CHICAGO - Labe Bank was having a hard time distinguishing itself when the Windy City's market started heating up a few years ago.
The two-branch, $400 million-asset thrift in northwest Chicago was profitable, but its emphasis on beating rivals' deposit rates was not working.
As David J. Arts, Labe Bank's president and chief executive, put it, "We were in tune with the competition, but not our customers."
So the bank shelled out $60,000 for consultants from the Chicago firm Brandtrust. They interviewed customers and employees, and even posed as mystery shoppers.
What they found was that customers cared more about service and how products fit their needs than about deposit rates, said Vicki Dryer, Labe Bank's vice president of marketing.
"It was a change from focusing on just the product," to how the bank has affected customers' lives, Ms. Dryer said.
The new approach is working.
Deposits soared 87% in the three years through the first quarter, to $365 million. Core deposits are up 49%, to $205 million, according to the most recent statistics from the Federal Deposit Insurance Corp. Average deposit growth at peer thrifts - those with $300 million to $500 million of assets - was 4% in the same period, and core deposits were flat.
Brenda Marlin, the associate director of the American Bankers Association marketing network, said the results are impressive because Labe Bank did not introduce new products - it merely repositioned its brand.
Banks need a strong identity, Ms. Marlin said.
"You have to put out a different message to get people to bypass three other banks to come" to come to yours, she said. "If you reach out to the emotional needs of customers, you have a better chance of creating a long-term experience."
The Chicago market is one of the country's most competitive. By the FDIC's last count, in mid-2003, it had 280 banks with 2,250 branches. Hundreds more are being planned by national giants such as Bank of America Corp. and Washington Mutual Inc.
David W. Furnace, a managing director at Alex Sheshunoff Management Services LP in Austin, agreed that branding efforts are more effective than competing on rates. Many customers shop for the best rate, but that does not make it a good business strategy, he said.
"We've studied high-performing banks for many years, and we've rarely seen" one that has used a rate strategy - "in other words, paying high rates on deposit," Mr. Furnace said.
Banks that use such a strategy cannot control their interest expenses, so their net interest margin suffers, he said. High performers of all sizes, including the money centers, try to give customers some other reason to choose them.
Labe (the Czech name for the Elbe River in central Europe) was founded in 1905 by a group of immigrants. Its traditional customer base of eastern Europeans, which has remained solid, has expanded with the addition of immigrants from Latin America, the Middle East, and Africa.
It made a variety of moves to change customers' perceptions of the bank. It used to have separate pamphlets for each type of account, for example, but now has just one brochure in which customers describe how they use Labe Bank's products.
Additionally, its Web home page once listed the languages spoken by employees. Today the site features testimonials - in customers' native tongue - about Labe Bank's service.
