Compete recently held a webinar in which we analyzed the role that search plays in consumers’ online research for auto insurance. The study revealed some interesting findings about just how prevalent search is within the consumer buying cycle. Some of the key findings from this webinar include:

• Online auto insurance shopper volume has increased and price is the key driver of consumer choice
  
  • 90% of those looking to replace an existing policy cite price as the reason
  
• Most consumers apply online and search is the second most used resource in the shopping process trailing only issuer websites
  • 56% of online auto insurance shoppers, who ultimately apply, do so online
  
• Shoppers use search frequently with application rates increasing with number of queries
  • 57% of shoppers perform multiple search queries
  
• Shoppers utilize both brand and non-brand search terms with non-brand driving better conversion
  • Non-brand terms convert at ~2x the rate of brand terms
  
• Search is used throughout the consumer shopping cycle
  • 50% of search referrals occur outside of the conversion session, thus indicating that consumers leverage search at the very early stages of their shopping process when they might not yet be ready to transact
  

In sum, despite the current economic recession we have actually seen online auto insurance shopper volume increase with price being the key driver leading consumers to look for new insurance. We also found that consumers not only use the online channel for auto insurance shopping, but are also most likely to choose this channel to ultimately apply. Finally, our data indicates that search plays a significant role in consumers’ online research for auto insurance. Auto insurance shoppers use search frequently and at multiple stages of their research process.

Please note that a replay of this webinar can be viewed at the following link: http://compete.na3.acrobat.com/autoinsurreplay/

The results of the stress tests conducted on some of the nation’s largest banks were announced on the 7th of May. The tests were intended to distinguish the ‘strong’ banks from the ‘weak,’ and to instill confidence in the market. Of the nineteen banks that were stress-tested, nine banks were deemed ‘strong’ while ten were asked to raise more capital in case the recession runs deeper and longer than expected. Some experts have argued about the thoroughness of the tests. Meanwhile, some banks have suggested that the tests had overly pessimistic assumptions, and as such they do not agree with all the assessments.

These debates led me to wonder – how did the results impact investors and average consumers? Were the tests successful in achieving the objectives?

I assessed investor reactions by comparing the stock price of three ‘strong’ banks (JP Morgan Chase, American Express, Capital One) and three ‘weak’ banks (Bank of America, Wells Fargo, Citigroup). Chart 1 below shows this comparison. The stock price of all banks, including the weak banks, increased leading to, and following the announcements. The stock prices have since decreased, but remain higher than pre-result prices indicating improved investor confidence. However, the interesting point to me was that all the banks seem to trend together. It, thus, looks like investors are still not differentiating between banks.

How about consumers: are they more confident about banks and are they differentiating between banks? To assess average customer sentiment, I decided to look at the number of online visitors. My hypothesis was that if people care about the results, there would be an increase in online visitor volume for strong banks and a decrease for weak banks.

Read as: In the week of May 17-23 Chase had 1% more visitors to its website than the average number of visitors during April 12-25.

There was a dip in online visitor volume across banks in the week that the results were announced. This could just be due to caution prior to the results. The following week, online visitor volume increased across banks indicating that people were happy with the results or at the least not overtly concerned. Again, all banks trend in similar directions. Looking at the two charts above, I would have a hard time distinguishing a ‘strong’ bank from a ‘weak’ bank.

Experts may continue debating about the validity, need, and timing of the tests, I however think that the tests were successful in instilling confidence but not in distinguishing banks.

It seems that every day we hear different news about the economy in terms of a turn towards recovery. The stock market is continually fluctuating based on news in the job market, housing prices, and the nation’s financial institutions. While the hope is that there is nowhere to go but up, many of our banking centers are still struggling within the current climate. As a result, 36 banks have already failed in 2009 before we have even reached the month of June.

Due to the current economy, both banks and consumers have focused even more on the quality of their relationships. Many bank struggles have been due to relationships with consumers of questionable credit rating. As consumers have been unable to make good on loans, banks have struggled with the consequences. Not only are consumers with better credit appealing on a stability level, but they also are more likely to carry higher bank balances than the average consumer. In a recent survey of savings shoppers, Compete discovered that about 2/3 of those with excellent credit have an average savings balance of greater than $10,000 compared to 1/3 for those with a lower rating (Figure 1).

On the other end of the spectrum, consumers are also looking for stability within the financial institutions they choose to do business with. In light of the many bank failures, it is not surprising that consumers in market for savings products are increasingly seeking out institutions that will still be operating well into the future. The Compete survey found that 41% of savings shoppers are now looking specifically at the financial security of the bank as part of their search criteria. Even more interesting is the fact that those with an excellent credit score are more likely to be concerned about a bank’s stability when compared to those with a less than stellar rating (46% to 35%) (Figure 2). Consumers with excellent credit built their rating with smart financial decisions and want to have relationships with firms that are built on solid ground.

The question for banking institutions is where to find these high quality consumers. The technology to be able to look at someone and immediately know their credit rating does not yet exist, right? In fact, this is something we are able to accomplish with Compete’s clickstream data. When looking at individuals that have opened a deposits account online by credit rating, we can determine sites that those with a higher rating are more likely to visit when compared to the average internet user. Below are a few examples of sites that deposits applicants with excellent credit are more apt to hit. For example, deposits applicants with a high credit rating are 97% more likely to visit latimes.com when compared to the average internet user.

Detailed information like this is very valuable when trying to target high quality consumers with messaging that fits the mold for what they seek in a financial institution. Consumers are looking for financially secure banks because of our economic environment. It is up to these institutions to put themselves at the forefront of these individuals’ web experience so the matchmaking can begin.

There is no denying the fact that the social networking site Twitter has exploded into popular culture this year. Unique visitors to this popular domain has grown over 225% since January (19,443,286 unique visitors in April 2009). While wading through the different applications for this type of information sharing, one offering in particular really caught my eye, StockTwits. StockTwits is an open community of investors that share advice and information about real time trends in the market. Many members of the community go so far as to give details on trades they are executing as they happen. At this point, it is good to point out that I dabble a bit in the investment arena so you can imagine why this would be so intriguing. In the investment arena, information is a valuable commodity so getting free advice from professionals synchronized with market conditions is an attractive proposition.

This sort of information sharing service seems a perfect fit for the Twitter model as both thrive on real-time data distributed on a massive scale. From the graph below it is apparent that StockTwits is still in its infancy stage but even through a short amount of time has experienced tremendous growth.

As StockTwits grows it will be interesting to see if other companies within the investment community try to capitalize on its success. Through Twitter, StockTwits already has over 70,000 followers, a number that is likely to increase quickly in the coming months. A site like this that fosters a large community of active investors would be difficult to ignore. Looking at the destination data for April 2009 it looks as though one investment firm, Scottrade, is already gaining traction from the success of this emerging social media site. Even though the volume may seem low, it is still very early in the game for StockTwits and there are plenty of opportunities for a company to target this growing community.

The level of growth StockTwits is experiencing is not surprising given the fact that people are always looking for advice on how to grow their money. Therefore, a service that provides up to the second market information for free is most appealing. The one caveat is that this information can be given by virtually anyone so the value of the data can be called into question. One way StockTwits alleviates this concern is through its Recommended List which highlights key contributors with a track record of success. For those serious about getting the best advice, StockTwits allows members to upgrade their service to include exclusive feeds for a monthly or yearly membership charge. By catering to both the savvy investor and casual traders (myself included) StockTwits has set itself up for continued growth and success using the Twitter platform.

Smartphone applications have been receiving a lot of buzz lately. Banks are not sitting on the sidelines: according to ABI Research, a technology research firm, the number of US banks offering mobile banking will jump from 245 in 2008 to 614 this year. The supply of mobile banking applications is increasing rapidly, but what does demand look like? Do Smartphone owners want to manage their finances from their phones?

As an avid iPhone user, I frequently surf the new apps in search of anything new or exciting. I never downloaded my bank’s free mobile banking application because I never saw the need to check my account balance or transfer funds while waiting in line for coffee. Apparently, I’m not the only one.

In our quarterly Smartphone Intelligence survey, Compete asked Smartphone owners how they are using their mobile devices to manage finances. Of the people surveyed, 82% do not currently use their mobile device to manage their finances. The chart below shows the most frequently selected responses when we asked these people why they weren’t using mobile banking.

We can see here that 53% of Smartphone owners said that they saw no need to manage their finances from a mobile device, while about a third said they didn’t trust mobile banking security. Other reasons, like concern about the cost of mobile banking, not knowing the service exists, slow Internet connection on their phone, and not having Internet on their phone were less significant for users.

So banks are confronted with two big challenges when it comes to mobile banking: convincing their customers of why they need to bank on their phones as well as building a sense of trust in mobile banking security.

Changing both of these things may just take some time, as it did with online banking, to get people used to the idea and integrate the service into their regular routines. But it will likely also take some marketing on the part of the banks to increase trust in security for mobile transactions and to help customers find ways to try and use the service on a regular basis.

The other day, I downloaded the BofA application to test it out. The app features a simple and user-friendly interface. However, I rarely find myself in a situation where I need to perform a financial transaction, or even find a nearby ATM, from my phone. I might be one of those people the banks need to convince.

Online banking is an effective way for banking institutions to deliver multiple services in a low cost channel. By increasing online banking usage and moving customers to use bill pay and paperless statements, banks not only reduce servicing expenses, but also increase the switching costs for customers to another bank. Just think, once someone sets up account alerts and their online bill payments, it’s not an exercise they are going to be eager to start from scratch. It is not surprising that over the past year, many institutions have been focused on increasing usage of the online channel. Over the last year (Feb 08’ to Feb 09’), monthly enrollment in online banking grew 27% across the competitive set*.

*Competitive set = Bank of America, Chase, Citibank, ING Direct, National City, SunTrust,
US Bank, Washington Mutual, Wachovia, Wells Fargo

While banks are increasingly trying to grow enrollment, another important aspect to consider when discussing online banking is the quality of the relationship. The better an institution is at engaging with its customer base, the less likely the customer is to defect and seek a new financial provider. Examples of engagement include setting up alerts as well as online bill pay. These types of services encourage customers to log in to the online banking platform on a regular basis which in turn strengthens the overall relationship. One way to measure the level of customer engagement is looking at “quality” online bankers. A quality online banker is defined as someone that has logged in to their bank’s site two or more times in the past two months. This subset of the online banking population makes using the platform part of their routine which further fortifies a relationship with their bank.

Bank of America is one of the industry leaders when it comes to the number of quality online bankers averaging 17+ million per month over the past year. One key to this success is the way Bank of America continues to provide innovative offers and incentives to customers who use the online banking service. The most recent offering from the bank is a program called Add It Up. This program allows Bank of America online bankers to earn cash back when they shop at select retailers online. Purchasing at these select retailers can earn customers up to 20% of their purchase in cash, depending on the merchant. This program not only engages those that currently use the online banking service, but also gives a major incentive for those on the fence about enrollment.

Interest in the Add it Up program has been tremendous as nearly half a million unique visitors hit the Add it Up section of the Bank of America website (additup.bankofamerica.com) in March. This collaboration is an example of a venture that is mutually beneficial to all three parties involved (customers, retailers, and Bank of America). It is these types of efforts that have kept Bank of America at the forefront when it comes to engaging with its online bankers. It will be interesting to see what they come up with next.