Banks can seem cold and impersonal, which isn't the best image when it comes to building relationships. Commerce Bank is using transaction data to try to reach the right customers at the right time in their financial lives — not necessarily to get warm and fuzzy, but to create a relationship that's profitable to all involved.

Geoff Thomas, vice president and director of marketing, is at the forefront of this effort. Prior to joining Commerce, jointly based in St. Louis and Kansas City, MO, Thomas was with National Finance, a New York sub-prime lender. And before that, he was with Marketvision, working with a variety of clients ranging from the New England Patriots to the Grateful Dead to Smith Barney. Moving from the agency world to the client side has given Thomas a new perspective. “I think in many ways I have a greater appreciation of most of my clients in the past,” he said. “I find myself saying things that I never would have found plausible when I was on the agency side.”

Like many banks, Commerce has grown significantly by acquisition as well as organic growth. The $13.8 billion regional bank holding company has 330 locations in three states — Illinois, Missouri and Kansas. The bank has about 1.8 million accounts, representing 620,000 households.

Direct talked with Thomas about how Commerce is working to keep those households part of the family in a competitive banking environment. “We've focused on making it easier to do business with us, and turning the [banking] experience into one that is more universally positive and higher quality,” he said. “Reinforcing and living our brand promise is a major focus.”

DIRECT: What are the major issues facing retail banks today?

THOMAS: We had a tremendous boom in refinancing [which has] pretty much run its course. So loan demand in general is a little bit softer. We've had a great run up in deposits because the market hasn't been terrifically attractive. So I think the biggest challenge for retail banks in general has to do with maintaining growth and improving satisfaction. A lot of people still associate their primary bank with the bank that either holds their mortgage or that they have the checking account they use most with. So that's very important to us because the primary bank is one of the factors that gets you on the short list of consideration for the next product or service.

There's a significant disconnect between what a customer views as their relationship with a bank and what the bank views. Typically, the bank says ‘Oh, you opened an account, therefore we have a relationship.’ We're trying very hard not to look at it that way, [and rather] build a relationship with an account opening as the starting point. The big challenge for banks is to take advantage of the incumbency of having some relationship — however you define it — with the customer, and growing that into other areas. At this point, I think the average consumer has something like seven different financial institution relationships. As a bank, some of those are profitable and some are not. You don't want to be on the side of just having the unprofitable components of that relationship.

DIRECT: What are you doing to improve customer relationships?

THOMAS: We've been working with Harte-Hanks' Allink Daily Deposit Builder product for about a year in about 30 of our branches. The product basically is designed to put you in the right place at the right time. It looks at our transaction files nightly and builds a profile of transactions at the account level. Then it calls out significant changes in the pattern from the norm.

The kinds of things that are included in that are fairly sophisticated models of balance change and activity change. [Activity change is] in some ways more indicative of things that might be happening. For instance, increasing usage of non-Commerce ATMs might be a sign that someone has moved or is moving or changed job locations or something like that. And it may be an indication that they might change banking relationships at some point.

DIRECT: So is a main goal to stem churn?

THOMAS: Absolutely. The primary goal we have for the program is balance retention. And you know, it's over time we've decided that if the three legs of direct marketing are targeting, timing and message, target and timing can really be the same thing when the timing is really perfect.

DIRECT: What's an example of a way you'd step in if you saw indicators of someone getting ready to jump ship?

THOMAS: We don't want to give people the impression that we're looking over their shoulder. So our MO is that we will make a service check-in call. Unlike some industries where people are sick of hearing from their service providers, the good news/bad news of being a bank is that our customers are very happy to hear from us. This gives us the opportunity to check in with them at just the right time. Either they've had a significant increase in the amount of funds available to them through the sale of a business or residence or a bonus and they're looking for a place to put [that money], or we've caught them midway in the cycle of making a change. And the ability to talk with your banker at that time makes a huge difference.

DIRECT: Do you find it's also a way to put a personal face on the bank?

THOMAS: You know, our brand promise is ‘Ask, listen, solve.’ Our customers are recognizing that this is what we're doing. You get a lot of points for doing what you say you're going to do.

DIRECT: Have you had instances where people are surprised the bank is aware of and tracking their financial patterns?

THOMAS: No, because we don't talk about their patterns specifically. There isn't really any knowledge [about] what prompted the call. It comes across from the customer's perspective as ‘Boy, this is a really good time to call me.’ We're very conservative about the way we approach this, making it a very gentle touch and not being sales-oriented at all. I really expected we might have some negative feedback, but we've made probably more than 10,000 calls at this point and have not had a single complaint. That surprised me. I'm still waiting for the first one when somebody says, ‘Don't call me again.’ By and large our customers are thrilled to hear from us. Not all the calls have impact, but the vast majority do make a difference. Even if a call doesn't change the outcome of a particular customer's account status or ownership, we think it's having a beneficial impact on their perception of Commerce as a bank.

DIRECT: Do you maintain one integrated database across different product lines?

THOMAS: [That's] something we've been working on aggressively for the last two years. The biggest challenge is coming up with a framework that works across the board and then cleaning it up. It's not very exciting, but the biggest challenges are in the lack of meta-data, the lack of data dictionaries, the fact that people don't know exactly how or why something was derived the way it was. Our bank is not that different from others in that much of our data is applications systems-specific, so we'll have information in the deposit system, information in the various loan systems, etc., and in many cases it's the same information. Trying to bring those things together into a single place without gross replications, to be as efficient as possible and understand what's what…that's the biggest challenge.

DIRECT: When you get a customer on the phone, are you gathering additional information for the database?

THOMAS: We do. We ask a series of questions, we perform a customer needs assessment and on the basis of that we try to make our recommendations. We adapt a needs-based approach rather than a product approach. To do that, you need to understand someone's situation beyond the level of the superficial ‘Hey, I need a checking account.’ You need to understand how people use their money, what their needs are, what their family situation is like, the ways in which they like to bank and manage their money and so forth.

DIRECT: Ultimately, how will you be judging the ROI of these efforts?

THOMAS: We look at control groups. Daily Deposit Builder does a great job of identifying money in motion. Money in motion for a bank is generally not a good thing, because the motion is generally out. A short-term increase [can] represent a larger outflow at some point, so we look at control groups in the type of alert [the system] generated. We compare those [who are] actually contacted vs. those who are not. And then we also look at a control group within our base as a point of reference. The thing we've seen quite clearly already is that while there is a overall decline in balances among this group, the decline is significantly less in the group we contact than in the control group.