Life Matters

Scotiabank, based in Toronto, Canada, launched an integrated one-to-one marketing program called Life Matters in a series of “waves” targeted at specific customer groups. Each wave of this program, which was the brainchild of Jonathan Huth, vice president, relationship database marketing, included a bundled marketing package with varying financial product offers. Customers were selected on the basis of their product holdings, credit criteria, and demographic data in Scotiabank’s data warehouse plus predictive models. The initial direct-mail message was followed by a personal call from a branch officer or call center representative. The campaigns were supported through all possible channels, including direct mail; mass advertising through TV, newspapers, radio, and online; point-of-sale materials at branches; outbound telemarketing; and personal contact by branch personnel.

The Canadian consumer marketplace for financial products was highly competitive. Aggressive marketing by single-product “monolines,” particularly credit cards, had increased the amount of near-junk mail that consumers were receiving. Capturing and increasing the scope of business from existing customers (rather than trying to acquire new customers) was the goal of the new program. The objectives of the new program were to:

• Increase bookings and profits from database marketing campaigns.

• Reduce the cost of campaign creation and mailings, and increase response rates.

• Automate multisegment and multichannel campaigns, while having the flexibility to implement rapid changes in design and targeting.

• Enable the database marketing group to manage entire closed-loop campaigns, including tests and controls and measurement of results.

• Make effective use of the bank’s data warehouse.

• Bundle relevant offers in a single but varying package, reducing clutter for the customer and thus becoming more customer-focused.

The bank began the Life Matters campaign with a test of 50,000 customers to prove the concept. Response rates of 25 percent led to acceptance of the idea. As a result, several additional bank business lines asked to be included in the second wave.

The second wave was aimed at an additional 565,000 bank customers, divided into 60 test and control cells. The mailings were done in two drops to take call center capability into consideration. The third wave reached over 800,000 customers, divided into 750 cells. The fourth wave was also aimed at 800,000 customers, but they were divided into only 270 cells. This last wave included more sophisticated modeling that integrated each individual customer’s propensity to purchase each of the products or services being offered within the package and the expected profitability of each new sale to the bank.

To illustrate the technique, in the Life Matters 2 campaign, the offers were the following:

• Each customer was offered a preapproved line of credit based on that customer’s creditworthiness. Since these customers were preapproved, all they had to do was to accept the offer without further credit adjudication. The offers had credit limits ranging from $5000 to $15,000.

• Customers were invited to switch their deposit accounts from another financial institution automatically, with fees waived for 3 months.

• New term deposits were offered with different rate incentives, based on the profitability of the targeted customer.

• The wave tested different mortgage offers to determine which would pull the best.

Customers to be included in the program were pulled from the bank’s data warehouse of over 6 million retail customers. The candidates were selected on the basis of an estimate of their need for the products included in the offer. In Life Matters 2, for example, customers who did not own the products being offered were selected. In Life Matters 4, the prime criterion for selection was the potential profitability of the account.

How the Campaign Changed the Bank’s Marketing Approach

Prior to implementing Life Matters, the bank’s database marketing campaigns had primarily been focused on a single product. It was possible for a customer to be repeatedly contacted with several product-centered offers that were sometimes confusing and frustrating. The new system allowed the bank to communicate with customers in a more customer-focused manner, while at the same time reducing the costs associated with running many single-product campaigns. Bundling the offers allowed the database marketing group to balance customer focus with the objectives of various product lines and channel capacity constraints for lead follow-up.

As a result of the lessons learned through the successive waves, the bank was able to develop complex campaigns approximately 25 to 40 percent faster than by using the previous SAS-based approach. Annual marketing program cost savings of approximately Can$3.5 million were achieved through eliminating separate product campaign mail and branch contact costs.

The cost and time savings enabled the database marketing team to execute campaigns for other divisions, such as Wealth Management, Insurance, and Small Business.

In total, 120 percent more marketing campaigns were run than had been run in the previous 12-month period, resulting in almost 9 million customer contacts—an increase of 180 percent. Life Matters campaigns yielded response rates of over 20 percent and produced an average return on investment of over 100 percent.