Alfred W. Ey, the new head of data base marketing at Atlanta's Bank South Corp., is not a typical banker.
The 30-year-old former computer programmer and self-styled "quant" is one of a growing cadre of young, technologically savvy business people who are being tapped to help banks discern the best way to motivate specific customers to buy more products.
Relying more on sophisticated computer models than on old-fashioned customer profiles, the idea is to make each customer more profitable to the bank. The means: mass customization of products, in which features or modifications are added to a generic product, like a credit card, in order to maximize its appeal to each customer.
Before coming to Bank South, Mr. Ey spent had six years at USAA, the branchless bank for military officers and their families that is considered a model of high-tech marketing.
Most recently at USAA, as market development manager, Mr. Ey's job was to evaluate customers based on so-called market propensities - the likelihood that a customer would inquire about, or buy, a product.
Barely two months into his new job, Mr. Ey was reticent about his plans at Bank South, where he heads a marketing staff of 30, but he was enthusiastic about the potential of direct marketing.
"Bank South is very aggressive in its methods and committed to one-to- one marketing for building strong customer relationships," Mr. Ey said. "Direct marketing will play a bigger and bigger role in banking, as we think less about how we do banking and more about how we do retailing."
Bank South clearly hopes that Mr. Ey will bring it the same kind of aggressive direct marketing that is characteristic of USAA Federal Savings Bank. Customers at the highly rated USAA never meet their bankers face-to- face, but the bank still has achieved 95% penetration of its target market.
Bank South also prides itself on being an innovator in electronic delivery. More than half its 300 automated teller machines are in in-store branches in Kroger supermarkets, which are open seven days a week. The bank has a teleservices unit at which customers can open checking accounts, IRAs, and other accounts by telephone.
The bank recently signed an agreement with Bell South to market screen telephones to its customers for home banking. The strategy has been successful.
Against stiff competition from First Union Corp., NationsBank Corp., and a host of community banks, Bank South has more than doubled the number of households it serves in the past three years, to 500,000. Bank South is the largest bank in metropolitan Atlanta, where it has 32% of the market.
An "Air Force brat" who spent part of his childhood in Teheran, Iran, and his high school years in Germany, Mr. Ey has a bachelor degree in computer science from Trinity University and a master of science degree in computer information systems from St. Mary's University, both in San Antonio.
After graduating, he moved into a programming job at a government contractor and from there to USAA.
He considers himself a numbers-cruncher above all. "Much of marketing is built around creative people," said Mr. Ey. "In direct marketing you need a certain amount of creativity, but a large part of it is quantitative" - identifying the best method for reaching a customer. It requires long hours of systems analysis, designing a system from beginning to end.
Banks historically have had difficulty translating the information they possess about customers into effective marketing campaigns, industry observers say. Mr. Ey agreed.
"Most of the problems banks have in such marketing is that systems areas are separated and banks have trouble designing systems to look at the whole customer," he said. Understanding the relationships among data "is essentially what I bring to the table. Many people have all the data in one place, but they don't know how to make it sing and talk."
Take a customer who uses his credit card but pays off his balance every month. Analyzing his buying patterns can tell the bank that this customer likes to take ski vacations.
One marketing ploy might be to offer points that can be used against ski vacations for every dollar that the customer allows to revolve on the card.
An avid downhill skier himself, Mr. Ey said, "Maybe only a direct marketer would feel this way, but I'm thrilled whenever I get a mailing aimed at skiers."
The type of marketing Mr. Ey is talking about goes beyond demographics. "Demographic information won't tell you what motivates people, what an individual's risk profile is, or what he likes to spend money on," Mr. Ey said.
Bank South and many other companies are adopting what is called psychographic modeling, which adds a dimension of psychological analysis to demographics.
An example of a psychographic indicator is the "dominant vehicle lifestyle" indicator. Translated into English, that means: "A person who buys a new Mercedes is different from someone who buys an old Chevrolet," said Jay Nagdeman, a telemarketing consultant and president of a New York- based company bearing his name.
Another factor could be whether a customer has a gold credit card. Many such factors combined make up a psychographic profile, which gives the bank a deeper understanding of its customer.
"The banks are late at this," Mr. Nagdeman said of psychographic modeling, "but they're coming on." One of the most important elements, he said, is for banks to figure out what they are looking for before they begin to analyze data.
Banks need to decide what makes a good customer, for example: Is it a customer with a large account or one who has many relationships with the bank? "Otherwise," Mr. Nagdeman said, "you can have loads of information, and you'll still not know how to ring the cash register."
Mr. Ey agrees. He says it's important to know the profitability of each customer and each product - something he says Bank South is capable of doing to some extent but will improve.
He prefers to motivate customers using incentives rather than penalties. He suggests that a bank give its least profitable customers a 5% discount on their grocery bills when they use a debit card instead of writing a check, which is more expensive for the bank to process.
Mr. Ey concedes ethical and privacy concerns arise in data base marketing. "We need to realize there is skepticism about what we're doing." However, he argues that by building mathematical models to reach customers "we're helping people, by sending them things that are only relevant to them."
Mr. Ey won't say what his first marketing campaign will be. Bank South has most recently promoted its home equity line and ran a direct mail campaign welcoming new customers. New customers with families were offered a Save-a-Saurus Account for children, which came complete with a fuzzy dinosaur toy.
But he will say what is coming down the road. Eventually, he says, a customer will put his bank card in a teller machine, and a message will appear on the screen aimed at that customer. The message could tout a mortgage, an equity line, or a mutual fund.
Part of Mr. Ey's job is to help Bank South develop the massive data base that will allow it to flash such individualized marketing information at customers. Only a handful of leading-edge banks are working on such systems, but it is all in a day's work for a data base marketer.
