Case 2: Segmented Promotion: Balancing Management and Market Responsiveness

Vital Savings Statistics: CBB Type of institution Cooperative bank Number of deposit accounts 12,163   Passbook deposits 11,710   Term deposits 453 Average savings account (for individual savers) $ 240   Passbook deposits 169   Term deposits 2,055 Total value of savings($) 2.91 million   Passbook deposits ($) 1.98 million   Term deposits($) 0.93 million Total number of borrowers 1,706 Loan portfolio($) 1.57 million Number of branches 3 Data as of first quarter of 2006.

Technique:
Simple products and segmented promotion

Takeaway:
A simple product mix is easy to sell and reduces management costs. Segmented promotion better targets marketing resources and responds to the preferences of different clients.

Results:
By appealing to both large and small depositors, CBB has amassed a total deposit base almost twice the average for similar banks.

Case:
As MFIs first started focusing on demand, market responsiveness was assumed to mean offering a wide array of products. On the savings side, however, experience shows that offering a few well-designed products that appeal to a broader section of potential clients is preferable. Not only is it easier for an institution's staff to explain and for customers to grasp, but it is also simpler to manage and less costly for an institution to offer a few well-designed savings products.

The Cooperative Bank of Benguet, a rural bank in the Philippines, offers two simple savings products: one liquid (passbook savings) and one semi-liquid (term deposits), which are targeted at all their clients regardless of segment. To ensure that its products are accessible to low-income clients, CBB has established low minimum deposit requirements: it only takes P100 (or US$2) to open a savings account at CBB, compared to other rural banks whose minimum opening balances usually start at US$50-60.

Rather than creating different products for different market segments, CBB segments its promotion. Different types of clients respond to different marketing techniques. CBB has found that large-balance depositors respond to colorful advertisements and high-profile publicity and sales promotion activities such as television ads. Personalized service is also the norm for large-balance depositors: from sending thank-you notes and greetings on special occasions, or even a cake on the depositor's birthday, to personal visits made by the bank's CEO.

While this type of marketing is key to attracting large-balance deposits, it would likely not be cost-effective for attracting small-balance deposits. Also, in CBB's experience, small-balance depositors tend to place greater value on the bank's community relations and a basic level of service from the bank's staff. Field observations made by the bank show that, low-income clients often cite "unfriendliness of the staff of other financial institutions" as a reason for not banking or choosing to save via more informal or semi-formal channels.

To maintain a mix of large and small depositors, CBB has adopted different sales policies for the two groups, tailored to their different preferences, numbers, and costs to the institutions. As large-balance accounts are in general more lucrative, more can be spent acquiring and servicing each account. So, for example, while all of CBB's staff members promote its savings products to small-balance depositors, only branch managers and key bank officers solicit and manage larger accounts.

Small-balance depositors are far greater in number than large depositors. At CBB, almost 91% of accounts have balances under US$300, with an average balance of only US$28. To reach these large numbers of people, CBB sponsors "soft" advertisements on local radio. In soft advertising, the bank provides a local radio station with information it considers interesting to the market, and the radio announcer is commissioned to present this information in a way that is appealing to its listeners. These messages last approximately 30 seconds per spot and are aired three times a week.

Soft advertisements only cost approximately US$79 per month, in contrast to regular radio commercial spots containing pre-recorded advertisements that require the services of ad agencies and are therefore more costly. Apart from this, CBB also ensures that it is present at important cultural and community events, such as monthly celebrations of cooperatives, farmers' congresses, community tourism festivals, and other social gatherings such as clan or tribal reunions.

This kind of promotion has allowed CBB to establish its image as an indigenous community-owned financial institution, worthy of the trust given to it by an increasing number of clients, both savers and borrowers. CBB's figures show a steady rise in the absolute number and volume of deposits generated in the last eight years the bank has operated. It currently has a total of 12,163 savings accounts, with a total volume of almost US$3 million, with three branches in operation. This compares favorably to the national average for rural and cooperative banks, which in 2004 was approximately US$1.86 million. A breakdown of CBB's deposit volume also shows its success in attracting a variety of depositors. While 89% of deposit volume comes from small and medium-sized accounts, the remaining 11% is composed of deposits with balances over US$20,000.