2006 4th Quarter:

How One Financial Institution Reduced Liquid Deposit Attrition and Boosted Net Income

 

Situation:
A retail bank with assets approaching $200 billion partnered with Harland Marketing Services to test various operational processes and analytical models in an effort to reduce attrition. The bank’s specific goal was to decrease liquid deposit attrition. Harland recommended and deployed its StraticsSM liquid deposit attrition model, which targets households that are likely to diminish liquid deposit balances. Since 75 percent of all attrition is due to balance diminishment rather than account closure, Harland has had much more success modeling diminishment in assets as opposed to outright account closure.

Action:
More than 300,000 households made up the population for a year-long testing effort that was designed to measure the ultimate rollout potential of a systematic targeting strategy to reduce liquid deposit attrition. Direct mail and teleservices were used as outreach methods to households that were identified through model scores as likely to result in attrition. Matched control populations were held out so results or lift of the outreach methods could be measured. Furthermore, tests were designed to examine performance between model segments. For example, tests were designed to ensure that households that scored high (or likely to diminish balances) actually did so at a greater rate than households that scored lower (or less likely to diminish balances).

Impact:
In total, five distinct campaigns were conducted throughout the period to control for the potential effects of seasonality and competitive forces.

The results of the tests were very compelling for this particular financial institution. The results strongly indicated that the institution could reduce liquid deposit attrition and therefore improve its net income by:

  1. Implementing an attrition prevention program targeting the top 10 percent of its customer population that scored most likely to diminish liquid deposit balances.
  2. Delivering retention programs via the branch personnel versus the institution’s centralized call center. In fact, relationship calls by branch personnel were found to be the most successful delivery method for the bank’s retention efforts.
  3. Separating sales messages from retention efforts. In other words, a “customer care” message was much more successful than a “customer care/up-sell” message.

Overall, the treatment populations outperformed the matched control populations by more than 250 basis points. When the results were extrapolated to this customer’s entire segment of “at risk” balances (just 10 percent of the entire portfolio), the impact to net income was estimated at more than $75 million (assuming a 2.5 percent spread) or an incremental $3 billion in retained balances.

To learn more about our Stratics attrition models or to view other case studies, visit www.harland.com/hpp/marketing