Of the four tenets of direct marketing—target, offer, creative and timing—getting the timing right—communicating with customers when they are actively "in the market" for a product or service—is a marketer's biggest challenge.

Financial services marketers, dissatisfied with direct marketing response rates that are often lower than 1 percent, have looked for ways to improve the timing on their campaigns. Some strategies have been very effective, such as offering IRAs during income tax season or making student loan offers to a family whose children are college age. What is less obvious is predicting when a customer might be most interested in a home equity loan or an investment account or, even more ominously, understanding when a valued customer is ready to attrite.

Event-based marketing (EBM) has emerged as a new paradigm to turn traditional segment-centric direct marketing on its head. The impact is dramatic: EBM programs are typically two to 12 times more effective than traditional direct marketing programs. By monitoring customers' daily transactional activity (including online and call center activity) and immediately reacting to any significant changes in their disbursement, deposit or purchase behaviors, bank marketers are now able to micro-target their marketing communications to reach the audiences with immediate needs or demonstrated attrition risks.

Rather than building targeting models to determine the population that best "fits" a particular offer, EBM identifies which customers are exhibiting behaviors that suggest an unmet need or attrition risk. For example, a customer who has historically issued between eight and 12 checks per month who writes more than 16 checks in the first two weeks of the current month is exhibiting a significant change in behavior.

If that behavior change, or "trigger," does not correlate with a commensurate drop in debit card use or a reduction in bill payment activity, then it is reasonably likely that there is a life-event taking place. The possible reasons for the increase in check activity can not always be inferred. One customer may be renovating his home and is writing checks to contractors and suppliers. Another may be starting a new business venture and is issuing checks to attorneys or suppliers. It could be fraud. Only by immediately engaging with the customer will the banker be able to ascertain the underlying cause— and be able to satisfy any unmet need.

But what about privacy issues? Don't customers find this invasive? Certainly, if an outbound telemarketing representative contacted the customer and began with, "I see you have written a lot of checks this month. Do you need a home equity loan?" it would, and should, be seen as highly invasive. If the outreach is, instead, made by a local branch employee and takes the form of a simple inquiry (such as, "I was reviewing our branch accounts this morning and noticed that there are an unusually high number of checks being written on your account. Is everything OK?"), the customer response will be quite different. Rather than feeling violated, such customers appreciate the proactive outreach and concern for their financial safety.

Underlying cause
Moreover, when engaged in a dialogue, customers will invariably explain the underlying reason for the change in activity. Often this explanation will uncover a potentially unmet need the banker may offer a solution for. Consider, for example, if the increased number of checks were written for college application fees. The banker might inquire about the family's tuition strategy. And even when the cause of behavior change is innocuous ("I went shopping and forgot my credit card, so I had to write checks"), or the offer is not accepted, the interaction has nonetheless differentiated both the bank and banker. When companies are running an event-based marketing program, it is not uncommon for them to hear their customers say, "Thanks for the call. I've never received a call like this from my banker before." Quite simply, customers appreciate the oversight and attentiveness.

EBM programs can be deployed through channels other than the branch. An online banking customer who has visited a high-yield savings account rate page on each of the customer's last three sessions may be good candidate for an email campaign or a prompted offer. An active rewards points redeemer who has recently exhibited a reduction in credit card purchases might be a good candidate for a "double-points" stimulation.

EBM programs generate impressive returns. It is typical for a firm to fully recover the cost of its EBM program in three to six months and to enjoy multifold increases in the success rates in its outbound calling programs; cross-sell and retention success rates of 10 percent to 20 percent are fairly typical—and sustainable. It is not uncommon for a midsize regional bank to generate new incremental profits exceeding $150 million over a five-year period.

The impact is immediate: Within the first week of a recent EBM deployment at a large regional bank, the bank identified more than 3,000 trigger events that had a better than 40 percent success rate (such as application taken and account opened) as well as 5,000 "on-boarding" triggers for new customers, of which 1,500 resulted in incremental business. Each successful sale represents approximately $325 in annual revenue to the firm.

A critical success factor is immediacy: The shelf-life of an EBM trigger is approximately three days, and success rates fall sharply during that period. State engines can simultaneously monitor hundreds of customer-specific behaviors across long time periods (13 months is typical) while reviewing only daily transactions, thus allowing the detection processing to occur in very small time windows between the completion of overnight DDA batch processing and the start of the business day.

Data-warehouse-based efforts, while logically capable of detecting simple behavior changes, typically cannot sift through the enormous amount of historical transaction data in the available time windows. As a result, warehouse-based programs are usually run on a weekly or monthly basis—and suffer a severe drop-off in effectiveness as a result.

EBM programs allow for the rapid and accurate detection of customer behavioral changes relevant to a bank's business objectives and specific to their customers' needs. Whether using the solution to generate email messages directly to its customers or to provide "reasons-to-call" for its bankers and service staff, a bank can with a well-crafted EBM program can drive a greater volume of high-quality sales leads, intercede early on to prevent attrition and establish an ongoing proactive dialogue with its customers.