when people who are interested in oriental rugs type that term into a search engine, it refers them to the Chubb site. Thus, Chubb gets the benefit of key-word targeting without paying for key-word ads (those that appear on the search site when particular words are keyed in). These site visitors are qualified insurance prospects. The site, which encourages visitors to subscribe to a monthly newsletter, stores the visitor’s e-mail address for other potential marketing purposes. As noted, the Web is the primary source of financial information for both consumers and institutions. In fact, Nielsen/NetRatings reported in 2002 that financial websites were among the “stickiest” on the Web, with an average stay of twenty-one minutes—far longer than the second-ranked news sites, where the average visitor lingered for only fifteen minutes. A 2002 survey by Nationwide Financial of high-income professionals found that 81 percent researched specific investments on the Web and that 51 percent used the Web for general research on financial planning, retirement, and estate planning.9 Because the Web has become the first source for customers and prospects seeking information, smart marketers will make sure that their websites contain useful items that will fulfill those search needs.
Customer service is one website application that is rapidly growing in importance. Allowing customers to perform service functions on a website (such as recording a change of address or transferring money between accounts) provides numerous benefits, including loyalty building—customers with online access to service functions have a higher level of satisfaction—and improved service. Customer service is the crucial differentiator among many financial institutions. If online customer service is well designed and well supported, it can improve the overall reputation of the institution. Customers like being able to handle their business online. One study indicated that 56 percent of respondents felt that online service was their most positive customer experience.
Just as good service can improve customer satisfaction and retention, bad service can do the opposite. Particularly disliked are slow response times in answering customers’ online questions and unreliable site performance. In one study, 31 percent of those who banked online considered switching banks because of dissatisfaction with their Web experience.
At the beginning of the Web era, sales professionals feared that the Internet would become a competitor. And, in fact, some commissions that might have gone to a stockbroker or insurance agent went instead to online-only firms. But after the stock market crashed in 2000, many customers turned to individual financial advisers who might help them avoid the worst of the market’s ups and downs. On balance, the Internet has emerged as a valuable source of support for both captive and independent sales forces. In the case of the captive channel, most firms have created a separate website for their agents and brokers. These sites may contain everything from personal information (such as commissions earned) to sales training materials to downloadable customer promotional materials (such as brochures, letters, and signed articles). Companies also make information available for independent producers, either through an extranet or through a password-protected area on their main website.
A particularly sales-friendly use of the Internet has been the agent locator tool, which has become common on many insurance provider sites. If the viewer wants a quote or more information, these websites direct them to a nearby agent. Another positive trend for the sales force is using two-way communications (personal digital assistants, or PDAs, e-mail, and Web-enabled cell phones) to update customers on investment performance issues and to communicate new buy or sell recommendations. The more regular contact the salespeople have with their customers, the higher the customers’ satisfaction. Because salespeople have limited time for phone calls, automated but personalized interactions can help them maintain the one-on-one contact that customers desire. Some firms are also using the Internet to provide cross-sell leads to their sales people. UBS, for example, offers a link to the client’s financial adviser on each page of the client account area. If clients are surfing the site and find something of interest, they can follow up directly with their financial adviser.
While large companies have had some capacity to transact directly with a financial institution since the late 1980s, prior to the spread of the Internet, those transactions were made over proprietary networks using proprietary software. For example, Bankers Trust had an accounting system for its custody clients in the early 1990s that enabled clients to directly access their accounts and render financial statements, general ledger, and other reports. Until the late 1990s, this system was available only through private networks, using customized software. After Bankers Trust was acquired by Deutsche Bank in 1999, a new system was introduced that permitted access via the Internet, along with faxes, SWIFT (Society for Worldwide Interbank Financial Telecommunication) mainframe transmissions, and private networks. On the consumer side, the pioneers in financial transactions were credit card companies. Once they had worked out the security issues, online shopping took off—and so did credit card profits. The next major financial application was online stock trading, which was buoyed by wide-scale advertising, publicity, the effervescent stock market of the late 1990s, and the rise of day traders. At the height of the market boom, about 4 percent of U.S. households used online brokers. Many expected online brokerage to be the online “killer” application that would transform financial services. But it was online banking, not brokerage, that altered the way many people transact online. According to a 2002 Pew study, 12 percent of Internet users traded stocks online in 2000 versus 17 percent who banked online. By 2002, the percentage trading online had remained at 12 percent, while the online banking percentage had risen to 32 percent.
With far more consumers having bank accounts than brokerage accounts, online banking is predicted to continue growing at a compound annual growth rate of 14 percent, according to Jupiter Research.14 Even with the market uptick in 2003, which increased traffic to brokerage sites significantly, by 39 percent from April to June alone,15 growth for online brokerage is expected to be much slower than for banking. In fact, by 2003 online banking had become the Web’s third-most-popular service, right behind auctions and dating services. The growth in online banking transactions has significance for marketers in several ways. Online customers tend to have higher retention rates, be higher-
Growth in Online Banking versus Online Brokerage
value customers, and offer more opportunities for cross-selling and referrals.
On the institutional side, hooking clients into a provider’s systems has been a key marketing tactic for many years. After all, it is difficult for clients to change providers if they have to adopt an entirely new system to do so.
Consumer marketers with transaction-based products have found the same to be true. Banks, brokers, mutual fund companies, and providers of loan products like credit cards and mortgages are all finding that online customers are the most loyal customers. For example, Bank of America has become increasingly profitable as its customer-retention rate has increased. One way it has improved the retention rate has been by dropping fees for online bill paying. Bank of America has found that online bill payers close accounts at one-fifth the average rate. Not only are online customers more likely to stay with the institution, but they are also likely to be more profitable. Bank of America’s online customers maintained loan balances that were 45 percent higher and were 21 percent more profitable over a thirty-one-month period following enrollment than comparable customers who did not bank online. The Boston Consulting Group estimates that the average online customer is 33 percent more profitable than the average offline customer, and those who pay their bills online are 98 percent more profitable.19 Of the four major banking channels (online, ATMs, branch, and phone), the more channels the customers used, the more profitable those customers were. These multichannel users tend to have higher net worth and purchase more high-margin products like certificates of deposit and IRAs. Speed and convenience drive online transactions. What are customers doing online? On the investment side, clients can check account statements and transfer money between accounts. Some brokerages and mutual fund sites offer search engines that can pinpoint investments by category, help clients develop appropriate asset-allocation models, and rebalance. Online-only brokers are also likely to have streaming real-time quotes and access to ECNs .
On the banking side, most banks give clients the ability to check balances; transfer funds between checking and savings; download account information to financial software, like Quicken; and pay bills. Some offer online bill delivery. Few banks successfully integrate all the client’s debit, credit, and investment accounts with that bank. Account aggregation (the ability to see accounts from many different providers in one place) was a big buzzword in the early 2000s, but technical constraints and customer resistance to sharing information have slowed down acceptance.
An estimated 75 percent of online adults use the Internet to help manage their finances.21 Financial services companies need to find ways to enable these users to do business more efficiently. As an example, one can imagine a consumer going from online tax preparation, to writing a check or taking out a loan, to filing with the IRS—all on one site. This is similar to the goal of straight-through processing, long-sought by institutions, where a single interaction controls everything from order entry through transaction to settlement. In both cases, the goal is an all-encompassing Internet-based capability that will attach the user to a single vendor.
There are effective ways to improve customer relationships using the online channel. Merely communicating with customers on a regular basis can strengthen the relationship. One study found that 88 percent of online consumers made a purchase as a result of receiving permission-based e-mail from their own financial institution.24 But few financial services companies are taking advantage of the opportunities for one-on-one relationship building via e-mail. Of 18 percent of U.S. consumers who said they had given their e-mail address to their bank, only half actually received anything from the bank.
There are two major kinds of permission-based e-mail. One is highly customized literally one-on-one, and is generally used to provide information of importance to customers about their accounts. Some examples of this type of service include banks’ sending an e-mail warning when a customer’s account drops below a preset amount or has insufficient funds to cover a check. Another example is a brokerage firm that sends e-mail alerts when a customer’s account shows variance from its desired asset allocation. Active traders with some companies can get e-mail (or wireless) alerts related to prices of their holdings. Brokerage firms that handle trades through a salesperson generally do not provide this type of automated e-mail service, lest they interfere with the relationship between client and account adviser. The advisers, in turn, are reluctant to use e-mail for the simple reason that all written communications (including e-mail) are subject to compliance review. Those firms that sell investments directly to the customer are thus in a better position to make use of this technology to build relationships.
The second type of permission based e-mail is personalized but not customized. It may consist of, say, stock research on a particular industry segment that is sent to everyone who has signed up for it. Or it may be an online newsletter, distributed to anyone who has expressed interest, whether a customer or not. The idea behind these communications is to build a database of names associated with particular product interests. E-mail marketing to both customers and prospects has proven very effective, although the CAN-SPAM Act of 2003 put restrictions on sending e-mail unless the e-mailer has received explicit permission. Before the new regulations were enacted in 2003, e-mail to both customers and prospects generated the highest ROI of any direct marketing medium for financial services marketers. This was attributed in part to the low cost of the medium (average cost-per-contact was 17 cents) and the relatively high hit rate of 1.3 percent.27
The effectiveness of the Internet as a means of attracting new customers varies considerably by the type of product or service being sold. Credit products (loans, mortgages) and simple insurance products (term life, auto) are more likely to be investigated on the Internet than other types of products. But even when consumers do their research online, many prefer to do business with a live representative. One study found that 61 percent of those who shopped for credit cards online applied online, but only 23 percent of those shopping for mortgages applied online. Because of the greater complexity of the mortgage application and the amount of information required, most applicants preferred to meet a mortgage specialist face-to-face or over the phone.
Paid searches are popular. Among the most effective forms of Web advertising for financial marketers are search-based ads. These are ads which appear on search and other sites only when the viewer has entered relevant key words (“online banking,” for example). In most cases, the advertiser does not pay unless the ad is clicked on—hence, their other name of “pay-per-click.” Google, for one, claims that its keyword-based ads have an average click-through rate of 2 percent. So effective have these ads become that they now make up 35 percent of overall online ad revenues.
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