During the late 1980s, the hot topic in bank marketing was how to reach the mature market. Banks rushed to establish senior clubs that provided a menu of services to attract and maintain relationships with the $800 billion marketplace that we heard and read so much about.

The early beneficiaries of mature marketing were turnkey providers who created boilerplate programs that became standard fare among banks offering senior programs.

Customers could go to any bank, pick up a brochure on the benefits of being 50 and open a checking account for $100 to receive a host of services and benefits.

By and large, these packaged accounts worked because before that time, older consumers received little recognition from the bank for all their years of business.

Often, however, inadequate market research was done before a senior program was launched.

Barnett Stands Apart

As Leonard Berry, a professor at Texas A&M University, has observed, almost anything worked because "so few banks were paying attention to this overlooked customer."

But, he went on to say, "today, nonfinancial services are much more readily available outside of the bank and therefore have less selling strength."

Some larger banks led by Barnett in Jacksonville, Fla., created a proprietary program. In 1982 Barnett launched Senior Partners for customers over 55 that differentiated it from all other banks in its markets.

Today, Barnett's program has more than 600,000 members and is credited with bringing in over $10 billion in deposits. Barnett has done extremely well marketing Senior Partners through its decentralized system to an expanding customer base. The program is most effective converting "snowbirds," who winter in Florida.

N.Y. Banks Behind the Curve

Banks implementing mature-market programs have flourished in most areas of the country. But banks in the New York metropolitan area, with a few exceptions, were not as successful.

Some attempts at starting programs were explored, such as Citibank's CitiSeniors program, which was tested in Queens. Susan Weeks, vice president of public affairs at Citibank, said, "The program was abandoned because w.c realized that what older customers wanted was simply good banking. We choose not to segment by age."

Republic National Bank of New York, in 1990 developed a unique proprietary program called the Renaissance Club. For their business relationship, customers each year are provided with a coupon book that offers members everything from free checks to discounts on bonus-rate CDs.

The cornerstone of the club is a series of entertainment events inside and outside the branch, including a summer concert series. The program currently serves 30,000 members whose average age is 65.

New York City banks that have programs for customers over age 50 promote the benefits through newsletters, statement stuffers, and customer service personnel. Very little paid advertising is used to promote the benefits of a senior club account at the bank.

Sensitive to Rate Changes

"Change" is the one word that characterizes banks' mature-market programs.

In recent years, older customers have been jolted as rates on certificates of deposit plunged to 2%, from highs of nearly 10%. Nothing moves a consumer to change more rapidly than the thought of losing money and interest needed to live on.

Many customers who were members of bank "senior clubs" recognized the need to explore alternative investments. Banks that did not offer such alternatives may have lost those customers forever to mutual fund companies and brokerage firms.

The consumer needed to learn a great deal about investment alternatives. Earning more interest with higher-risk products was more important to the consumer, and continues to be, than the security of Federal Deposit Insurance Corp. coverage or the perks and privileges provided by being a member of the senior club account.

Assets Spread Around

Many savvy seniors knew that nonfinancial services cost money and would have preferred to receive a higher rate on their CD.

As a result of a number of bank closings, customers also learned to spread their money around. Increasingly, they do not keep their nest egg in one basket. Customers today have relationships at seven to nine different financial institutions, which include nonbank providers.

Banks changed as well. Thanks to a wave of mergers, many banks are changing the names and features of their seniors programs.

Another result of bank mergers and acquisitions is that internal cultures have clashed. Bank marketing departments were streamlined and downsized.

While mergers appear to have had little effect on the consumer, some older customers may have been confused by the changes and lost some confidence. This is especially true for smaller banks in small communities that were acquired by larger banks.

By their nature mergers mean change, and older customers do not adapt as well to change. This is especially true if the larger acquiring bank changes the way statements are printed, eliminates newsletters or magazines, or changes check identity and begins to add annoying service fees.

Profits Through Fees

Matt Olson, managing director at the Council on Financial Competition says, "The most effective way to improve profitability of the seniors' relationship is through fee income, rather than growth of deposit relationships. The most obvious source is by capturing more seniors' investment business."

Marty Aiello, group product manager for deposit services at Bane One Corp., indicated that the bank's mature market program is constantly undergoing revisions, from the name to the financial products provided. Bane One is taking a hard look at how customers are profiled and in the future plans to focus not so much on age but on behavior patterns.

"Customer behavior has changed over the years," Mr. Aiello said. "Just because a person turns 55 doesn't mean he or she will stop using credit cards. The customer has become very savvy to using home equity lines of credit as a means to purchase items that might have been postponed in life."

Generating fee income from investment business is the way most banks are improving the profitability of mature-market packaged accounts. Most banks are doing this by using third-party providers.

Better than CD Spreads

Revenues from fees contribute more to the bottom line than the small spreads from CD deposits. So, in order to maintain relationships with midlife consumers, those in retail banking will have to have to take some marketing cues from established nonbank firms that have successful track records.

Ed Lutz, vice president of marketing at the Bank of America in Phoenix believes a lot of work needs to be done to build customers' confidence in our ability to provide them with a full line of securities and annuity products.

"Customers are not flocking to our front door for these products," said Mr. Lutz. "Customers tend to associate these services with other nonbank providers. While they may have confidence in our bank, they oftentimes do not think of us as insurance or investment providers."

In order to provide the customer with a wide variety of investment products, banks may find their current structure a handicap.

According to Paul Laughlin, chairman of the Laughlin Group, a struggle exists in the way banks are currently structured. Retail banking, the trust department, and mortgage lending have different mission statements that often conflict with one another, and this internal conflict stands in the way of serving customers effectively, he says.

By VICKI THOMAS

President, Thomas & Partners Co., Westport, Corm. First of Two Parts

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