Although our hypothetical financial institution, Banana Bank, has been servicing its customers with online banking for several years, new leadership is pushing to make the leap into online customer acquisition. What is the best way forward?

Selling financial services online is different from selling physical goods, because in most cases the revenue model is entirely based around customer retention, the length of time a customer actively uses the financial service. Mobile phone carriers force customers to enter contracts for a reason - new customers are expensive to acquire and so must be locked in for a period in order to recoup the cost of acquisition. Banana Bank does not have the luxury of forcing customers into contracts, and so must approach online acquisition carefully to ensure that customer acquisition costs are not higher than the revenue generated from those accounts.

The diagram below shows a typical conversion model for online financial services, where the bars represent volume of potential customers.

(Click to Enlarge)

When planning a site conversion strategy for Banana Bank, it is important to consider the point in the acquisition funnel at which marketing acquisition cost is incurred. This depends on the economics of the cost structure for traffic generation through advertising. There are five major models for online marketing:

• Pay per impression (PPM) - This is the classic banner advertising model popularized by Yahoo. These days, the PPM model is considered a dinosaur, perhaps because of its similarity to TV and Radio advertising. PPM is used more often by Fortune 500 companies with huge marketing budgets to support their brand. Banana Bank will pay the same amount no matter how many potential customers visit their site.
• Pay per click (PPC) - This model is typical of paid search engines such as Google, Yahoo, and MSN. Banana Bank pays for every site visitor and acquisition cost is essentially already paid, regardless of how many visitors convert to paying customers.
• Pay per lead - Affiliate Marketers often demand payment for applications, whether they are accepted (approved) or not. Usually, Tracking Pixel embedded within your acquisition site reports each lead back to the marketer, who will invoice on a regular basis.
• Pay per order - Some affiliate marketers will agree to commission structures that pay out only when customer applications are approved. Typically, these are specialized affiliates in high commission environments such as credit card applications (e.g. creditcards.com. Affiliates rely on tracking pixels in conjunction with account approval reports generated by the Financial Institution.
• Pay per active - This is extremely rare in “off-the-shelf” online marketing, and is usually structured as a deeper contractual relationship between two companies that co-market products. For example, Banana Bank might market credit products in conjunction with a specific online retailer. It is the only model where marketing acquisition cost is related directly to the number of paying customers.

So which advertising model is best for Banana Bank? Is it possible for Banana Bank to use all of them at the same time? Does it make sense to do so?

I’ll answer these questions in my next post, and also show that contrary to popular belief, maximizing acquisition site conversion is not always a good thing.

I know that I was supposed to be done with the productivity posts for a while but I found a great little tool today that I thought I would share.

http://www.stevemiller.net/puretext/

My philosophy is to always strive to remove the minor annoyances from life, and this tool solves the problem of pasting formatted text into emails or word documents. Nine times out of ten I just want the text, not the formatting, and this is a simple system tray tool that allows you to paste plain text into any application with a single keystroke (e.g. Windows Key + V) instead of selecting File … Paste Special … Unformatted Text, which is cumbersome. I searched around for Office macro based solutions and found one or two, but the good thing about this tool is that it automatically works for all applications.