DIRECT recently talked with Karen Gopalan, vice president, brand and marketing services for Chase Manhattan Bank, to get her thoughts on financial services direct marketing. Previously with American Express, Mercedes-Benz and Ogilvy & Mother, she joined Chase in the summer of 2000. Gopalan oversees the DM communications supporting the investment, retirement and basic checking and savings portions of the company's retail banking division. Needless to say, we're not talking about a nickel-and-dime operation: Not counting statements, the division sends between 10 million and 12 million pieces of direct mail annually. In Texas, New Jersey, Connecticut and New York, Chase has 3.1 million retail relationship accounts. Its largest concentration of retail banks is in the Manhattan area, with 730,000 accounts in New York City. In this interview, Gopalan shared her thoughts not only on the trends and challenges facing retail banking in a weakened economy, but also how the events of Sept. 11 affected the New York-based financial titan. “With our merger with J.P. Morgan last fall,” she noted, “we probably have about eight to 10 office buildings in the Manhattan area, so we felt [the impact] very personally.”
DIRECT: How did Chase respond to customer needs surrounding Sept. 11?
GOPALAN: A very important part of our business is the small business customer. Access to finances was never a problem, since all of our systems were up and running. But businesses needed access to information. If you worked in the New York City area, you didn't have phone service, computers were down. So we set up an emergency team and resources in our offices downtown at 1 Chase Plaza for small business owners, as well as various resources that they could access by phone and computer. Chase also immediately sent out a direct mail piece to all of their savings, checking and retirement customers just to reassure them, and gave them a contact number to call if there was anything we could do. It wasn't a communication that had to go out by any stretch of the imagination, but it went out to all of our customers to let them know everything was up and running. We also sent a communication out within two to three weeks to all of our investment customers, telling them how we had adjusted our portfolio in terms of managing their money, to give them some ideas of what the bank's thinking was in terms of what was safe at this time.
DIRECT: Did the aftermath make Chase reassess any of its DM plans?
GOPALAN: We had a Continental Airlines debit card acquisition program at that time and there was a lot of sensitivity around that. We held onto it for a couple of weeks, just until we felt confident and comfortable that the airlines were feeling up to speed in terms of the changes that they had to make. We just held onto everything promotional for a few weeks until things calmed down. We didn't feel it was an appropriate time to overwhelm either our small business owners or our customers with unnecessary communications. And our communications are always very clearly branded, so we didn't have to [address] any of the concerns that some people had relative to anthrax if they didn't do a considerable amount of branding.
DIRECT: Going forward into 2002, what do you see as the trends for retail banking?
GOPALAN: What affected the retail bank the most is watching the interest rate. When the interest rate changes, it affects dramatically the business of a retail bank. In particular we found that a number of customers were looking for advice and they were much more interested in FDIC-insured products. We're offering people [the chance] to put their money where they can get high yield savings and there's potentially a lot of new money coming into the bank as a result of that. People are looking for a safer place to be instead of the stock market. Not that we're encouraging people not to go in the stock market. But our customers tend to average a little bit older, and may need to be in a safer place where their interest rates are guaranteed, so we really need to keep an eye on that so we can offer them different options.
DIRECT: Do you have a general demographic of the Chase customer?
GOPALAN: It really varies. They tend to be a bit older. We look at it by bank product and not across the board. But I'd say that they tend to be in their 40s, married and have children. We do quite a bit of subsegmentation; we have special programs for new customers, retired customers, low- to moderate-income customers, as well as our general customers. And within our general customers we have different offerings for them so it meets their needs based on where they are in terms of their life stage and their financial resources.
DIRECT: What are the biggest opportunities in retail banking?
GOPALAN: It's important to know that the average customer has four or five financial relationships. They have their retail bank. They may have someone else who does their retirement, they might have someone else who does their investments. What [some of our customers] found is that some companies they had been doing business with when the economy had been doing well were not necessarily there for them when the economy softened and they didn't have the money to invest and be trading regularly. So that's a big opportunity, not just for Chase but for retail bankers overall. With deregulation we can offer anything from insurance to investment and retirement, as well as the basics like savings and checking. They can come to us for advice and we'll help them look at their whole portfolio and they know that we won't lose interest in the relationship because their personal portfolio changes or because of changes in the economy.
DIRECT: Does Chase maintain an enterprisewide database across its various lines of business?
GOPALAN: Yes, Chase had an integrated database, as well as an ability to look across the entire portfolio when it comes to credit cards, mortgages and auto finance. But retail banks as a whole are surprisingly considerate and conservative when it comes to privacy. If you think about retail banks, it's a very, very old industry. So their policies tend to take the customer more into account and what the perceived needs of the customers are, rather than leveraging knowledge for their own benefit the way a number of other industries do.
DIRECT: Are you seeing more customers banking online?
GOPALAN: Like most other industries, though we see it growing, over the last six to nine months it has plateaued to some extent. What we find is that customers like to use multiple channels. It would be unusual for someone to just be an online customer. There are some things that you just want to be able to come in and talk to somebody about. We find that there are very few people who just use the retail bank, or just use our phone services, or just use the online channel. People like to be able to move very fluidly across channels and our systems are set up to support that.
DIRECT: Is e-mail a factor in your marketing initiatives?
GOPALAN: E-mail marketing is something we've just started doing. Again it comes down to that privacy issue more than anything else. People open online accounts, but they still get statements if they want statements and they still get direct marketing if they want direct marketing through traditional marketing channels. We will in 2002 more aggressively go and speak to our customers individually and offer them the opportunity to opt in to the communications channel they prefer.
DIRECT: We talked about the Continental debit card. Do you have a number of branded debit cards?
GOPALAN: We do. We have our core card, which comes in multiple flavors. We have the core card basic — you can get a silver as well as a gold card there. We also have two upgraded cards or points cards. We have a leisure reward program, as well as a Continental program. I wouldn't say the portfolio for them is very large, relatively speaking. The majority of our customers still have the core card, but the renewal rates on the branded programs are phenomenal, well in to the 90% range, which is staggering. One of my business clients came to me and asked how to improve renewals on their loyalty cards. Well, one was 95% and the other was in a point or two of that. I said I don't know, maybe we could go visit those five people who decided not to renew.
DIRECT: Who do you see as your biggest competitors?
GOPALAN: Citibank is a big competitor of ours, Fleet is a big competitor, it varies in Texas but in the tri-state I'd say those are two of our biggest competitors. There is a tremendous amount of churn in retail banking. Most customers make that initial decision based on location, so location is always going to have a huge influence on how people make that decision. We don't really do acquisition work to try and steal a Citibank customer to Chase, for example. And I don't think that's Chase-specific, I don't think you see that in retail banking as a rule. Our individual branches may do individual promotions if they see a competitor opening up a branch in close proximity to help build that loyalty.
DIRECT: For the retail banking industry, how was 2001 compared with 2000?
GOPALAN: In terms of total number of customers, our loyalty numbers, we've definitely grown accounts the way we wanted to. But, because again of how retail banks make their money, every time the interest rate drops, it makes it that much more difficult for you to actually meet your numbers. It's an equation of what does the bank purchase the money at vs. what can they sell it back to their customers as. So as the interest rate drops we're buying it at a little bit less but we're also selling it back for less, so it's harder to make the money. So in terms of our overall numbers, I'm sure the bank feels very positive. I'm sure they've made some adjustments throughout the year though, as has everyone.
