Relationship Marketing - Presented by: Desjardins, Cooperating in building the future

Relationship Marketing
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Presented by: Desjardins,
                                                   Cooperating in building the future…

  Study case written by:

  Caroline Girard, M.B.A, Lecturer, FSA ULaval, Laval University

  Frank Pons, Ph.D., Professor, FSA ULaval , Laval University

Relationship Marketing

Financial services: a competitive sector

Canada’s competitive banking system provides good value, ready access and wide choice for
Canadian consumers and small businesses. Banks are actively competing with each other to
provide financial products and services to Canadians, making sure their needs—whether a
bank account, a mortgage, insurance, financing for a business opportunity or help in
managing their money—are met, every day and in every way.1

There are more than 80 domestic and foreign financial institutions operating in Canada.
Canadian consumers have access to a wide array of products: over 100 account packages are
available on the market, and service fees and interest margins are lower than in other
countries. A total of 96 percent of Canadians have an account with a financial institution.2

In Quebec, several banks, and one cooperative—Desjardins, are vying for their share of the
market.

Desjardins, the leading cooperative financial group in Canada

Desjardins is so well known that it hardly needs an introduction. The mission of Desjardins,
which proudly claims to be the leading financial group in Canada, is to contribute to
improving the economic and social well-being of people and communities. It goes about this
primarily in two ways:

       First, by continually developing an integrated cooperative network of secure and
        profitable financial services, owned and administered by the members, as well as a

1 http://www.cba.ca/en/media-room/50-backgrounders-on-banking-issues/121-competition-in-
the-financial-services-sector Accessed on January 30, 2014.
2 Financial Consumer Agency of Canada.

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        network of complementary financial organizations with competitive returns,
        controlled by the members

       Second, by educating people, particularly members, officers and employees, about
        democracy, economics, solidarity, and individual and collective responsibility

Like other cooperatives, Desjardins advocates respect for people and institutions. Its ideals
are expressed through six values that guide its decisions and actions.

       Money at the service of human development
       Personal commitment
       Democratic action
       Integrity and rigour
       Solidarity with the community
       Intercooperation

As Canada’s leading financial group, Desjardins has an imposing presence in the Quebec and
Canadian markets, as seen in the following statistics.3,4

Highlights

       $196.7 billion in total assets (as at December 31, 2012)
       $1,582 million in surplus earnings after taxes and before member dividends
       Top cooperative financial group in Canada
       Largest financial group in Quebec
       Ranked 23rd among the world’s safest financial institutions5
       Robust Tier 1 capital ratio, among the best in the Canadian industry
       Strong credit ratings:
        AA (DBRS), A+ (Standard and Poor’s), Aa2 (Moody’s), AA- (Fitch)
       Founded in 1900 by Alphonse and Dorimène Desjardins
       Named Top Corporate Citizen in Canada by Corporate Knights (2012)
       Ranked 13th among the world’s strongest banks by Bloomberg (2013)

3 Data taken from http://www.desjardins.com/ca/about-us/desjardins/who-we-are/quick-
facts/index.jsp Accessed on January 30, 2013.
4 Data as at December 31, 2012, unless otherwise indicated.
5 According to a 2013 ranking by Global Finance magazine.

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It’s all about people

      5.6 million members
      44,942 employees
      5,268 elected officers
      $85 million in community support (donations and sponsorships) in 2012

Services across Canada and internationally

      897 points of service
      2,508 ATMs
      43 business centres
      More than 20 entities offering financial and insurance services
      Active in 40 developing and emerging countries through Développement
       international Desjardins (DID)
      Pioneer and leader in online and mobile banking services in Quebec

Four business segments

One of the most diversified service offerings in the country

      Wealth Management and Life and Health Insurance
      Property and Casualty Insurance
      Personal Services
      Business Services

Desjardins’s challenge moving forward

There is an all-out fight between financial institutions to attract and maintain as many clients
as possible—including, in particular, young customers. Although young people, especially
those between 18 and 24, are not a profitable market segment, they offer strong profit
potential in the medium and long terms. This explains the fierce competition between banks
to win this client segment over.

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Generation Next: a demanding clientele?

It’s not just financial institutions in Quebec that are putting ideas and initiatives to work to
charm Gen-Next. All around the world, banks are pulling out all the stops to attract young
clients, whose expectations far exceed what current products can provide, if we are to
believe the authors of a French study on the student market. “Young customers expect to be
acknowledged and valued as clients.”6 To reach students, some financial institutions have
invested in opening bars on university campuses, while others have focused on creating
crowdfunding platforms for student projects. Others still have made it possible for students
to download course content directly from the bank website.7 In short, the race for
innovation is on, but the fact remains that banks need to fully understand Nexters to more
effectively market themselves to this generation of clients.

Who are they?

The members of Generation Next, or Generation Y, expect products to be innovative, to
make life easier and to live up to their expectations. What Gen Yers want, above all, is to be
empowered. They need an abundance of options, occupations, choice and variety. They are
constantly on the go and are overbooked. They don’t plan their lives or what they’re going to
do, and they don’t manage their time. They are uncomfortable with long-term plans. They
want speed and quality. Their actions reflect their values of authenticity, and the desire to
“just be ME.”8

Generation Next is hyperconscious of value for money. Nexters buy and sell new and used
items online. They’ll keep something for a few months, and sell it when they’re done with it.
They’re not afraid of taking risks. They’re ready to trade in their apartment for a nice trip,
knowing that if they lose money on the apartment, it’s only a little. They like instant rewards
for their loyalty, and they always expect extras. Young people today are constantly seeking
new deals and great prices to get their projects off the ground (education, internships,
language studies abroad). For example, they’ve got their eyes open for easy and flexible
student loans.9

What’s their relationship with financial institutions?

For financial institutions, the youth market is not easily won over. In fact, nearly one in three
clients will change banks before they turn 24,10 which makes Gen Y an elusive client segment

6 http://www.lesechos.fr/entreprises-secteurs/finance-marches/actu/0202935596428-pourquoi-
les-banques-innovent-pour-penetrer-le-marche-etudiant-598163.php
7 Ibid.
8 http://share.pdfonline.com/e4768fb022ae4a77b9fd3b1e139a7d0d/nou.pdf, p. 5.
9 http://share.pdfonline.com/e4768fb022ae4a77b9fd3b1e139a7d0d/nou.pdf, p. 5.
10 Ibid., p. 6.

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that banks need to pin down. In addition, Gen Y clients are much more opportunistic than
their older counterparts. They are much less hesitant to change banks in order to take
advantage of better rates and more efficient or effective services. Online accessibility has
become a deciding factor. More than any other client segment, Gen Yers are not likely to
choose their bank at random. They choose in keeping with family tradition. They will
compare offers and talk things over with friends before deciding, and they have no problem
opening accounts with several institutions. To attract and, more importantly, keep these
clients, banks need to have an engaging online presence.11

In a study on Generation Y, Nexters were asked what they look for in a financial institution.
The most important factors affecting where they did their banking were:
     Convenience (easy access to the funds in their bank account)
     Financing (although here in Quebec, the loans and bursaries system in place
        facilitates access to educational loans)
     Advice (since their financial knowledge is often limited)
     Geographical proximity to the financial institution
     Value for money (attractive rates)
     Advantages (bonuses, rewards and gifts that speak to their interests and pastimes)12

A 2010 study by TD Canada Trust showed that more than one third of Quebecers who
belong to Generation Y (36%) felt that saving money was nearly impossible. Young people
today face financial challenges that previous generations did not, like working to pay off big
student loans and managing expenses on low wages.13

That same study revealed what Gen Y considered to be the main obstacles to saving:

    Wages that are too low to cover the cost of living
    The temptation to live beyond one’s means
    Tuition fees
    Paying off credit card debt, loans and lines of credit14

11 Ibid.
12 Ibid., p. 10 and 11.
13 http://www.newswire.ca/en/story/1181523/la-realite-de-la-generation-y-un-cout-de-la-vie-

eleve-une-multitude-d-occasions-de-depenser-et-une-grande-difficulte-a-epargner
14 Ibid.

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Financial institutions ready to charm university students

Quebec’s financial institutions have known for some time already that their business partly
depends on bringing in new and loyal clientele. Banks realized they can do this in a
considerable and sustainable way by reaching out to the youth market segment (18 to 24 year
olds), which is why they have become so active in university settings.

Desjardins’s attempt to penetrate the youth market began in 2007. It created a team of 14
representatives responsible for negotiating partnerships with student associations in all the
universities in the areas Desjardins serves. In addition to negotiating agreements, these
representatives are in charge of directly building partnerships and developing business
relationships with the students. To get student associations and organizations to agree to a
partnership, Desjardins carefully selects activities that will bring visibility to the group. It also
takes note of the students interested in meeting with an advisor and tries to be as present as
possible for the students. Working with student associations enables Desjardins to quickly
develop a relationship with the target clientele, but since the executive committees of the
associations change so often, Desjardins practically has to start from scratch with the student
groups every year.

The work most commonly done with student associations is organizing and presenting
conferences. Financial education is also part of Desjardins’s strategy (budget planning, the
importance of maintaining a good credit rating). Each year, the cooperative holds about 450
business development activities that put it in touch with about 20,000 students. The content
presented to students is all validated by product experts to ensure its accuracy. Desjardins’s
goal in working with students is to have them view the financial institution as a true partner
rather than simply as a sponsor. The cooperative wants to be seen as standing apart from the
rest by building close ties with the student community, and its work on university campuses
is opportune for doing just that.

Of course, Desjardins is certainly not the only financial institution trying to court new clients
on campus. Its biggest competitor by far is National Bank, which is very active on the
university scene, especially within targeted programs such as medicine, pharmacy and
engineering. Like Desjardins, National Bank partners and works together with student
groups, but after entering into agreements with the groups, it hires people from outside
firms to run the kiosks during the student activities. Recently, National Bank also launched
its “One for Youth” campaign, an initiative that supports young people through the
important stages of their lives, from nursery to university. Other banks are also present,
mostly in Greater Montréal, and they also target so-called high-potential faculties. Their
strategies are similar to those of National Bank.

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The mission

As part its efforts to attract, convert and win over students, Desjardins wants to boost its
presence on Quebec and Ontario university campuses in the very short term. It wants to
develop a relationship with the students, and for that to happen, it has to reach students
early and in a way that is meaningful to them.

Considering this clientele’s profit potential for banks, it is imperative that Desjardins be
distinctive and innovative in its approach and, even more important, that it develop a close
relationship with these clients.

Desjardins is asking you to develop a relationship marketing strategy with effective and
original tools to achieve the following:

      To reach an even greater number of students within the area Desjardins serves
      To generate a list of key contacts to be entered into its database, which Desjardins
       relies on for its customer relationship strategy
      To ensure that the people contacted ultimately become members of the cooperative
       and that they use a greater number of its financial products and services

Desjardins would also like you to develop a series of relevant measurement indicators to be
able to assess the effectiveness of your strategy.

Your strategy must consider a time frame of one year and a budget of $1 million.

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Desjardins and students

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National Bank and students

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BMO and students

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Scotiabank and students

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