Forget the battle over Free Checking and whether or not it is a profitable account.

The weekly update of branch closures has disappeared.

Yes, Dodd-Frank continues looming large in the background.  Its implementation is like death by a thousand cuts.

The ongoing saga over too-big-to-fail banks seems to be fading.

The hot topic in banking today is the future of the bank branch.

Hardly a day goes by that I don’t encounter an article about the future of the branch.  Some arrive via free subscriptions to online blogs like MyBankTracker and The Financial Brand.  Others are forwarded to me by people who are well aware of my opinion about branches.

Just yesterday I was treated to two such articles.

The first was by fellow blogger Joe Swatek.  Joe’s blog is about what he calls “pocket” branches – much smaller branches similar to those you find in Walmart and some grocery stores today.

My mental picture of what Joe is talking about is the choice between buying groceries at the local 7-Eleven or one of the large regional chains like Safeway or Kroger.

If you haven’t already done so, please read Joe’s blog below.

The second was an article forwarded to me by fellow blogger Mark Zmarzly.  This article provides the results of a consumer survey showing that a slim majority of today’s consumers still demand a physical branch.

I suspect people love sending me these articles because of my strident position on the future of bank branches.  I see them as quickly becoming obsolete.

“Quickly” is the operative word here.

I don’t see them disappearing overnight simply because people tend to cling to tradition long after the need changes.  An assortment of vested interests also fights to stop or slow down forward progress.

I see “quickly” on a time horizon range of five to ten years.

The thing is – today five or ten years is “quickly” given the rapid advances being made by technology.  For perspective, just consider how fast mobile banking has taken hold or millions of consumers buying shoes from Zappos.

Besides, if you were the CEO of a regional bank and you knew that branch banking would be obsolete six to ten years out, I suspect you’d be extremely busy today making plans for the transition.

Nor do I believe that within ten years all branches will be gone.

But then, “all branches” are the operative words here.

First, it wouldn’t surprise me that the four mega-banks retain branches.  They’ll just be repurposed and no longer used for transaction purposes.

I see the mega-banks using branches to sell insurance products, investment products, loan products, while providing financial consulting and advisory services.  Such branches will be sales offices staffed by professionals working on commission.

They will no longer be traditional, full-service consumer bank branches.

Second, I see the smaller, community banks operating a single branch in a prime location.

Why?

No matter how you slice it, today’s brick and mortar branches are simply too expensive to be viable in the long run.  They are costly edifices occupying some of the most prime real estate in America.

And, fewer and fewer customers find a need to walk into a branch for any reason.

If you can meet all your banking needs today without ever visiting a brick and mortar branch, then it is safe to say branches are no longer a necessity.

They have moved into the “nice to have” category.

There is a really big difference between “necessity” and “nice to have.”

The “nice to have” crowd came to mind upon seeing the following chart appearing in the article from Mark Zmarzly.

From the online article posted May 14, 2013, by Rob Rubin, "Bank Switchers Insist They Must Have Branches,"

First off, I have to tell you I’m usually very skeptical about most survey results.  There are simply too many controllable variables that can be manipulated.  Among these are the size of the group being sampled, the selection criteria used to select the sample, the wording of the questions being asked, who asks the questions, the channel used to contact the people being surveyed, the time of day or night answers are provided, and how the data is handled and presented.

And we should consider the motives behind a company or organization paying for a survey.

Although this particular survey may have been conducted using the highest standards, there’s another issue plaguing most surveys.

Frequently people provide answers they believe makes them look smart and thoughtful, not what they really believe or how they will actually behave.

When it comes to predicting what they’ll do in the future, most people have poor track records.

During my 30+ years in bank marketing I’ve seen my share of manipulated and worthless data.

As a result, I take a lot of survey data with a grain of salt.

Note in the above chart that 53% of the respondents claim they’d never consider banking with a bank or credit union without physical branches.

I wonder how many of these people would have proclaimed a few years ago that they’d never buy shoes online, never use a cell phone as an alarm clock, or use their computer or mobile phone to watch a movie.

Here’s what I’d love to see happen.

Consumers today have two basic banking options:

• Do all banking online, via ATMs, and mobile phones.
• Continue using the branch all the time or periodically.

Since branches are extremely costly and getting more so by the year, start charging customers a simple $5 fee each time they enter a branch for any purpose.  It’s a fair price for face-to-face service today.  It’s about the cost of one Starbucks grande latte.

Every bank and credit union implements the fee and it is widely publicized in the media.

Then, after six months, ask these same people as surveyed above if they’d consider banking with a bank that has no branches.

Something tells me many of them would sing a different tune.

Charging a fee sure worked to transition customers from paper statements to online statements.

As long as banks and credit unions continue offering an expensive branch option for free, some number of consumers will think branches are a requirement whether or not they ever walk into one.

But charge a fee to cover the huge costs of providing this “convenience” option and we’ll see how important it is.  In fact, I doubt a $5 fee would come close to covering the costs of providing physical branching services.

By the way, by becoming basically obsolete, the market place will then be open to the occasional niche banker who provides a physical location to conduct banking transactions and opening of new accounts.  He or she may even decide to do so for free.

Bottom line, the ongoing debate shouldn’t be about whether or not branch banking will become obsolete.  It should be about the timeline for when bank and credit union CEOs and boards get serious about doing something about their unsustainable branching costs.

Today, USAA, Ally, Discover, and Capital 360 are niche players.

A few years from now they’ll be hailed as visionaries.

The one-branch banker in the small town will be the niche player.

That’s how I see this playing out over the rest of this decade.

Talk about a different approach to branch banking, take a look at what Virgin’s Richard Branson is offering in England.  It’s over the top.

Tea and crumpets anyone?

Click here and here.

I’m not referring to the cell phones your customers carry in their pockets and use for mobile banking. I’m talking about size. And as the old saying goes, size matters.

So what does “pocket” mean for banking?

The British came up with the term “pocket battleship” to refer to pre-WWII German ships that were as heavily armed as the powerful dreadnought battleships, but constructed smaller and much lighter weight.

As a kid, I built plastic model kits. Ship kits made me aware of that meaning for “pocket” — just as effective, but leaner and smaller.

With that definition in mind — just as effective, but leaner and smaller — would pocket branches answer the debate over the future of branch banking?

Proponents of branches say the physical presence is absolutely necessary. People want to talk face-to-face with other people and conduct their banking transactions in a physical place.

Opponents claim the costs of operating the buildings swallow up a hefty chunk of the financial institution’s profits. Besides, branches are underused. Banks and credit unions have driven their customers and members toward other avenues of banking. Online banking and bill pay. Mobile banking. ATM transactions. Remote capture. Opening new accounts online. Branches are becoming obsolete.

Personally, I lean toward the opponents’ viewpoint, but I don’t go so far as to assume all branches will or should disappear.

As you might imagine from what I wrote at the start, I believe the pocket branch should replace most of today’s oversized and underused branches.

Pocket branches, although they’re not called that, already exist. Supermarket branches are compact. There’s a counter for the tellers. An office or two in the back for account openings.

Now, imagine this same type of operation in a free-standing building. There would likely be an extra office or two, and a drive-up lane, but why would it need to be much larger?

Less staff and certainly a smaller physical building would hold down operational costs.

I imagine one argument running through some readers’ minds goes like this: “We’d need to build all new branches? How does that save money?”

Here are a couple of alternatives. First, downsize existing branches by remodeling so a portion of the building becomes rental space for other businesses. That’s cheaper than buying new land and putting up a new building, even a smaller one.

Another option is to find corner locations at strip malls where the office area is small, yet there’s space for a drive-up lane. Branches like this already operate.

Eliminate the drive-up window and the branch could be even more compact. Compare it to the ticket windows at arena venues.

A pocket branch seems to solve both major problems with today’s branches. Pocket branches would operate at less cost. They would allow personal banking and personal contact when customers want or need it.

***************

Does the size of a branch network affect interest rates?

Nationally, branch numbers are decreasing, but around here there’s a branch building boom.

But don’t worry, I’ll return to it soon.

In the meantime, my spouse received a piece of marketing mail the other day that immediately caught my attention in a negative way.

Of course, the copywriter for this mailing is probably cheering that his trick worked on me – and undoubtedly lots of other members of the target audience.

Take a look at the teaser copy on the outer envelope.

Isn’t it cramazing?

The copywriter, undoubtedly much younger than me, opted to grab our attention with a bit of urban slang – a make-believe word that appears to have its origins as far back as 2004.

Adding insult to injury, each time I type it, spell check underlines it in red – a constant reminder that this is not a real word but something conjured up because there were no existing words in the vast English language to describe whatever it was that needed such a silly word.

Fortunately for many marketing mail haters, a quick glance at the preprinted postage indicia warns them this mailer is from Geico, the giant insurance company owned by Warren Buffett’s Berkshire Hathaway.

So, there’s really no need to open the envelope unless curiosity demands that you do so to learn the meaning of “Cra-maz-ing.”

Normally, I would quickly discard this piece of mail for two reasons:

One, it’s from an insurance company and I’m not in the market for auto insurance.

Two, I dislike attempts to con me into opening an envelope simply because of some silly made-up word or phrase on the front of the envelope.  I find it manipulative, demeaning, gimmicky, and totally unnecessary.

But, being a curious direct mail guy I have to put aside my prejudices and open the envelope.  After all, one never knows what awaits you inside a direct mail envelope.  I may learn something new.

Take a look at the bold headline and bit of copy in the upper right corner of the letter.  This space is generally reserved for what direct mailers call the “Johnson Box.”  Its primary purpose is to showcase the “offer” or to show a favorable number like a low rate of interest on an auto or mortgage loan or high rate of interest on a CD.

Studies show that most people read the information in the Johnson Box and P.S. before reading the body of the letter.

But in this case, the creative team used this valuable space to explain the meaning of “Cra-maz-ing” to those of us unwilling to subject ourselves to a daily diet of Twitter, YouTube, and Facebook.

It’s the Johnson Box where curious members of the target audience learn that “cramazing” is the made-up word used to describe something that is both crazy and amazing at the same time.

Now that I know the meaning of this word it does an excellent job of describing much of what I witnessed the first, and only, time I watched the 2002 film Jackass: The Movie.

For some reason, I just don’t see this silly, made-up word being applicable and appropriate for selling auto and homeowners insurance – even if the company also provides great customer service.

Among other things, it comes across as too gimmicky.

For those of you thinking that the mailing was targeting a younger audience, my spouse is pushing 59 this year.  I showed her the mailing and she was unfamiliar with “cramazing.”

Although some of you may think this is a sexist statement, it did occur to me that perhaps this mailing was targeting a female audience.  Our household gets a lot of Geico offers in the mail with the vast majority of them addressed to me.

Now it’s possible a case can be made that using this non-word is consistent with some of the unusual imagery used by the Geico marketing team including the gecko, the caveman, and more recently the Pillsbury Doughboy, and Dracula.

But I’m not buying it.

It’s my opinion that, in this instance, the copywriter was desperate for a fresh, new idea and all of a sudden the word “cramazing” surfaced from his or her memory as a result of a recent encounter.  And, it’s always possible that this same copywriter actually uses the word from time to time.

Regardless, from my perspective it weakens the sales message – at least for those older consumers in the target audience.

Surely, there is a much more effective copywriting approach to communicate the facts that Gieco not only has low insurance rates but also provides great customer service.

Hey, why not simply say so?

What’s wrong with a Johnson Box that reads:

• LOW RATES
• SUPERB 24/7 CUSTOMER SERVICE
• 97% CUSTOMER SATISFACTION

It definitely works for me…and my spouse.

The “Johnson Box”

Want to learn more about the famous “Johnson Box” used by veteran direct response creative teams?  Joe Swatek provided the history behind the “Johnson Box” in his June 15, 2009 blog available here.

One day, this message appeared in my email inbox. The subject line read, “Save time by using the PMD.” No idea what PMD meant. I assumed it was another marketing white paper offer. But here’s what I saw…

The body of the email from PMD.

After my eyes scanned the message (click image to enlarge), my mind jumped into marketer mode and I started to analyze it. As a promotion, this email fails. Here’s why…

• “the 8-Hour Experiment” doesn’t relate to the graphic or to the secondary headline. If you read both headers you get, “the 8-Hour Experiment…Don’t put your people behind it.” Is that clear to you?
• Proofread, folks. Look at the second sentence of the first paragraph: “Don’t take them away from their real jobs to do what the PMD has already been done for them.”
• What are you selling? I read the copy three times and still didn’t know what product was offered. Something about saving staff time by hiring PMD. But how?
• What industry? What professional? The second paragraph gives me no information and only confuses me more, especially with, “the researcher could account for some good information to act on.” Good for him. Meaningless for me.
• Who are you guys? PMD never identifies itself or what “industry” it’s in. Even the identifier under the logo is too small to read on the email. And what do I order when I “click here”? I’m only convinced I should be suspicious, not convinced to buy the product.

I went to my web browser and typed in the PMD URL to discover it’s a pharmaceutical marketing directory compiler that will give me healthcare industry contacts.

Now to show you I’m not simply being critical about email marketing, here’s an example of a promotion from Chase Suite Hotels that shows this marketer knows how to get its message across.

This email promotion came from Chase Suite Hotels.

Right at the start, I know who sent this email because they identify the hotel with a logo at the top. I see the local connection because it names the city where I’ll find the hotel. Let’s look at some of the other positive features of this email message…

• The headline is a teaser and it’s clear what it means.
• There’s a deadline. It’s obvious and it adds urgency.
• It’s easy to see the connection between the graphic element (money growing on a tree, a subtle political jab) and the tax-day offer. Can’t say the same for PMD’s 8-ball.
• The first two short paragraphs make the offer clear. They reiterate what the headline tells me.
• Need more convincing? Read the third paragraph to see more “reasons why.”
• This is Event Marketing. You wouldn’t normally connect Chase Suite Hotels with tax day. The marketers created a connection that gives them a reason to make me an offer.
• There’s a footnote…but my marketer’s sensibilities can live with it. It’s not long and they chose to use a readable-size type. Compare this disclaimer size to the identification under the PMD logo. As a prospect, I can feel confident Chase Suite Hotels isn’t hiding anything. Can’t say the same for PMD.

I realize financial institutions send email marketing messages infrequently, if at all. Phishing concerns and all that. But the same pros and cons I’ve pointed out for these two email promotions can apply to marketing projects in other media that you’re working on right now.

Good and bad marketing techniques are likely good and bad across all media.

***************

Here’s an example of a financial institution’s imaginatively created marketing event that uses a small self-mailer.

Since last Thursday’s blog about the current state of the housing market, two front page stories appeared in the local Sacramento papers.

The messages couldn’t be different.

Needless to say I felt a bit vindicated upon seeing this giant cover story in a local Sacramento newspaper.

Note the cover story in the Thursday, May 2, 2013 edition of the Sacramento News & Review

But this vindication was quickly interrupted by the “everything is fine” story on the front page of The Sacramento Bee seen below.

Note the bold headline on th front page of the May 6, 2013 edition of The Sacramento Bee

Who’s right – The folks at the Sacramento News & Review or those working for The Sacramento Bee?

Here’s a hint to help you decide.

The Sacramento News & Review is the city’s alternative weekly which is privately owned, has no real estate section, carries no “homes for sale” ads, and does an excellent job of investigative reporting.

The Sacramento Bee is the city’s only mainstream daily, it is part of the McClatchy chain of newspapers, it’s is a publicly-traded company, and generates a lot of revenue from realtors, homebuilders, and lenders and publishes an extensive “homes” section weekly.

If you’re still sitting on the fence with this one, here’s another hint.

One of the News & Review’s current co-editors was a victim of the last housing bubble and reported on it extensively in several issues.

Personally, I feel strongly that the News & Review is right on target with its current story about the return of the housing bubble.

I have zero faith in the objectivity of The Sacramento Bee.

It was a housing cheerleader during the last bubble, refusing to use the word “bubble” in the hundreds, if not thousands, of articles about the frothy housing market as the bubble inflated.  Worse yet, it held out using the word “bubble” while reporting the housing market crash until near the end.

It’s my contention that the paper didn’t want to do anything to jeopardize its advertising revenue.

From my perspective, its dependency on massive amounts of advertising money from the various groups benefiting from the housing market make it an unreliable source for any objective reporting about the housing market – then and now.

By the way, there’s a third newspaper serving the Sacramento area.  The Sacramento Business Journal is a weekly directed at area businesses and business leaders.  Note the headline on the front page of a recent edition.

Note the big, bold headline on the front page of the April 19, 2013 edition of the Sacramento Business Journal

The gist of this story is that the housing recovery is being met with shortages of materials needed for new home building.  In other words, there’s a gap between supply and demand.  Shortages generally mean price increases for raw materials like lumber, drywall, and electrical supplies.

Of course, price increases quickly drive up the cost of a new home.

While it’s a balanced story compared to most of those appearing in the Bee, it avoids broaching the topic of another possible housing bubble.  It’s more of a “wait and see” article.

But, the mere fact that it was deemed a newsworthy, front-page topic adds fuel to the fire that a second housing bubble is being inflated.

This is something I witnessed in the first bubble.

It begins with a few, scattered stories and the topic gathers momentum.  Others rush in to write articles about what is happening.  More and more articles are written about the miracles of homeownership and the American dream.  Success stories abound.  And before you know it, people believe the impossible.

And soon, it reaches a point where otherwise sane people come to the conclusion they must interject themselves into the housing miracle for fear of being left behind.

The end result is a nation littered with overpriced McMansions sitting in a foreclosure queue.

Yet, I see a very important difference this time.

This difference is the arrival of the hedge and equity funds to the rescue.

To those of us carefully tracking the fallout of the last bubble, we were warned what could happen next.

I wish I had saved one or more of the early, brief articles about the government turning to some big hedge and equity funds for help in solving the foreclosure problems plaguing Fannie Mae, Freddie Mac, and the nation’s largest banks.

Initial articles mentioned allowing these funds to buy hundreds, if not thousands, of foreclosed homes for pennies on the dollar to remove them from the inventory in the pipeline.

You see, this inventory was so huge that banks and the government were reluctant to throw too many homes on the market at one time.  Doing so would have cratered housing prices – making a bad situation much worse.

Fast forward a couple of years and all of a sudden we are reading stories about these same hedge and equity funds showing up at home auctions and outbidding consumers desiring to buy single homes for their families.  These funds are cash buyers.

They are quickly bidding up the prices being paid for foreclosed homes.

Here’s what’s bothering me.

What happened between the time we first read about them acquiring homes for pennies on the dollar by buying them directly from inventory and today where they are being reported as flush cash buyers competing directly with individuals seeking one home?

As I see it, something is amiss here.

Think about this for a moment.

First, these investment sharks were going to be allowed to buy homes in bulk from inventory for pennies on the dollar so they could fix them up and put them back on the market as rental homes.  And when the market improved they would sell them for a profit.

It meant very little front-end investment for a potential big return.

But apparently this isn’t what happened.  At least that’s what we are led to believe.

Now, we discover, or are being led to believe, that these same sharks have decided to use billions of their own dollars to buy homes for cash one at a time at local auctions?

What changed, if anything, and, if so, why?

There’s something we’re not being told here.

Giant hedge and equity funds do not make their millions and billions buying homes one and two at a time at local housing auctions where they have to compete with Joe and Sally Smith trying to buy their first house or replace the one lost to foreclosure or a short sale four years ago.

If you’re not bothered by this mystery, you should be.  I am.

The statement below was in an email and forwarded to me. An individual at a bank, whose title is VP of Marketing, wrote the original message. It refers to a marketing promotion created for the bank.

“I would say let’s get rid of Free almost everywhere — seems kinda ‘slimy.’”

I envy the competitors in this bank’s market. They’ll use headlines like Free Checking and a Free Gift and see scores of people come through their lobby doors while this other bank is afraid to use the “slimy” word Free in its promotions.

“Free” is one of the most powerful words in advertising. It ranks with — maybe higher than — words like…

• Save
• Guarantee
• Health
• Money
• Love
• You

…and a few others.

In the banking world the “Free Checking and a Free Gift” slogan has been used successfully since the early 1980s. If “Free” wasn’t a powerful word, this phrase would have been abandoned long ago. But today, it still attracts new bank customers and credit union members.

Consumers are more cautious than ever. If you don’t say your service is free (accounts, debit card, bill pay, etc.), most people assume you’re hiding fees. You must tell them when you offer a free service because these are benefits prospects consider when they decide if they want to do business with your financial institution.

While I was preparing this post, another email message came from a VP/Marketing Director who was excited over a recent promotion we prepared for his branch’s grand opening.

He said the creative “…was great and so was the response to the mailing. People were lined up outside the doors two hours before we opened to get the free gift!”

You decide. Which marketing VP understands good marketing techniques, consumer preferences, and the importance of the word “free.”

It’s possible but not conclusive.

I do believe that one of the ways today’s financial institutions are supporting their expensive branches is by minimizing the amount of money paid savers at all levels from the basic regular savings account to the high-balance Certificates of Deposit.

It’s a side-benefit of the Federal Reserve’s near zero interest rate policy aimed at stimulating purchasing at the expense of saving for the future.  It’s a giant gift to the nation’s banks and credit unions – big and small.

I was reminded of my belief last Friday as I encountered the following full-page magazine ad from the marketing folks at Ally Bank.

This ad appears on the inside back cover of the May 10, 2013 issue of The Week magazine

As an online-only bank, Ally avoids the brutal costs of managing and maintaining a network of brick and mortar branches.

It’s likely this helps enable the bank to offer an 84-basis points rate of interest for a basic savings account.

Ally can afford to pay higher interest because it doesn’t have some of these weighing down its cost structure.

One of Chase's 5,600+ branches throughout the country

Yes, this is one of Chase Bank’s more than 5,600 branches scattered across America.  This one happens to be one of two near my home in Sacramento.

So what rate of interest is Chase paying its regular savings customers these days?

How about 0.01% or one basis point for all balances in its basic savings account.

In spite of this low rate, Chase has been spending marketing dollars for direct mail promoting its basic Chase Savings account.  Here’s the top and bottom of the letter I received on February 1^st of this year.

Top of Chase direct mail letter showing the $150 bonus coupon for opening a new savings account with a minimum deposit of $10,000

Chase's letter copy including my note about the interest rate for this particular savings account

The rate at the time of the mailing was 0.01% as noted in mice-type on the back of the letter.  Visiting the bank’s website yesterday, the rate remains 0.01%.

My local credit union is currently paying me a whopping 0.03% for my savings balances and it has branches all over California.

This got me to thinking about some of the other online-only banks and what they are paying for regular savings balances.

Discover Bank’s current rate of interest is 0.80%.

Capital One 360 (formerly ING Direct) is currently paying 0.75%.

I was becoming convinced that perhaps there is a link between the lack of an expensive branch structure and the rate of interest paid on regular savings.

So my next stop was USAA Savings Bank headquartered in San Antonio, Texas, and serving millions of military and ex-military consumers throughout the world with zero branches.

I was shocked to discover USAA’s tiered-rate structure for its regular savings account:

0.10% for balances from $0 to $4,999.00

0.15% for balances from $5,000 to $9,999.00

0.20% for balances from $10,000+

USAA is currently paying a bit more than Chase and Golden1 but much less than other online-only banks with no branches.

So why is USAA paying much less interest than its online-only competitors?

At first I was baffled and then it hit me.

USAA doesn’t have to pay higher rates even though it isn’t burdened by costly branches.

It has an almost guaranteed target market of millions of consumers.  It has a stellar reputation for customer service and to-die-for positive word of mouth marketing.  It’s extremely innovative and has never been tarnished by economic or financial wrong-doing like the nation’s mega-banks.

Branchless-banks like Ally, Discover, and Capital One 360 need to pay higher rates to grab attention and attract consumers.  And a mega-bank like Chase has to dangle its $150 carrot to attract savings customers.

So while USAA is an outlier when it comes to low savings rates even though it has no branches, I tend to believe there is a relationship between the rate paid for deposits and the presence or absence of branching costs.

What are your thoughts about this?

That blah feeling. You should feel happy, but you’re simply let down.

Out of my mailbox came a bulky envelope package. Certainly, I was excited to see what was inside.

The copy on the carrier envelope from The Colonial Williamsburg Foundation teased me with, “Your Free Note Card Collection Enclosed, Plus a Special ‘Thank You’ Gift…”

That’s enough of a promise to get anyone to open the envelope. It was true. Five large note cards with a set of mailing envelopes. Nice.

Then I read the letter. I already knew this was a solicitation for money. While that’s not the type of promotion financial services marketers make, you can learn something about your own marketing campaigns from this letter.

I hope you’ll see what you need to do and avoid, whatever media you use.

Take a few seconds to click on the image and read the letter copy.

Now, are you thrilled and ready to send a check? I wasn’t. What was wrong?

The Foundation took a low-key approach, which can work, but this copy doesn’t build excitement. Doesn’t motivate action. Even writing about historic buildings can be made to stir emotions or patriotism. This letter copy is simply a matter-of-fact history lesson, much like you get from a school textbook.

I didn’t show you the back of the letter, but it’s only one paragraph that says…

“I hope you will choose to make a gift to support the Colonial Williamsburg Foundation at this time. I would be delighted to welcome you as a fellow guardian of this remarkable place.”

That’s not much of a final plea. (Plus, no P.S. — a major direct marketing omission.) The delight should be something the reader feels. It doesn’t matter much how the writer feels. (Remember WIIFM — What’s In It For Me?)

I won’t take time or space to rewrite the entire letter, but here’s an example of, I think, a better closing paragraph…

Our historic heritage is important to our country. I believe it is to you. But these are tough financial times and we need your help. Please consider making a donation — a pledge to a remarkable place in our great country. Send your check today, and if it’s for $35 or more we’ll give you a beautiful 13-star American Flag, free, as a special thanks to you.

Now the message addresses the reader and tells the person what should happen. There’s a call to action, but the copy is still low-key. The flag offer is shown on an insert inside the package. It’s the Thank You Gift promise from the envelope teaser and it should be repeated in the letter.

The buckslip (insert) from the envelope package.

The package includes a colorful, well-illustrated brochure that offers a “gold-finished” ornament and a magazine subscription, also available with the individual’s $35 donation. (Why hide these premiums?) Overall, a terrific offer in a well-designed package. However, the letter violates most of the rules of a good direct response letter.

Do you see how the copy should complement and boost the offer?

Examine your own marketing projects. Are you using a trusted direct marketing style of copywriting? Or does your copy fail to generate enthusiasm for your banking products and your special offer?

Today’s blog was originally going to be about a Virginia bank that recently brought back Free Checking.  I enjoy writing about Free Checking as I continue to believe it remains consumers’ #1 choice for checking.

But I changed my mind Tuesday upon the release of February housing data from the S&P/Case Shiller composite index.

I found the information online in the article, “February home prices see best yearly rise in almost seven years: S&P,” posted to the MSN Money website.

Here’s the article’s opening sentence:  “Single-family home prices rose more than expected in February, racking up their best annual rise since May 2006 in a fresh sign the housing recovery remains on track, a closely watched survey showed on Tuesday.”

By the way, it was a 9.4% year-over-year increase.

I’m bothered by the words “a fresh sign the housing recovery remains on track.”

What track?

These words suggest that someone or some organization has quantified what constitutes a housing recovery.  It suggests that one or more numbers or other metrics have been created and made public so that all of us can track this recovery as more data are released.

What, exactly, constitutes a recovery?

Does a recovery mean reaching the point where home values are, once again, increasing 25% a year?

Does a recovery mean going back to the inflated home values in 2007 just before the bubble burst?

Does a recovery mean going back to the 73% homeownership figure reported by Gallup for 2006-2007?

Does a housing recovery mean that everyone employed building homes during the bubble are now back to work building more new homes?

What about the thousands of realtors who left the market when the bubble burst?  Will they be coming back as realtors?

If any reader is aware of any numerical predictions that signal milestones and the end point of a recovery please let me know right away.

Without such numerical goals it is impossible to measure whether or not a recovery is successful and the goal has been met.

As I see it, such information doesn’t exist and is unlikely to ever be forthcoming.

Why?

Accountability – without some metrics guiding the process no one can be held responsible for it getting out of control like it did a few short years ago.

As a result, the media, the government, and the housing industry can drone on and on about a recovery in their collective ongoing attempt to persuade more and more consumers to borrow money to buy new or used houses.

What’s really important in all this is creating the “wealth effect.”  Inflate the stock market and inflate the housing market and the masses, believing they can afford to do so, begin spending like crazy once again.

Our economy requires it regardless of whether or not it makes good economic and financial sense…which it doesn’t.

But this is the ultimate goal of low interest rates and the government’s quantitative easy programs.

Realistically, I see the housing market from an equilibrium point of view.  At equilibrium, the number of buyers and sellers are about equal, the number of houses available match demand, and prices are relatively stable.  This is the ideal housing market in a free market economy.

When buyers outnumber sellers, when there is a shortage of houses for sale, or when prices are rising dramatically, the market is out of equilibrium and is not sustainable over the long run.  Something always happens to move it back towards equilibrium.

At issue here is the quantification of equilibrium so we all know what is required to reach that point.  From my perspective, reaching equilibrium is the point of recovery.

Overshooting it in either direction is bad – it results in an unstable, erratic market like the one we experienced from 2000 through 2007.

And I get the strong feeling that we are, once again, seeking to overshoot equilibrium and head back to the extremes of the last decade.

There are a growing number of signs that point in this direction – equilibrium be damned.

It really bothers me that the housing market has been corrupted to the point that it resembles the stock market.  Consumers are told that buying a house is a great investment and that their home is their biggest investment.

The vast majority of home mortgages today are turned into marketable securities and either traded on the stock exchange or sold in the bond market.  The lenders no longer hold them on their books as liabilities.  The resulting securities are so complex that few people on Wall Street even understand them.

Adding further proof to my belief is that recently major hedge and equity funds have become major buyers of foreclosed homes.  These sharks don’t spend big money unless they sense a major payback somewhere down the road.  This means that at some point in the future they’ll start selling overpriced homes to unsuspecting consumers anxious to “invest” in a home of their own.

If you don’t believe me you aren’t paying attention to what’s happening in the housing market.  Or, you choose to ignore the reality of the situation.

All this got me to thinking about some of the terms and ideas used when discussing the housing market.  Here are five of my favorites.

I’m a homeowner

No you’re not, unless you’ve paid off your mortgage and have physical possession of the title.  As long as you’re making mortgage payments, the holder of the title owns the home, not you.

I own my own home free and clear

Not really.  It’s a mirage for most of us.  If you don’t believe me, stop making property tax payments and see how quickly you lose your home.  I look at my situation as paying rent to the county each year.

A home is a great investment

Maybe for a few lucky consumers but not for most of us.

In theory a home should be a depreciating asset.  Every homeowner is familiar with the amount of money it costs to maintain a home from year to year.  Buy a home and keep detailed records of the mortgage interest costs, the property taxes paid each year, homeowners insurance, liability insurance, and ongoing maintenance costs and at the end of 30 years you’ll be shocked at the amount of money poured into your asset.

Name another asset that requires this amount of ongoing investment.

For many homeowners their house is more of a money pit.

And even if you sell your home for a profit, that profit goes away the instant you buy a replacement home unless you downsize and move to a less-costly area.

The main reason you buy versus rent is freedom – freedom to paint it any color you wish, to tear down walls, to remodel the kitchen, to add additional rooms, to play the TV as loud as you want, and to plant whatever you choose in the front yard (unless, of course, you live in a gated community).

I’ve always believed what my father told me over and over – a house is not an investment, it’s a place to live you can call your own.  Pay it off as soon as possible so you can live rent free for as long as possible.  And finally, avoid pouring money into upgrades as you can’t sell a $200,000 home in a $100,000 neighborhood.  I’m sure glad I took his advice.

Paying off your mortgage early is dumb because of the tax-deductibility of interest

This bit of advice means less and less every day – particularly today when savers are being punished with low interest rates near zero.  Plus, fewer and fewer people are seeing the entire benefit of interest deduction given the impact of the Alternative Minimum Tax and the annual increases in the standard deduction.

This advice has been pushed and pushed primarily by financial advisors and others wishing to get their hands on some of your money to invest in the risky stock market or to buy expensive annuities.

The CPA who does my taxes told me years ago that I would be smart to pay off my mortgage as soon as possible and ignore the tax deductibility advice.  I’m sure glad I listened to him.

To most of us, the freedom of no mortgage is much more rewarding than the few dollars you might make putting extra money into the stock market or some other risky investment.

Homeownership is part of the American Dream

Says who?

Right now I’m sure you could find over a million American citizens who would disagree with this statement.

And what about all the people unemployed as a result of the bursting of the housing bubble?

I’m not sure who first uttered these words or why but I’ve always thought them to be somewhat manipulative as if they belonged in a propaganda campaign.

I’m sure it goes back a long time, probably to some politician or writer, yet it makes more sense to have been uttered by a company likes Sears & Roebuck that began selling do-it-yourself housing kits in its early catalogs.

Ultimately, it’s rather vague statement subject to various interpretations.

Don’t get me wrong, I love owning my own home.  It’s my fourth home and the only one I’ve managed to pay the mortgage in full and take title.

I have no intentions of ever selling it or moving.

I’ve been both a renter and a homeowner since 1971.  I prefer owning but am a realist.  Owning a home is not for every adult.  Some folks are better off renting.

What really bothers me are all the misconceptions about homeownership and the blatant manipulation of the housing market that is now occurring.

Achieving equilibrium is a long way off and may never be achieved.

And I’m not sitting around waiting for the metrics required to effectively track a housing recovery.

In the meantime, I’ll continue following the housing market closely as it makes for interesting theater.

By the way, if you want to read a very interesting article about how a few banks are refusing to foreclose on certain homes, called zombie homes, the article is available here.  I think you’ll be surprised at what you learn from this informative article.

Opening paragraphs of the article about zombie homes

I’m talking about the 40-40-20 Rule. You should know it well. It says every direct mail marketing promotion consists of…

• 40% offer
• 40% list
• 20% everything else, including the creative

Most marketers get off track when they focus all their efforts on the creative pieces. As The Rule tells you, that’s a major mistake.

But over time, I’ve seen a factor in the 20% category that alone has even more than 20% effect on promotions — especially for banks and credit unions.

That factor is training, or rather, lack of training.

I’ve seen clients disappointed by campaign results, and when the campaign is analyzed it’s found the failure took place in the branches. The staff piled up unnecessary, unintended restrictions. Or, they simply didn’t understand how to properly open accounts. Many prospects who were drawn into the branches by the offer, walked out without becoming accountholders.

Poor communications can be a problem. One bank ran a mortgage loan campaign that featured a very attractive offer. The marketers were stumped when only a handful of new mortgages were opened. They didn’t realize until later that the loan officers weren’t told about the offer’s special circumstances. Using their old underwriting guidelines, the loan officers declined scores of applicants who should have been approved.

Maybe, the old 40-40-20 Rule should be revised for financial services marketing so it becomes an awkward sounding 40-40-40-20 Rule. (I’m a word guy, not a mathematician.)

You get the point. Financial services marketers should consider their promotions consist of…

• 40% offer
• 40% list
• 40% staff training and education
• 20% everything else, including the creative

If you’re not educating the personnel in your branches and the back-office workers about the features of every marketing campaign and promotion you’re running, then expect failures.

An informed, well-educated, well-trained staff will open more accounts.

***************

Ed Mayer (1907 – 1975), respected direct marketing expert, devised the 40-40-20 Rule. His marketing career spanned 50 years, beginning in 1928. Each year at the Direct Marketing Association (DMA) annual conference, the Direct Marketing Educational Foundation presents the DMEF Educational Leadership Award, a.k.a., the Edward N. Mayer, Jr. Award.

While the featured rate and basic ad layout were familiar, it was the presentation of the rate that caught my eye and reminded me about the ongoing efforts to create a new housing bubble.

I guess the creative team responsible for this ad thought that if you can’t lower the mortgage rate, you can make it larger in an attempt to grab more attention.

Compare Sunday’s ad with previous ads from the same credit union.

Earlier mortgage rate ads from the local credit union

Note the giant 2.79% rate which had to be positioned vertically to fit the ad space.

Of course, to get this attractive, historically low rate a prospective borrower must choose a five year term.

Hey, what happened to the long familiar, standard 30-year mortgage?  As I recall, it was the mortgage term of choice for most borrowers for many, many years.

From a marketing perspective, it’s been discarded and replaced by a ridiculously low 5-year term in order to market the absolutely lowest mortgage rate possible.  A quick trip to the credit union’s website shows the 30-year mortgage rate for a no-points loan to be 3.576% – still a very low rate by historical standards.

Why the sudden shift to 5-year terms?

You can’t blame it on the lender’s desire to more closely match its lending rate with its cost of funds given that most loans today continue to be passed along to one of the three government entities for purposes of securitization.

I see it as part of the overall effort to put the paddles to the heart of the housing market in hopes of stimulating the economy.

Yet, when you pay close attention to the myriad of media stories about today’s housing market you discover that things aren’t always what they seem to be.

The positive stories are blasted across the media with huge headlines while the negative stories get buried where fewer people will read them.

I see this as just another attempt to juice the housing market at the expense of another housing bubble.

While I have a growing collection of positive and negative examples, I’ll share three with you today.

Here’s the great news being blasted to unsuspecting consumers living in the greater Sacramento area.  Both articles appeared on the front page of the local newspaper.

Friday, April 19, 2013 edition of The Sacramento Bee, front page, top of the fold

Sunday, April 21, 2013 edition of The Sacramento Bee, front page, below the fold

The top article appeared above the fold.  The headline tells prospective buyers they’d better jump in the market immediately before prices continue rising.

Note the reference to 1990.

I remember just a few short years ago during the last housing bubble that consumers were led to believe that home values would increase 25% a year ad infinitum.

The bottom article appeared below the fold and was continued on the entire back page of the front section.  The giant headline on the back page screamed: “HOMES: Builders seek lots at ‘frenzied pace.‘”  Again, a headline suggesting that prospective buyers better move immediately before there are no more lots for new homes.

This hype is similar to what we observed in the early part of the last decade as the housing bubble was being inflated.

In fact, it may be ratcheted up a notch or two.

Apparently the banks, credit unions, realtors, builders, governments at all levels, and anyone else involved with the homebuilding and selling effort have quickly forgotten history’s lessons a few short years ago.

Now, take a close look at this housing story, “More Defaults,” buried in the bowels of last Sunday’s paper in the business section.

Note the article in the middle of the page, under the arrows

Here’s an excerpt from this buried bit of housing news:  “The oldest permanent [mortgage] modifications made through the federal Home Affordable Modification Program, which launched in 2009, were re-defaulting at a rate of 46.1% as of March 31, according to the report.  HAMP’s permanent modifications from 2010 have redefault rates ranging from 28.9% to 37.6%.”

Wow, those are some serious default rates.

And in spite of this news, there’s a move underway at this very moment at the federal level to “realign” down-payment and underwriting requirements to make more borrowers eligible for mortgages.

Again, these are just three of the many articles I’ve saved over the past couple of months.

In the race for more fees, taxes, and profits we seem to have quickly forgotten that, give or take a few percentage points over time, approximately 35% of the adult population is either not qualified to own their own homes or prefer to remain renters.

Historically, the percent of homeownership in the U.S. since 1960 is roughly 65% with wide variations based on region, rural versus metro areas, age, and ethnicity.

Yet, during the last housing bubble we saw homeownership pushed and shoved to the 73% range during 2006-2007 according to data from Gallup.

Obviously, such a figure isn’t sustainable and shouldn’t be an objective.

Remember the sage advice: “Those who ignore history are bound to repeat it.”

And if you are naïve enough to believe things are different this time, I want to remind you of something said by legendary investor Sir John Templeton: “The four most expensive words in the English language are ‘It’s different this time.’”

Okay, so we haven’t resurrected the liar loans, no-doc loans, option ARMs, and other hybrid mortgage products.  But they’ve been replaced by hedge and equity funds buying millions of homes for pennies on the dollar to take them off the hands of banks, Fannie Mae, and Freddie Mac.  They’re being thrown into the housing mix as rentals to be sold later when home values escalate.  Like it or not, this distorts the normal workings of the housing market.

And now we find banks and credit unions pushing five year mortgage loans thanks to artificially-low interest rates…rates that are not sustainable over the long run.  This distorts the normal workings of the housing market.

And we have a compliant mainstream media aggressively reporting on the rebounding housing market as though it was some world championship sporting event.  This helps distort the normal workings of the housing market.

At this point in time, we can only wonder what others things are being cooked up to juice the housing market this time around.

It boggles the mind.

As you know from reading my blog posts, I encourage financial services marketers to focus on the benefits a customer or prospect gains by doing business with your bank or credit union.

For instance, point out your free services. When you don’t say something is free it gives many prospects the impression it’s not. Besides, “free” is a key word for marketing.

Also, always spotlight your offers, whether it’s a premium, cash bonus, special interest rate, or some other advantage.

But be careful about going too far. What we might call fuzzy math. Some people will take time to calculate what you’re describing — cash award, time saved, an so on — and realize your offer is more fluff than substance. It can hurt your credibility.

Here’s one example. A bank made a cash-back offer for its debit card — earn up to $300 a year, as the bold headlines stated. Sounded great, until you read the fine print. The cardholder earned 10 cents per transaction. That still seemed good. But when a prospect did the math, she found it would take 3,000 purchases to earn the advertised $300. To put it in perspective, that’s 250 per month, or over eight purchase transactions per day.

A quick, unscientific poll of colleagues and friends told me none of them comes close to averaging eight debit card purchases a day. So the offer, while it sounds good on its face, falls flat on its face when prospects calculate the offer. Once they’re skeptical, that disbelief carries over to the entire promotion and to the institution.

Here’s another example a colleague pointed out to me.

The ad looks clever, but there are two aspects that will distract prospects.

First, how much interest would your CD need to earn for you to “See Paris”? Let’s see, international airfare, hotels, meals, fees…hmmm. At today’s interest rates, the prospect would need to have a hefty pile of cash lying around to invest in a CD that would earn enough to cross off all those bucket list activities. (Click ad to enlarge. Read the disclaimer.) Again, readers are skeptical.

Less fuzzy math and more like fuzzy logic: Some ad readers joked about the obviously unintended impression that the list’s writer had to scratch out all the hoped-for activities and “Write a new bucket list” because the CD didn’t pay enough to fund any of the original activities.

Beware the unintended meaning.

Don’t use fuzzy math.

They are “new” and “improved.”

Many packaged goods marketers go so far as to use both words on their product packaging when appropriate.  Laundry detergents immediately come to mind.

Two days ago another checking account offer arrived from Chase Bank.

While it delivered the now familiar $125 bonus offer for opening a new Chase checking account, the format was different.

I can best describe the new mailer as “new” and “improved.”

The old mailer, which arrived at my home address many times over the past couple of years measured 5 ½” x 4″ closed.

The “new and improved” mailer measures 7″ x 5 ¼” as you see below.

At first glance the covers look identical.  Both carry the $125 offer.

But a closer look highlights the nuances of word choices.

Comparing copy on both covers you’ll note that the copywriter for the most recent mailer replaced the rather bland word “Get” with the more emotionally-rewarding word “Enjoy.”

And he or she dropped the meaningless phrase “Good things do come in small packages” appearing as a headline on the original self-mailer.  I call copy like this “throw-away lines” as this is exactly what you can do with them before approving the creative.

The “Details inside” copy was moved to the bottom where it is less intrusive and the busy background images of the Chase logo were removed.

Take another look at both covers.  I think you’ll agree that the cover on the most recent mailer is less cluttered, cleaner, and easier to read.  It carries a very strong but simple offer:  “ENJOY $125 ON US.”

Opening the mailer reveals the most important improvement as far as I’m concerned.

The original, smaller mailer included a tipped-on $125 bonus card which lays flat on the panel.

Compare this to the new die-cut card which provides a three-dimensional effect when the mailer is opened.  It appears to actually jump off the panel – demanding to be quickly removed and saved for the trip to the nearby Chase branch.

Both cards are considered involvement devices in the direct mail business.  Other involvement devices include tokens, coins, stamps, QR codes, and faux credit cards.

Including a removable card provides the recipient with an opportunity to physically interact with the mailer.  In direct mail test after direct mail test, involvement devices have proven to increase response – this is why they continue to be used today in spite of their increased cost.

In the case of the two Chase mailers, it is possible that the newer package with the die-cut card is actually less costly to produce than the original mailer with the separate, tipped-on card.

I think you’ll agree that the newer mailer makes a much greater impact upon being opened.

After all, the $125 bonus card is the focal point of this mail package.  It provides recipients with tangible proof that the bank will honor its offer of $125 upon opening a new Chase checking account.

Placing your bonus card on the branch employee’s desk during the account opening process puts you in charge during the transaction.

Moving on, note what happens when both mailers are fully opened.

Oops, what happened to the $125 bonus card in the smaller self-mailer?

In the original mailer, the $125 bonus card disappears.  That’s not good.

Not so with the newer package.

With the newer mailer, the important $125 bonus card never leaves your eyes.  That’s important.

While I may not be a fan of the nation’s four, too-big-to-fail mega-banks, I make an exception with Chase as it relates to direct mail marketing.

Chase not only continues to spend millions of dollars for direct mail, it continues testing new ideas while tweaking existing packages.

And on occasion, a breakthrough occurs like the latest self-mailer with its three-dimensional $125 bonus card.

For a direct mail junky, receiving such a mailer is exciting.

I’m just glad I remain on the bank’s mail file.

The Burma-Shave technique was to place one “jingle” style message on a series of small signs. Here’s one…

Hardly a driver / Is now alive / Who passed / On hills / At 75 / Burma-Shave

Signs were spaced at a readable distance apart along highways.

Each sign had a different part of the message. The last sign in the series was always the product name. The rhyming slogans and the extensive use of the signs made them memorable.

The Burma-Shave idea wouldn’t work well today. Commercial billboard styles, practices, and state laws have changed.

What works today?

Our Financial Marketing Insights blog crew prepared a critique of some current financial institution billboards. That critique…

ADVERTISING CLINIC: 6 TIPS FOR BETTER BANKING BILLBOARDS

…is posted on The Financial Brand blog. I encourage you to read it.

If you’d like to see more examples of the witty slogans Burma-Shave used to promote its product, there’s an online collection at Burma-Shave.org.

When this occurs, it sends a message that your bank or credit union (choose one or more):

• Is poorly managed
• Doesn’t have a reliable, up-to-date customer file or database
• Hires employees who don’t care
• Is more concerned about cutting costs than serving customers
• Is technologically behind the times
• Doesn’t care about its brand or has no branding initiative
• Never checks to see what the marketing department is mailing
• Has so few employees as customers that few actually know what marketing messages customers are receiving

Given more time I’m sure I could add to this list but these eight should suffice.

Needless to say, this happened to me a few days ago.

Today’s story is an update of my April 11 blog about my Comcast experience, “Cross-Selling Your Way into the Poorhouse” available below.

Four days after posting my blog, a sales letter arrived from Comcast attempting to sell me the upgraded Internet service at the center of the cross-sell issue described in detail on April 11.

Here’s the outer envelope and letter.

At first glance I thought it was a follow-up message about my faster Internet service and TV access that I’ll never use.

But a quick read of the teaser copy proved otherwise.

Not only is Comcast asking me to “Upgrade today for blazing-fast Internet and the best in TV,” it’s being offered for $79.95.

Mind you, about three weeks ago I was paying $79.95 plus fees for slower Internet speed without TV access.  After the stealth cross-sell and speed upgrade, my monthly fee was lowered to less than $50 a month.

All this gives me the impression that the inmates are running the asylum at Comcast.

About now at least one reader is probably thinking, “Wait a minute Steve, not so fast.  Comcast probably had this mailing in production, perhaps at the lettershop, when you were upgraded and your monthly fee lowered.  So give Comcast some slack.”

Perhaps I would give Comcast some slack had somewhere in the letter the following bold copy line jumped off the page:  If you are already enjoying Comcast’s new blazing-fast Internet speed with TV access, please disregard this letter.  Thanks for being one of our preferred customers.

But no, this copy line did not appear in the letter.  Had it been there I would have given Comcast credit for planning ahead, knowing that between the time the mail file was created and the letters arrived in homes across America, some number of people on the mail file would have become new customers or upgraded existing customers.

This brings up the famous six P’s of planning:  “Prior planning prevents piss poor performance.”

Unfortunately, someone or some group working for Comcast failed to think ahead and protect the company from irritating customers like me.

It also invokes one of my favorite bits of advice about life:  “A chain is only as strong as its weakest link.”

In this situation, all the good things done by Comcast have been tarnished by a stealth cross-sell and one careless mistake in a mailing campaign.

I’ve been a long-time Comcast customer.  In the earlier years calling tech service or customer service was a nightmare of long waiting.  Today, calling Comcast is a model of speed and efficiency.

In the early days, being a Comcast customer meant more than the occasional service outage which is most irritating.  Today, service is rarely interrupted.  It’s close to 100% up-time.

My patience has been rewarded.

I’m very pleased with my Comcast relationship.

Yet, lately they’ve been doing things to drive a wedge into this long-standing relationship.

It makes me wonder how such a big company that has made so many improvements over the years can continue doing bonehead things like the stealth cross-selling incident and now the confusing marketing letter.

Remember marketers, your bank or credit union is only as good as the dumbest thing you’ve done.  As consumers, we tend to not only remember, but dwell on, the irritating mistakes while taking what you do right for granted.

And remember the power of word-of-mouth – we tend to tell many more people about the bad stuff than the good stuff.  Funny, I don’t remember writing any blogs about the good things done by Comcast.

That’s the lesson in today’s blog.

You can’t just get some things right – you must strive to get everything right.  That’s what branding is all about.

The JCP story is widely known. Sales were already declining when in November 2011, Ron Johnson was hired as CEO of the department store to turn things around. Johnson’s ideas included eliminating merchandise sales and coupons in favor of the same low prices every day and other sweeping changes.

Shoppers stayed away, more shoppers left, and in the fourth quarter of 2012, sales were 32% lower than the same quarter of the previous year.

Here’s where the story gets more interesting for marketers.

Ron Johnson resigned on Monday, April 8.

Monday, April 15, this postcard arrived in the mailbox.

Message on the back of the JCP postcard.

It didn’t take JCPenny long to revert to its pre-Johnson sales and mail coupon promotions.

But as a marketer, imagine what this postcard means. ONE WEEK after the CEO’s resignation, a previously-banned promotion hit consumer mailboxes. Wow!

Have you ever produced a mail marketing campaign that fast?

You almost wonder if JCP’s marketing staff had this mail campaign in the works before April 8. Hmmm. I don’t think they know how to time travel.

If you want to respond to changes in your own marketplace with a fast, event-focused marketing campaign, here are some ideas to keep in mind.

• Stay aware of what your competitors are doing. You might hear snippets of news about a branch closing or product line changes. Accurately time a counter-promotion and scoop up a big share of the competitor’s upset customers.
• Have promotion templates “on the shelf” and ready for market disruptions. Suppose a competitor closes a branch near one of yours. You want to get mail into those surrounding neighborhoods to promote your products. With a ready template, you can adjust for the right details, polish the creative, and swiftly send the order to the printer.
• Build a contingency fund into your budget for special marketing projects that react to unusual market conditions or disruptions. This shouldn’t be a “use or lose” budget item. You need it available anytime so you don’t cannibalize your marketing calendar funds when an opportunity or unforeseen need pops up.
• Create disaster preparedness contingency plans. While this must be a company-wide project to deal with natural or man-made disasters, what specifically can your marketing department do to help manage the situation? You’ll likely be asked to handle PR and media relations.

As the JCPenny postcard example shows, the quicker you react to changes, the faster you can get back to normal — or take best advantage of a profitable, new opportunity.

We are currently experiencing a massive student loan bubble with loans outstanding in excess of $1 trillion dollars and rising delinquencies.

How long before it meets the same fate as the housing bubble which is, once again, being re-inflated.  Scroll down to my March 28 blog about housing bubble warning signs.

By now we’re all very familiar with the euphoria over housing and how it resulted in what could be the most massive bubble in history.  It didn’t end well.

One really good sign that we are in the midst of a prepaid debit card bubble is the recent announcement about the introduction of the Justin Bieber prepaid debit card targeted to the nation’s young folks.

Purportedly, its goal is to help educate them about managing finances.  Yea, right!

You see, it’s just not that difficult to spot financial bubbles in the early to middle stages of inflation.  All you have to do is pay attention to the many articles now available online and in those pesky newspapers that refuse to go away.

It was a recent article about prepaid debit cards in The Sacramento Bee that caught my attention and provided additional proof-points that a bubble is, indeed, being inflated.

The article’s title is a proof-point itself:  “Banks offer more prepaid cards.”  Here’s the article.

This article appeared in the Sunday, April 14, 2013 edition of The Sacramento Bee

You just gotta love the quote from the FDIC official in bold above the article:  “Electronic cards are a good way to get people into the banking system.”

What’s he smoking?

For the most part, the unbanked and under-banked don’t like banks and the banks generally don’t want these low-balance folks as customers.

So what’s changed?

From my perspective, there are only two reasons why the nation’s biggest banks, those bailed out by the government a few years ago, are rushing into the prepaid card market:

One, they are deathly afraid that Bluebird from the joint venture of AMEX and Walmart could ultimately lead to a full retail banking charter for Walmart.  They want to limit the number of customers captured by the low-cost Bluebird card.

Already, Bluebird balances now have FDIC deposit insurance so the card qualifies for direct deposit of social security and other government payments.

Two, the largely under-regulated prepaid debit card market is a treasure-trove of fee income waiting to be harvested.

Leave it to the big banks to find a loophole and rush in to take advantage of the situation.  With the loss of ODP fee income and debit card interchange income, there was a void to be filled.

Just remember, getting into the prepaid debit card business is not some altruistic decision to serve needy consumers – it’s about the fee income…and only the fee income.

We’ll see how fast these big banks dump these prepaid card customers the minute the Consumer Financial Protection Bureau issues its guidelines governing prepaid debit cards.  Remember what happened to Free Checking.

If the big banks wanted to reach out to the unbanked population, they could have done it years ago with lifeline checking accounts that were mandated by several states years ago.

Reading the newspaper article is quite entertaining and includes this major contradiction.

In the second paragraph we are told that the big banks “…are tapping into the pool of consumers who don’t qualify for a traditional banking account or can’t afford one.”

Then further into the article, the 16^th paragraph, we are told that “…the large banks are gaining market share by leveraging their existing customer base, according to Aite Group.”

Hey, I thought that the main value of prepaid debit cards is that they are attractive to low-balance, credit-impaired, unbanked and under-banked consumers who would prefer to stay clear of banks of any size but especially the big banks.

They not only do not want to be nickel-and-dimed to death by the big banks, they don’t want to be treated as second-class customers.

Yet now we learn in this article that JPMorgan Chase is pushing these cards to a segment of its existing customer base.  I’d love to know the criteria being used to identify these “lucky” customers.

Here’s another quote from the article: “It costs JPMorgan Chase 40 percent less to serve its Chase Liquid prepaid card customers than clients with a checking account, since the majority of transactions are electronic, said Ryan McInerney, the company’s head of consumer banking.”

McInerney must be talking about those new customers plucked from the group of heretofore ignored, unbanked customers.

It’s all so confusing and unbelievable.

And let’s not forget the millions of consumers walking around with their SNAP prepaid debit card being loaded monthly by what used to be called the food stamp program.  I wonder how many of these card carriers now have two or more prepaid debit cards.

But one thing is believable – we are witnessing the inflating of yet another bubble.  This time it’s the prepaid debit card bubble.

The proof can be mined from the growing number of articles about prepaid debit cards.

You’re probably familiar with a basic Tell A Friend (TAF) program, even if your financial institution doesn’t use one. The regular TAF program depends on a banking customer or member referring the financial institution to family, friends, or colleagues.

You might think the Business TAF would be similar: One business refers another business. But no, that’s not how it works.

Here’s the basic idea. Your branch managers visit businesses in their marketing territory (current banking customers or potential customers) and ask if you can set up a Business TAF display in the store near the checkout. Recommend that the cashier drop a TAF coupon in the shopper’s bag after each sale.

The copy on the Business TAF form is different from the TAF your tellers hand out with each branch transaction. Here’s a sample.

The customer-to-customer TAF awards a gift to each participant — the customer who recommended your FI and the new customer. With a Business TAF, the business is doing the “recommending” and the business customer opens the account. Like the C-to-C TAF awards both participants, the B-to-C TAF awards both the business and the business customer.

But what would a business do with a pile of your premiums? Instead, you give a cash award to the business. About the amount you pay for a premium and enough to make the program attractive to the business owner.

If the business isn’t already a customer of your bank or credit union, here’s a chance to open a new account where you can deposit those TAF payments. With the good relationship you develop, the business owner may move the rest of the banking business to your FI.

Another advantage of the Business TAF: You reach prospective customers who might not otherwise be aware of your marketing promotions. At a reasonable cost-per-account, too.

Your branch manager or assistant manager should set up a fresh display in the businesses each time the premium changes. You need to print Business TAFs and distribute them to the participants, including times when they run out of forms.

Some branch staff might complain about extra work, but you know there are slow afternoons when it’s easy to handle the distribution. You might turn it into a monthly contest between the branches to stoke interest, especially at the start.

Like the customer TAF side, the Business TAF program can generate a considerable number of new account openings. For the cost of printing the forms and the time it takes to recruit businesses and stock in-store displays (time that’s already covered by salaries), you can gain additional new customers and open more accounts.

Fortunately, the downside is to banks and credit unions – not to consumers using mobile deposit.

Growing up how often did an adult caution you that “you can’t have your cake and eat it too?”

I know I heard it fairly frequently when I was making an unreasonable request or had some unreasonable expectation.

Perhaps you were told “you can’t have it both ways.”

Well this is what comes to mind each time I encounter a newspaper ad from a local bank or credit union promoting its new mobile check deposit service.

Here’s the latest such ad from a local Sacramento-area credit union.

This ad appeared in the April 14, 2013 edition of The Sacramento Bee

Note the ad’s subhead, “A smarter way to deposit.”

I think we can assume this means it is not smart to continue visiting your local branch to deposit a check.  Why waste the time and effort when you can simply take a photo of your check and deposit it using a simple software program on your mobile phone?

So, let’s see if I understand what’s happening today with banks, credit unions, and branches.

Thanks to an array of technological advances, fewer customers find a need to visit their local bank or credit union branch.  It’s simply much easier to bank online, via ATMs, direct deposit, debit cards, automatic payments, and now mobile devices – primarily phones like the ubiquitous iPhone.

This exodus began with the advent of the ATM in the 1970s and continues today at a much accelerated pace.  Mobile deposit of checks is just the latest advance to hasten the retreat.

As a result, a number of pundits and experts have predicted the ultimate demise of the branch.  Others have called for realignment, downsizing, right-sizing, coop-branches, and smaller high-tech branches.

Yet, the banks and credit unions continue fighting to retain their expensive, less-used branch networks.

Recent media articles describe how the mega-banks like Wells, Chase, and Citi are testing smaller, high-tech branches staffed by mobile-savvy employees.

They claim to need them for opening new accounts and cross-selling.

Well, from my perspective, you can’t have it both ways.

You can’t have your cake and eat it too.

You can’t continue offering ways to conduct banking faster, easier, and less-costly by avoiding the branch and yet retain these branches hoping to attract these customers so they can be cross-sold.

I’m one of the holdouts in that, while I do everything online and am a frequent ATM user, I continue visiting the branch once a month.

Yesterday I had to make the drive to my local credit union branch to a deposit a monthly check I receive in the mail.  Direct deposit isn’t available in this situation.

But after seeing the ad above, I finally decided it was stupid to stick with the old routine.  Upon arriving home, I immediately went online and enrolled in mobile banking.  I then downloaded the credit union’s mobile banking app and signed-up for online and mobile check deposit.

What does this mean for my credit union?

They’ll likely NEVER see me in the branch again.

It’s not that I don’t like the branch employees – it’s just that I no longer need to interact with them in person.

I’ve finally severed my physical tie to the branch.

I’ll soon be 68.  If I can do this, I assure you that the vast majority of your bank or credit union customers can do so as well.

If, in the future, I need an auto loan I can get it done quickly by some combination of online and old-fashioned telephone calls to the credit union.  I suspect all it would take is one online visit.

What you might find odd is that I’ve been a USAA member since 1970, long before USAA began offering banking services.  I’ve had a USAA credit card for many years but have held out moving my checking and savings accounts.

The primary reasons for sticking with my local credit union are the vast ATM network locally and the monthly need to deposit a check.

Now that I’ve finally embraced online and mobile check depositing I have only one excuse for sticking with my credit union and that is the convenience of the local ATM network.

My point is very simple – there’s no longer a need for bank and credit union branches.  The only exception is the older customers who find computers and mobile phones threatening.

And these folks aren’t viable candidates for cross-selling.

Today, everything can be done online and via the mobile phone.

This has been proven for several years by online banks and especially by USAA.

Over the next few years, it’s going to be interesting to follow the various branching initiatives, particularly by the mega-banks, as the nation’s banks and credit unions struggle with the need to reduce costs while embracing new technologies at the same time as a growing number of consumers no longer have a need to visit a branch.

I continue to believe that branch banking’s years are numbered.

What we are experiencing right now is the reluctance to let go of an obsolete delivery system.

But later that day, a blog reader commented on his experience with the offer and the Wells Fargo execution. The comment — a firsthand result — gives us a chance to look at what you should do or avoid when you fulfill offers for your own bank or credit union.

First, a quick recap of my earlier post. I compared two full-page, tabloid-size ads Wells Fargo ran that offered a free credit score and free credit report. The credit report is the important part of this no-premium offer because consumers know they should check, but usually fail to do so. I called the report the “value” to the consumer.

So that you can quickly see what I’m talking about, this is one of the ads.

March 24 full-page ad in Parade magazine

Here’s what our reader experienced after responding to the offer:

“A great offer indeed! I shopped this in our market, though, and unfortunately the execution was a huge miss. I had to be in the branch to get the code (perfect sales opp), but all they did was give me a brochure with a code that I had to use online, not in the branch. And after I completed the process, no one ever followed up with any offers….

“An offer is only as good as the execution.”

First, let’s discuss the execution. The ad says you must stop in the branch to request your scores. No phone calls or other response methods (probably for personal security). Not ideal for the consumer, but could be part of the bank’s plan.

But as our reader says, he was given a brochure with a code that he had to use online. He doesn’t say if he was instructed to go to the Wells Fargo website, but let’s assume so since the three major credit bureaus don’t require codes when you request your reports.

This system creates a doubly-long process. Instead of simply applying online at AnnualCreditReport.com, the consumer has made a special trip to the branch and still must apply online.

Why not offer to help the consumer apply online while he’s in the bank office?

Next, I see not one, but two wasted opportunities.

1. The consumer came to the branch to get the brochure, but no one talked about accounts or other offers.
2. There were no after-visit cross-sell attempts, at least so far.

Yes, the ad says, “You then have the option to discuss your credit score with a Wells Fargo banker.” The ad copy was written so it wouldn’t scare off prospects who thought they’d be pressured at the branch. Commendable.

So, what was the purpose of the promotion? Simply a goodwill gesture?

Would you have your marketing department spend money to place multiple full-page ads in a nationally syndicated publication with the likelihood you wouldn’t generate any account openings or other business?

As our reader’s comment shows, no one in the bank asked if he wanted to talk about the credit score. Were branch personnel told to handle requests without question or comment (or even a product brochure), or was there no proper training?

What this marketing expense amounts to is a branding exercise. Money spent, but no business generated. I can appreciate a public service offer, if that’s what it was, but since we’re all marketers we analyze standard promotions differently.

Now you see why our blog stresses a call to action, an offer, multiple avenues of response, and staff training for all marketing campaigns.

Spend your marketing dollars wisely so your promotions — your offers — open accounts and add to your customer base.

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Here’s my original post that generated the reader response: What? A No-Premium Offer (and other helpful examples).