Offering the right "value proposition" to the right customer is critical to the success of community banks.

For example, many of us have figured out that senior citizens are heavy depositors. Consequently we create programs to attract them. That's a step in the right direction.

But though banks' senior citizens' clubs are valuable, they still represent a "one price fits all" situation for the customers who provide the bulk of our deposits.

We need to go to a second level of differentiation, based upon the value of the senior citizens' relationship. The more we increase differentiation at this level, the more our profitability will increase, because we are aligning marketing costs with customer profitability. The more you reward your best customers, the greater your profitability .

In his book "Custom Specific Marketing," Brian Woolf recommends improving differentiation by applying qualified thresholds to receive awards.

For example, Marriott Courtyard Club tries to differentiate between its frequent and infrequent guests. The club charges $10 to join, but those who do receive two $10 coupons for two separate stays.

Guests decide on the basis of their likely travel plans whether membership makes sense. One-time guests will not find value in this proposition, whereas repeat guests realize that joining is a profitable idea for them.

The challenge for bankers is to figure out which customers see themselves as long-term customers. Differentiated marketing is crucial to attracting more loyal, longer-term customers.

Banks need to invest most of their marketing dollars in attractive segments. The ideal should be the grocery store where cardholders walk to a kiosk, swipe a their cards across the glass reader, and receive printouts listing up to 24 items especially priced for them.

Those of us who have made strides in this area are moving toward relationship-based pricing through product packages. We need to go beyond that and find a way to reward our best customers for giving us their business.

Like grocery stores, banks need to correlate the depth of price- reduction offers to customer profitability potential and product and channel preferences. We need to develop value propositions that correspond to the customer's consumption habits

We also need to recognize that with the differentiated marketing program, the company can't continue offering great specials matching competitors' prices.

We must focus entirely on the new way of marketing to create true differentiation for the highest value clients.

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