Chase Manhattan Corp. hopes to score with small businesses by using a data base similar to the one it uses for credit card marketing.

"We wanted to understand small-business owners and their needs better than any competitors," said Joseph Scharfenberger, executive vice president for commercial and professional banking. "The only way we can do that is by using all this information."

New York-based Chase has compiled a data base on its small-business customers and is using the information to predict which are more likely to want particular products.

Though such data bases are commonplace in consumer banking, they are still rarely used for marketing to small businesses, said Linda Soldatos, Chase's senior vice president for information and technology management.

Mr. Scharfenberger and Ms. Soldatos got the idea for the data base marketing method from Chase's credit card department, where they worked before the 1996 merger with Chemical Banking Corp.

Chase, which has $365 billion of assets, uses the small-business data base to identify prospects, target direct mail offers, and issue pre- approved credit, Ms. Soldatos said. So far, Chase has been able to reduce its small-business direct mail costs by as much as 25% while generating the same number of responses, she said.

The primary difference between the use of a data base for credit card marketing and for small-business banking is that the bank tries to sell entrepreneurs more than one product, she said.

"Business owners don't want you to look at them as product users, they want you to look at their overall relationship," she said.

The direct marketing technique is similar to one pioneered by Wells Fargo & Co. in 1995 when it began mailing pre-approved loan applications to small-business owners nationwide.

Since then, PNC Corp., First Union Corp., and Banc One Corp. have been mailing loan applications to small-business owners.

But Ms. Soldatos said Chase is interested in more than loans.

When it began developing the data base in 1996, Chase compiled information on all the customers with deposit accounts, added borrowing information, then added investments. Last month the bank finished adding information on small-business insurance to get a complete view of the customer's relationships.

Chase also analyzed whether customers choose to interact with the bank through branches, a call center, or via PC banking. The bank plans to increase its promotion of its PC banking program to likely users.

Small-business data base marketing began at Chase when branch employees were handed a list of longtime customers that used a variety of services. Branch managers were asked to check whether those customers had other banking needs, Ms. Soldatos said.

One of the customers the bank identified was Robert Levy, whose family's linens store had banked with Chase for at least 90 years. The local branch manager called Mr. Levy and offered a term loan to replace a revolving credit line.

"I know the branch manager is looking out for us," Mr. Levy said. "It is pretty remarkable now to get that kind of personal service from a big bank."

Mr. Scharfenberger said many small-business owners expect the bank to offer that kind of attention to corporate customers, but are surprised when Chase bankers call them.

"That's how we demonstrate we really know the customers and value the relationship," Mr. Scharfenberger said.

Before small-business customers pay off their loans, Chase now offers them another term loan or credit line, Ms. Soldatos said. The bank does not make customers reapply to renew their loans.

Charles Wendel, president of Financial Institutions Consulting in New York, said the challenge for Chase will be to combine the data base with an effective sales effort.

As a result of the merger, Chase is the small-business "leader in the New York market.

However, they have to take all the data they have and turn it into information to diagnose the customer's needs and sell additional products," he said.

Since Chase gave its business development officers access to the data base last year, revenue has increased an average of 35%, Ms. Soldatos said. Once Chase gave data base information to the branch staff, the number of loan applications tripled.

Now the bank is trying to develop more detailed information, such as which customers respond to offers for credit lines or term loans. For example, Ms. Soldatos said, Chase can use the data base to track how often a customer calls a telephone call center to inquire about balances and whether a check has cleared.

Frequent callers are likely candidates for checking account overdraft lines of credit, Ms. Soldatos said.

Previously, Chase's call center staff had information about a customer that was different from what branch employees had. And senior executives would have still another view of the overall market, she said.

"If we are all going to decide who the best customers are and what we need to offer them, everyone in the bank needs to have the same knowledge base," she added.

Next, the bank plans to determine how to use the data base to figure out the personal finance needs of small-business owners, Ms. Soldatos said.

The plan is to initiate the relationship by offering credit to small- business owners, followed by an effort to win the company's deposit accounts. Then the bank would try to schedule a meeting to determine what other services the owner needs, she said.

The increase in revenue the bank would generate from handling business and personal accounts could be enormous, Ms. Soldatos said.

"It's big," she said. "There's a huge financial impact, and then there is the impact of increased loyalty the bank gains from the customers."

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