Aventine Partners

Tipping Point for Online Banks?

Wingspan Bank.  Remember the short-lived online-only bank launched by BankOne in the late 1990s? 

A recent post at Bankwatch called attention to an American Bankers Association survey showing that online had become the most-favored channel for bank customers for the first time. Memories of Wingspan, Telebank, Jupiter Bank, and others that made a go at the online-only business model came flooding back along with the unanswered questions.  Was online-only banking the wrong idea, or was it just the wrong time?  With changing consumer preferences, might we expect a new breed of online-only banks to emerge soon?

Topgrading Marketing Spend

As I noted in my post To Cut or Not to Cut?, this is a smart time for most companies to reduce marketing spend, notwithstanding desperate pleas from marketing services providers that you double-down in the downturn.

Is there a smart, systematic way to do this?  Probably, but it's elusive, as confirmed by the many stories I hear of the across-the-board, arbitrary 10%, 15%, 25% cuts many marketers are trying to cope with.

A recent white paper from former colleagues at Deloitte Consulting prompted my writing this post, so let's look at their approach, which they call Structural Cost Cutting.  

The premise of the Deloitte's Structural Cost Cutting is that the big opportunities for big near-term reductions in spend come from challenging basic assumptions about the business and how marketing supports it.  The savings will emerge from multiple categories of marketing spend.  The Deloitte hit list of areas to examine are:

The Shifting Consumer

Identifying how consumer attitudes are shifting in this downturn and which shifts will stick is an important, but tricky, task.  John A. Quelch and Katherine E. Jocz tackled this issue in the Financial Times with their Managing in a Downturn.  

I can recommend this article as thought provoking, and it contains some good insights.  But there's some bad mixed in with the good.  First the good.

Key takeaways:

"What is certain is that the market segmentation scheme you were using to plan your marketing budget and programmes this time last year is obsolete. You need to listen to your customers and possibly develop a new segmentation approach."  

Very true.  The authors recommend an overlay segmentation that adds insights to how consumers are reacting to the current environment.  This is likely a good first step.  

Bubble Charts, Good or Bad?

I like bubble charts.  It seems many others don't.  This is a quick review of bubble charts as a tool, with thoughts about why I like them, why others don't, and how best to use them.

At Aventine, our focus is marketing analytics, but we have a strong commitment to the related discipline of Information (or Data) Visualization, InfoVis for short.  By using good InfoVis techniques, we are able to create better graphical presentations of the analyses we do for clients.

I've watched with some interest recurring discussions in InfoVis circles about the use of bubble charts, including one recently on a site we like, Junk Charts, panning a graphic in the Financial Times using bubbles.  By and large, the InfoVis experts hate bubble charts, feeling people can't do a good job distinguishing differences of bubble size. 

The interesting, parallel development is that motion charts, which are just a type of animated bubble chart, are getting increasing attention thanks to Google and a remarkable presentation at a TED Conference in 2006.  These motion charts are getting traction despite the criticisms.

Asset Portfolio Risk vs. Customer Portfolio Risk

Nearly every financial institution is undertaking a comprehensive reevaluation of methods and processes for measuring and managing asset portfolio risk.

But what about customer risk?

This came to mind recently when reading an interview with Wells Fargo's CEO, John Stumpf, in Investors Business Daily.  IBD chose Stumpf as their CEO of the year because he had the foresight to keep WFC away from the most toxic forms of mortgage assets, sacrificing considerable profits in the short term but keeping the bank out of trouble in the long term.  WFC may be down 33% from Jan 1, 2008, but that's a far cry better than the 60%+ drop in value for the banking sector as a whole.

I noticed in the interview a story we've been hearing from Wells for years -- an emphasis on cross selling and signs of higher-than-average retention experience in their customer base.  

Predictive Fund Redemption Behavior

It's always exciting to be able to apply analytics to a problem in real-time.  So often we are looking in the rear view mirror to analyze the events that took place 12 to 24 months ago and applying the insights to the current situation.

When the financial tsunami struck at the end of last  year, one of our clients became acutely concerned about taking action to manage attrition in its investor base.   Amid the swirling market uncertainty, they had limited resources for this unplanned initiative late in the fiscal year, and asked Aventine to develop a model to identify the most at-risk investors.  

Among the challenges was determining the right metric target behavior (unusual, out-sized fund redemptions) and accounting for the dramatic change in the environment in 2008.  Nonetheless, we developed a model that has proven effective, and will continue to refine the approach in 2009.

We've just added a case study describing this project, and a PDF version is available for download.  Hopefully this might spark thinking about what new phenomena in your business would lend themselves to using predictive models as part of the response.  Certainly, we all have plenty of new challenges to confront these days.