Umpqua Holdings Corp. aims to double its size in northern California over three years by using guerilla marketing and new ways to attract customers - particularly the young - to its branches.
The inducements include an in-branch music download service and, possibly, stored-value cards, says chief executive Raymond P. Davis.
Umpqua, of Portland, Ore., has been emphasizing northern California since buying Humboldt Bancorp of Roseville eight months ago. The acquisition gave it a foothold in the state, with 27 branches between Sacramento and the Oregon border.
Umpqua already follows a retail-oriented model that stresses service in its branches, but Mr. Davis says he has plans to "reinvent" bank marketing as Umpqua evolves.
"We're going to brand it, and we might make it available to other banks," he said. "I don't look at it as a bank. I really do look at it as a marketing company, and I say, What else do I need to market, what else can I sell, how else do we perpetuate the company?"
Umpqua has brought in Ritz-Carlton to help train its branch staff and is working with Procter & Gamble Co.'s marketing company, Tremor, which uses an online network of 250,000 teenagers to rate products and services and to spread the word about those products in viral marketing campaigns.
Procter & Gamble has used the system for marketing its Cover Girl line of products, and Mr. Davis said the approach could work for community banks. "We're definitely going to experiment with that," he said in an interview last week. "You'll see us do something."
Umpqua has carefully cultivated its distinctive Pacific Northwest brand image. "The risk is, as we continue to grow, can we sustain our culture?" Mr. Davis said in a speech at the Retail Financial Services conference last week in Carlsbad, Calif.
The retail bank has been able to maintain its service levels, "but on a business basis I've heard different stories from different regions - that the feeling has changed a little bit," said Louis Feldman, an analyst at Hoefer & Arnett. "It's not the same as it was when they were half their size or one-fourth their size."
Umpqua has grown from less than $400 million of assets to $4.9 billion in the past five years.
Since the Humboldt purchase, annualized deposit growth at the former Humboldt branches has jumped to the double digits, from 6%, and commercial loan growth went from zero in 2003 to 25% in 2004, Mr. Davis said.
Growth in California will be primarily through start-ups, he said, but "we will remain opportunistic" about acquisitions. "The M&A market is very, very difficult right now. Expectations are through the roof. Investment bankers have already factored in takeout premiums. We're not counting on acquisitions; that's not in our strategy."
Marketing is, however, and Umpqua is turning its attention to the under-30 crowd and looking for ways to encourage "browsing" in its branches, said Gary Gray, the executive vice president of retail administration. As with any retailer, that means continually showcasing new products.
Umpqua is testing a music download service and is close to introducing it, Mr. Davis said. The service enables customers to select songs through an Internet system. The branch will burn a compact disc and have it for the customer two days after the initial visit.
Mr. Davis is also enthusiastically exploring the use of stored-value cards, which he says have particular appeal to younger consumers.
"I think banks are going to have to get into that market in a big way, and we're looking to do that," he said. "I think that's going to be a big, big market. If you want to capture certain market segments, that's a huge way of doing it."
Umpqua might offer its own branded stored-value card or it might stock other retailers' cards, Mr. Davis said. He said there is no time frame for a rollout of the cards.
The plans seem to jibe with regulations that say banks must stick close to banking when selling products in their branches. Services such as CD burning and stored-value cards, if they are more marketing than a side business, meet that requirement.
"We can't sell gaming and lottery products," Mr. Gray said in a phone interview Tuesday. But "banks under their charter are not prohibited from selling retail-type products."
He said the strategy with products such as branded coffee and clothing has been to bring in customers, and "in general, we look for opportunities to provide nonbanking products and services out of our stores that create a revenue stream."
After buying Humboldt, Umpqua leased an ice cream truck, put the Umpqua name and logo on it, and drove through small towns in northern California for eight or nine days, giving away 1,000 ice cream bars every day.
Mr. Davis said the company is testing other tactics and hopes to pull them together in a marketing package.
"It's goofy stuff, but it's a different kind of marketing," Mr. Davis said. "If I was a small bank, would I do media, television? Yeah, if I'm able to and I can do it cheap to get my name out there. But then I'd supplement it with all this crazy kind of stuff. Then you stand out."
Mr. Davis' experimentation has won praise from analysts. "I like how he's thinking outside the box to try and find creative ways to get some more foot traffic through his branches," said Joseph Morford at Royal Bank of Canada's RBC Capital Markets.
