Many banks believe they can improve profits through information-based continuous relationship marketing (CRM).1 A better understanding of customer needs can help them acquire new customers, sell more products to those customers, and prevent other customers from taking their business elsewhere. In two years, one large North American bank trebled the number of products it sold per client household by using needs-based profiling; another pursuing the same approach saw a 60 percent increase. Yet others have acquired new customers for loan and investment products who hold transaction accounts elsewhere. And, intelligently used, database marketing has reduced mailing sizes for direct mail campaigns by as much as two-thirds.
But this type of marketing approach has to be developed carefully. Many of the fast-growing and profitable US financial companies (such as Capital One) that have stolen business from traditional multiproduct banks are expert at it. To build the same skills, many banks are spending tens of millions of dollars on databases and marketing techniques—with no guarantee of success.
The fact is that CRM cannot simply be grafted onto the multiproduct, multichannel organization of most banks. The huge amount of information available to these banks, coupled with the wide array of products...