Who's the fairest of them all? The key to dynamic bank growth is to identify your most profitable and loyal customers and then 'sell them up.'.

• Author: Hanselman, Orlando B.

These facts are common knowledge: A new retail customer is five times more expensive than retaining an existing customer. Twenty percent of your customers generate the equivalent of 150 percent of your profits. Shareholders prefer investing in companies with proven competency in organic customer growth rather than those that purchase deposits and customers through acquisitions. (Indeed, banking industry studies demonstrate strong positive correlation between return on equity and organic growth rates.)

Despite this common understanding, bankers often spend the majority of scarce marketing and sales resources chasing new customers rather than building loyal and profitable relationships with existing customers. Daily actions often are at odds with the long-term realities.

The primary purpose of marketing and sales is "to sell the right product at the right price to the right customer at the right time." With this in mind, one cost-effective marketing solution is evident: Target the right existing customers with the right product at the right price at the right time. (For the sake of brevity, we'll skip a discussion of price in this article.)

Here are some ways to enhance your marketing to existing customers.

First, identify your "right" customers. Generally, there are two customer groups that fit your target parameters: loyal customers who are currently profitable and loyal customers who are not currently profitable, but who have the potential to become profitable in a reasonable amount of time. To identify these two segments, assess the loyalty and measure the profitability of your existing customers.

By assessing loyalty you gain valuable insight into perceptions customers hold about your bank. Conduct loyalty assessments by reviewing customer information files. For each customer gather as much of the following information as possible:

* Length of relationship with your bank.

* Each product, service and delivery channel used.

* Trends in account balances and activities.

* Branch most frequently visited.

* Frequency, most recent contact and nature of contact.

* Number of referrals made by the customer.

Periodically survey customers by telephone or with short written questionnaires. (Editor's Note: The ABA Marketing Network provides an online tool to help marketers do this. Called the ABA Financial Client Satisfaction Index, the website provides support and instructions and everything else needed to survey bank customers and compare results to those of over 700 other financial institutions. ABAMN members receive a discount off of the regular subscriptions price. For more information, go to www. clientsatisfaction.com.)

Your survey should, at minimum, ask the following questions:

* Which banks do you use?

* How satisfied are you with (each) bank? (Very satisfied; satisfied; neutral; unsatisfied; very unsatisfied).

* Which of these banks is your "primary financial institution?"

Surveys for loyalty assessment should be formally conducted and documented. Banking personnel, however, should optimize every customer contact by achieving two relationship-building goals:

* Thank the customer for choosing to do business with your bank.

* Ask the customer "How are we doing in...