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When the u.s. banking industry got the urge to merge a few years ago, direct marketing agencies braced for fallout.

It was feared by industry observers that mailings from banks, heavy users of direct mail for selling consumers everything from home loans to credit cards, would sharply decline as major banks joined forces.

So far, however, merger-mania has had the opposite effect: informing consumers about new bank names, branches and products has boosted bank mailings significantly, resulting in a significant uptick in financial services direct mail.

"Mail from banks keeps going up, and mergers have been a significant contributor to the trend as banks give consumers extensive mailings explaining the changes ahead," says Marcia Waite, VP-marketing for Market IQ, a consulting company that tracks financial services' direct marketing efforts.

In the long run, observers expect to see additional account consolidations and a decline in overall mailings as the biggest of the bank mergers unfold over the next year.

The trend picked up speed when the Chase Bank and Chemical Bank merger became final in 1996. After that, the trend hit critical mass last year with a wave of major bank merger announcements including: Bank of America with NationsBank, First Chicago NBD with BancOne and Wells Fargo Bank and NorWest Bank. These mergers are in various stages of completion.

"There will be more direct marketing agency consolidations, and over time, mailings will be consolidated. Where two banks were sending a mailing to one household, now one bank will target that household," says George Wiedemann, CEO of Grey Direct, New York. Grey is the direct marketing agency for Chase Bank.

In a fiercely competitive field, banking products and credit card features have become so widely copied that consumers have become indifferent toward bank brands, says Bruce Brittain, president of Brittain Associates a credit card consultancy. In addition, he says mergers give customers one more reason to question their loyalty to their bank.

"The merger is a trigger, giving the customer the opportunity to leave or to deepen his loyalty to the institution. Much depends on the communication a bank sends to the customer at that moment," says Mr. Brittain.

Currently, the majority of banks are treating mergers as a routine business communication with consumers, using direct mail primarily to announce changes in the bank's name, products or policies, says Ms. Waite.

A few banks, however, are using mergers as an opportunity to win over consumers and cement loyalties with direct mail promotions.

When Fleet Financial Group took over the consumer credit-card portfolio of Advanta Corp. this year, it alerted thousands of Advanta cardholders with a direct mailing that included a sweepstakes promotion. Devon Direct, Berwyn, Pa., and Barry Blau & Partners, Wilton, Conn., handle Fleet's estimated $150 million direct marketing account.

Arriving in an Advanta envelope last month, the direct mailing included an announcement about the merger on a Fleet letterhead plus an offer to participate in a sweepstakes to win $25,000 by activating the new Fleet credit card that replaces the old Advanta card.

In another such example, when CoreStates Bank and First Union Bank announced a merger to customers via direct mail earlier this year, they sweetened the news that CoreStates customers would soon become First Union customers with special enticements.

In each mailing, customers received coupons for free cookies from the Original Cookie Co., free Crazy Bread from Little Caesars Pizza, a $10 discount on floral delivery from FTD and $15 off on a car rental from Hertz Corp.

"Most banks are focused on the transition itself in a merger, but they could be missing an opportunity to win over consumers during the process by using an incentive of some kind," says Mr. Brittain.

Indeed, card usage is becoming the hot button for credit card marketing, not winning over customers to new cards since the landscape is so cluttered with credit card brands. As a result, marketing experts say mergers could create an excellent opportunity to cement a relationship with a customer and enhance the relationship through direct marketing.

"The success of the current wave of bank mergers rests heavily on how well the survivors handle direct marketing from this point forward," says Charles Wendel, president of Financial Institutions Consulting. "[Banks] ought to use their new size and power to invest in high-powered data mining technology to reach the right customers with the right product, because their customer base is bigger now, and targeting is essential to achieve effective results," he says.

Merging two bank databases, however, can take as much as a year or longer, say experts.

"It's a process, and it doesn't happen overnight," says Tom Kelly, corporate communications specialist for First Chicago NBD Bank, which is in the process of merging with BancOne Corp. to form Bank One.

Over the next year, First Chicago NBD branches will be gradually converted to Bank Ones, as systems in the combined banks' 14 states are integrated.

"First the system has to be in place, then we can notify customers by direct mail that their bank has a new name. It's a carefully timed operation," says Mr. Kelly.

Conveniently, both merging banks had separate brand names for their credit-card operations. First Chicago NBD's First Card credit-card brand will not change its name; neither will BancOne's First USA. Bank One will merely alert credit card customers to a new holding company name.

But other mergers are far more complicated and will require marketing to ease the confusion.

This month,Bank of America will complete its merger with NationsBank, resulting in the largest independent U.S. bank, and a flurry of direct mailings will follow, says Ellison Clary, NationsBank's senior VP-corporate affairs.

Each bank has a credit-card program and hundreds of outlets across the nation-in each bank's name. Experts predict NationsBank customers will be converted to Bank of America customers through a year-long, direct mail-driven process.First Financial Corp. recently absorbed U.S. Bancorp in another major deal. The transition, involving the shift of all First Financial branches and credit-card accounts to the U.S. Bank brand, will take more than a year, says Dave Ingraham, senior VP of customer management.

"We are calling it integration, not conversion-it's a long, careful process requiring a combination of direct mail, advertising and publicity to introduce a new brand and concept to thousands of consumers with the minimal disruption," he says. Direct mailings bearing the First Financial logo on the back flap of the envelope lift to reveal the new U.S. Bank logo underneath.

"We're using graphics to show the fadeaway from one brand to another, demonstrating in the very graphics of our direct mail how the brand itself will make such a change soon," Mr. Ingraham says.

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