Database marketing is the latest Holy Grail in banks' search for ways to capture small business customers and make existing customers more profitable to the bank.

A survey conducted by Consumer Bankers Association and Furash & Co. found that 64 percent of banks queried plan to enhance database marketing to small business clients in the next 18 months, with 17 percent listing it as their highest priority.

But for banks that have already started this process, access to extensive sources of data, advanced modeling and data integrity are key components to a database marketing solution that can get a bank past the old "product of the month" style of marketing and graduate it to understanding client needs. KeyCorp, with more than 400,000 small business customers, has focused on database marketing for the past several years and has raised customer profitability, say company sources. By monitoring customer responses to marketing, looking at what products they've purchased and tracking activity on their accounts, says Jackie Baer-Cowdery, vp of small business marketing at Key Bank, the bank can get a fix on products a customer may want or need. "That's what allows us with predictive modeling to determine what other type of services they might be interested in at certain points of time."

But data integrity is an ongoing battle. "You know Coca-Cola is Coca- Cola, but a small business might go under a couple of different names," says Kevin Toomb, vp of small business marketing at First Union. "If you translate that to direct mail, we may send letters to the same controlling entity but under three different names."

To aid database marketing efforts, banks are collecting added information from outside vendors to supplement their own customer information file. "(It's) really has been helped along by better information compilation on the outside vendor level," says Kathleen C. McClave, CEO of Furash & Co.

Says Toomb, "The banks that get very good at that are the ones who are going to pull ahead."

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