Frost BankFrost BankMAD I: Target Deck

Kelly Coonan Kelsey Rachal Lauren Jones Wheatley Gates Maria Solorzano

Table of Contents5 Executive Summary6 Company Overview8 Banking & Credit Card Industry 11 Competitors 15 Marketing Trends 16 SWOT17 Consumer Trends 18 Rewards 19 Usage23 What it all Means 24 Zeroing in on a Target 26 Our Decision 27 Considered but not Recommended29 A Closer Look at Our Target 30 How Big is Our Target 31 Current Card Usage 33 Where They Live 34 How They Spend 35 What They Do 36 Technology Use35 How We’ll Reach Them42 Conclusion43 Media Vision

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Executive Summary

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Frost Bank, a Texas born and raised company, is among the top 10 banks in the state. During the past decade, the banking industry has undergone many changes due to the economy’s struggles. Consequently, the credit and debit card segment of banking has been affected greatly and consumers have been faced with the decision of whether or not to use their credit cards to supplement their income or to use their debit cards for only the things they can afford

Right now, Frost Bank offers its customers Visa check cards and gift cards. The bank has plans to offer Visa credit cards for the first time in 2012 and therefore, Frost is looking to send a message emphasizing cash rewards/cash back. Frost’s main goal is to increase credit card usage by offering these rewards to customers and Domino Media’s goal is to develop the most ideal audience for Frost to target this new addition to. With thorough research and our creative minds combined, we here at Domino Media are confident in the decisions that follow.

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Company HistoryCullen/Frost Bankers, Inc., incorporated in Texas in 1977, is a financial holding company and a bank holding companyconsisting of two wholly owned banking subsidiaries: Frost National Bank (Frost)--the largest independent bank in Texas--and United States National Bank of Galveston. The company is headquartered in San Antonio, Texas, and has more than 100 financial centers across Texas in the Austin, Corpus Christi, Dallas, Fort Worth, Houston, Rio Grande Valley and San Antonio regions. Frost Bank was chartered as a national banking association in 1899, but its origin can be traced to a mercantile partnership organized in 1868 when Thomas Claiborne Frost organized the state’s first merchandising, financing, and marketing program. Cullen/Frost Bankers serves a wide variety of industries, including energy, manufacturing, services, con-struction, retail, telecommunications, health care, military, and transportation. Recently, the company acquired two independent insurance agencies that specialize in providing employee benefit plans to busi-nesses: R. G. Seeberger, Inc., in Dallas, and Prime Benefits, Inc., in Austin.

^Datamonitor360 - Cullen/Frost Bankers, Inc. ^Official Frost Bank website - www.frostbank.com

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Customer ServiceFrost has positioned itself as the bank of Texas since it was created in 1868. They have always taken pride in providing exceptional customer service. Even with the recent influx of banking technology, they have sent the message that they still prefer to talk to their customers in person.

Texas PrideIn addition to the loyalty they have to their customers, they also have proven their loyalty to Texas. They make large efforts to give back to the community through donating to non-profits, sponsoring philanthropic events, and encouraging employees to volunteer. Each branch has someone locally to plan philanthropic events that will benefit that community in a way that is unique to them. Their current advertisements focus on the brand personality more than the benefits, products, and services that they have.

Brand Identity

Banking & Credit Card Industry

^The New York Times - “Economic Crisis and Market Upheaveas Recent Developments”

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Banking Overview In the summer of 2011, the United States economy continued to struggle as markets were rolled by fears of new setbacks, defaults and the risk of another recession.There are many factors behind the chaos, such as the high unemployment rate, Europe’s sovereign debt crisis, the partisan fight over the federal debt ceiling, and the decision by Standard & Poor’s to downgrade the government’s AAA rating.

The biggest factor, however, was the July 29th announcement that the gross domestic product (GDP) was only growing at an annual rate of 1.3 percent in the second quarter, much lower than analysts’ had predicted. These new figures showed how the economy was stalling out entirely.

It did not take long for people to begin questioning their confidence in the banking system, especially after the July European agreement on a new round of bailouts failed to calm the international markets.In September, the Federal Reserve announced an unusual plan to reduce borrowing costs for businesses and consumers in attempt to spur economic growth. Unfortunately, the end of September was marked by a steep decline in global markets, which analysts blame on investor’s fears about the international economic outlook.

^The New York Times - “Economic Crisis and Market Upheaveas Recent Developments”

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Credit Card IndustryThe industry has undergone several significant changes in recent years. The shift to debit and away from credit has been going on for quite some time. Total transaction volume on credit and debit cards rose 8.1% in 2010, to $3.8 trillion from $3.6 trillion in 2009. Debit has continuously increased its market share in comparison to credit, with over half of the total volume being done on debit cards in 2010. Over half of the total volume was done on debit cards in 2010. As a result, borrowing on credit cards has dropped considerably. More than $100 billion of bad debt has been written off in the past few years, and consumers remain reluctant to borrow in order to spend.

The Durbin Amendment The Durbin Amendment, passed in 2011, could make debit cards less profitable for banks. With this amendment in place, consumers may feel the need to shift some of their spending back to credit cards, due to high usage fees and reduced awards for debit cards. Credit card issuers will begin to encourage consumers to spend and borrow by offering attractive cash-back programs, nearly all of which carry no annual fee.

The Consumer and RewardsAccording to a Mintel survey, credit cards that reward their customers with cash back and points are the two most popular cards among respondents. Around a third of respondents posess cards with cash-back rewards, while 31% have a card that rewards them in the form of points. But, over a quarter of respondents have a credit card that gives them no rewards and nearly 30% say they don’t own a credit card. Almost half of respondents say their debit card carries no rewards at all. ^Mintel - Credit and Debit Cards - US - July 2011

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Competitors

Leading Banks in Texas:1. JP Morgan Chase

2. Bank of America

3. Comerica Bank

4. Wells Fargo

5. Compass

6. Wells Fargo (South Central)

7. Frost National Bank

8. Amegy Bank

9. International Bank of Commerce

10. Prosperity Bank

^http://www.banking.state.tx.us/pubs/topbnks/top100.htm

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Competitor Profile:Bank of America

OverviewBank of America, based in North Carolina, is one of the world’s largest holding bank companies serving over 55 million consumer and small business clients. BoA has a strong geographical presence throughout all of America and 40 foreign countries.

Social Media Strategy BoA uses social media as their preferred method of communication for many of its customers. The bank has a very engaging social media strategy, for example they have a very active Twitter account that is used primarily for customer service. If the customer’s issue is too sensitive to discuss on their public Twitter forum, the bank uses a more secure form of communication to privately resolve the customer’s problem. These private communications also help the bank notice what other customer needs they can serve.

Strengths•Great mobile banking features with applications in both Droid and iPhone devices•Good overall customer service•Strong brand recognition across the nation•Thousands of banks and ATMs all over the nation.•Visa credit and debit card options

Weaknesses•The acquisition of Countrywide and Merrill Lynch weaken BoA in certain areas•Increasing loss trend at Global Card division likely to persist

^Datamonitor360 - Bank of America

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OverviewWells Fargo is the biggest consumer bank, according to the New York Times. The bank operates mainly in the United States through distribution channels such as the Internet and their banking stores.

Social Media Strategy Wells Fargo has an integrated social media presence, with all of its blogs and links to its blog, YouTube, Twitter and Facebook sites in a single place so as to make it easy for the customer to find. The bank has blogs for two different types of audience: one that is interested in Well Fargo’s history and the other is students looking to learn more about financial topics.

Competitor Profile:Wells Fargo

Strengths•Strong franchises across segments •Acquirement of Wachovia Corporation•Ranked by BusinessWeek as America’s “2nd Most Generous Corporate Foundations” in 2010•Named top bank brand in Brand Key’s 2010 Customer Loyalty Engagement Index by Brand Keys

Weaknesses•Limited international presence •Low level of debit card market share•Small investment bank in comparison to rivals•Weakening expense management •Increasing loss trend at Global Card division likely to persist

^Datamonitor360 - Wells Fargo

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HistoryJ.P. Morgan Chase is one of the largest financial institutions in the world with many global commercial banking services under the J.P. Morgan name such as investment banking, wealth management, institutional asset management, and private equity. They provide services at locations across the country.

Social Media StrategsJ.P. Morgan Chase lacks a strong integrated social media presence in comparison to other top banks. They have many different Facebook pages for different regions of the world. They also have Facebook pages devoted solely to their corporate philanthropy efforts, the J.P. Morgan Challenge run. The run has raised millions of dollars for numerous charities around the United States. They also have numerous twitter handles, each twitter serving a different purpose. For example, they have one twitter handle that only reports breaking news in the banking industry while they have another handle dedicated to J.P. Morgan funds.

Competitor Profile:Chase

Strengths•Leading global financial brand, operates in 50 countries •High quality asset-liability management capabilities •Strong liquidity and capital position •Operates both banking and non-banking subsidiaries •Good customer service

Weaknesses•Ended outsourcing with IBM, resulting in angry employees and lower productivity levels •Dependent on US market as it accounts for 78% of profits•Lack of investment from the people

^Datamonitor360 - J.P. Morgan Chase

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Direct MailIn attempts to entice consumers to apply for credit cards, companies began to increase their credit card acquisition mail in 2010 and even more in 2011. Although consumers have shown resistance to using credit cards, issuers have been reaching out to them by offering a larger variety of rewards. Credit card banks are also using low introductory teaser rates in their mail offers.

Social MediaMany credit card industry professionals say social media will become a “significant factor” in customer service, while others say that these sites already play an important role in improving service.

Marketing Trends

^Mintel - Credit and Debit Cards - US - July 2011

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Strengths

•Texas pride•Focus on customer service•Highest in customer satisfaction with retail banking in Texas two years in a row.

Frost S.W.O.T

Opportunities

•Increasing use from current clients.•Mobile banking in the form of iPhone and Droid Apps

Weaknesses

•No branches outside of Texas•No presence in social media

Threats

•Major national banks such as Bank of America already offer this service.•Google wallet & mobile payment systems•Bringing in new potential clients.

Consumer Trends

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According to a Mintel survey, credit cards that reward their customers with cash back and points are the two most popular cards among respondents.

Around a third of respondents posess cards with cash-back rewards while 31% have a card that rewards them in the form of points. But, over a quarter of respondents have a credit card that gives them no rewards and nearly 30% say they do not own a credit card. Almost half of respondents say their debit card carries no rewards.

Consumers & Rewards

^Mintel - Credit and Debit Cards - US - July 2011

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According to a Mintel survey, credit cards that reward their customers with cash back and points are the two most popular cards among respondents.

Around a third of respondents posess cards with cash-back rewards while 31% have a card that rewards them in the form of points. But, over a quarter of respondents have a credit card that gives them no rewards and nearly 30% say they do not own a credit card. Almost half of respondents say their debit card carries no rewards.

By AreaUrban dwellers use more credit cards than people who live in suburban or rural areas . Over 40% of urban dwellers are more likely to use two credit cards a month and only 28% use just one card a month.

In comparison, 35% of suburbanites and 31% of those from rural areas use two cards a month, while 35% suburbanites and 38% in rural areas use one credit card. Rural dwellers say they have credit cards but rarely use them, double the rate among suburbanites and compared to only 3% of urban dwellers who say the same thing.

Credit Card Usage

^Mintel - Credit and Debit Cards - US - July 2011 ^Mintel - Credit and Debit Cards - US - July 2011

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Brand PreferenceChase-branded credit cards are the most popular credit cards among survey respondents. Bank of America came in second for popularity, although it is the biggest card issuer in the U.S. in terms of outstandings. Discover and American Express tied for third place, followed by Capital One. Only 7% of respondents said Citibank, the third largest issuer in the U.S. in terms of outstandings, was their main credit card.

Number of CardsA large majority of respondents to a Mintel survey said they typically use one or two credit cards in a month. Around 15% say they use three different cards a month, while 7% use four or more. Looking at the age of respondents, there isn’t a strong difference in the number of cards in possesion, except among the youngest. 44% of those aged 18-24 say they use only one card a month, compared to 34% of all respondents.

Credit Card Usage, cont.

^Mintel - Credit and Debit Cards - US - July 2011

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MRI Data

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What It All Means

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Looking at the MRI consumer data, we highlighted any significantly high indexes to search for any trends in the data. In general, credit card users skewed towards the educated, rich, and older populations.

Looking even closer, at ownership of rewards credit cards, there was a concentration of owners in the 45-60 age group, those with Bachelor’s degrees and higher, and those households earning over $50,000. At first, narrowing in on those who fell into all three of these groups seemed like a great opportunity.

However, some red flags went off in our heads.

Zeroing in on a Target

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Our parents who fell into these categories have been long time customers to their banking institutions and credit cards, and seemed unlikely to switch. One mom said she’d been using Bank of America ever since she moved to Texas in 1994 and Discover Card even longer, since she got married at age 24. When asked what would cause her to switch she said “Oh gosh, I guess maybe a big increase in fees”. J .D. Power & Associates 2011 US Retail Bank New Account Study reveals that these sentiments ring true with most consumers. The number one reason cited for consumers switching banks is life circumstances such as moving, the second being an increase in fees.

Capitalizing those who are moving to Texas seemed like a good idea on the surface, especially with Texas’ booming population. However, we felt that new Texans would be unlikely to relate to Frost Bank’s core messaging, Texas Pride.

...continued

^J.D Power and Associates - “Shopping and Switching Rates Increase among Retail Bank Customers as Competition in the Industry Intensifies”

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Because the segment most likely to own a rewards credit card is difficult to convert, we decided to target them before they commit to a bank or credit card company.

Since those with a college education index high on almost all types of credit card ownership and usage (those with post-graduate degrees indexed at 170 for ownership of cash rewards credit cards and those with bachelor’s degrees at 148), we decided to target recent college graduates right when they’re trying to establish they’re own financial identities.

Currently, 73% of college students own a debit card (and 95% of the respondents in our survey), making graduates comfortable with using plastic. However, with the Durbin Ammendment going into effect, debit cards will begin look less attractive as banks begin to tag on charges for debit card uses.

Bank of America, one of the largest banks, recently announced that they would be adding a $5 monthly charge for credit card usage. With only 34% of college students using credit card, this means there is a huge market for first time credit card users, especially as credit cards become more attractive than debit.

Our Decision

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Current College StudentsCurrent college students have been a popular target for credit card companies. However, this practice is considered predatory by consumers. Additionally, with the credit card reforms enacted in August of 2009, attracting these customers is difficult as those under 21 cannot apply for credit cards without a parental cosign. And because Frost advertise itself as more responsible and consumer friendly, engaging in such predatory practices would conflict with their image.

45-60 year old High EarnersThose in this segment are more likely to use credit cards with cash back rewards, but this may be because they are more likely to qualify for credit cards offering cash rewards. In addition, these older consumers are much less likely to switch to a new bank or card, making them an unwise target.

Current Frost Customers While current Frost customers do provide a loyal and captive audience to introduce the new credit card to, these customers are likely to already have a credit card with another provider. As stated before, consumers are unlikely to switch credit cards. However, we do recommend using limited, inexpensive resources such as email and upselling on the website to court this crowd.

Consideredbut not recommended

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A Closer Look At Our Target

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In Texas, •82,020 Adults under 24 hold a bachelor’s degree or higher (0.4% of the population)

•411,942 Adults 25 to 34 years old hold a bachelor’s degree or higher (2.2% of the population)

•That’s about 493,000 people or 2.6% of the Texas population.

•Because this is such a small portion of the population, we can really zero in on their behavior and reach them with messages that will resonate with them.

How Big is Our Target?

^U.S. Census - 2010

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Of the 73 college students and recent graduates we surveyed:

•27% Own a credit card

Of those who don’t own a credit card:•94% plan on obtaining one •99% of those plan on obtaining one before age 26

The average age they plan to obtain a credit card is 21.7

Current Card Usage

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Factors influencing brand choice:Ease of use was the most common response with parent’s brand choice and rewards programs coming in second. The prioritization of ease of use highlights this segments unfamiliarity with credit cards and the importance of becoming helpful source of information to our target.

In those who do not yet own a credit card, the most common response was their parents brand choice, followed closely by rewards programs and ease of use.

Current Card Usage

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These young professionals live all over Texas in its largest cities:San Antonio, Houston, Dallas, and Austin are in the top ten cities in the U.S. for young people, according to a Forbes report. They are drawn to the “bright-lights-big-city” appeal that these cities have to offer.

36.2% of Texans rent, compared to 33.8% for the entire country: Those in the 25-34 age group are most likely to rent.

Where They Live

^Forbes- “America’s Best Cities for Young Adults” ^U.S Census - 2010

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Learning financial responsibilityThese young professionals are still learning how to effectively manage their day-to-day finances. They have to be smart with their money and since they are out on their own now, they actively seek out good deals. According to research conducted by the Cisco IBSG Research & Economics Practice in October 2010, a majority of shoppers have increased the amount of time they spend looking for good deals compared to two years ago. Furthermore, about half of shoppers surveyed expect to increase the time they spend deal-seeking in two years.

Want to establish good creditThese young, ambitious people need to build up their credit over time so that they can qualify for larger loans when needed. This is especially important for those who want to buy a house or open their own business in the future. Therefore, they are looking at credit cards as a way to buy the things they cannot quite afford at the moment, pay them back at the end of the month, and build their credit.

How They Spend

^Cisco - IBSG Research & Economics Practice

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Happy HoursHappy hours are one of the main ways these young professionals explore their cities in a budget-friendly manner. They love ending their days with some after-work bonding at a happy hour.

Exploring Their CitiesThese cultural consumers are curious about what their city has to offer. They use the internet to seek out information about their city’s social scene. Websites such as Groupon and LivingSocial offer them wallet-friendly ways to enjoy the city they live in.

What They Do

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Heavy Technology UsersThis highly engaged audience actively uses technology, especially the Internet. They are avid users of mobile devices and social networking, utilizing these platforms to stay connected with their friends and families.

Early AdoptersThis target audience is very open-minded and interested in anything that is new, whether it is technology or store openings.

In particular, recent studies have examined the impact of early adopters. These studies show that adoption can cascade through a social group and popularize a financial product or investment category.

Technology Use

^Mintel - Behavioral Finance - US - March 2011

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...continued

^Mintel ^Neilsen Wire Blog - “Social Media Report: Spending Time, Money and Going Mobile”

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Younger customers want banks to address their needs using the tools they and their peers have adopted, including mobile devices, video, and social networking—and they are willing to switch to banks that embrace these

technologies.

-Cisco: The Next Growth Opportunity for Banks

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How We’ll Reach Them

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Although traditional advertising methods will be recommended, Domino Media highly suggests the focus be in digital and interactive media.

The majority of our target audience has grown up with the Internet and the innovation that came with it. In addition, the target market spends 32.2 to 35.8 hours online a month; they are keeping up with friends on social media sites, shopping, reading their emails, keeping up with current events on news sites, taking quick breaks at work, and streaming tv shows and movies. Therefore, advertising online is critical to reach our audience.

Online

^Mintel - Credit and Debit Cards - US - July 2011

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EngageCurrently, there is no social media strategy implemented by Frost. The opportunity to reach current and especially new clients through a social media presence is one that competitors are taking initiative with and Frost cannot ignore. Frost’s social media presence enhances their brand image and allows potential clients to see what the company is like and what current clients are saying about the company.

EducateOne huge opportunity we see for Frost in this market is to become an educator for the target. With these graduates trying to navigate the confusing world of finance and banking, Frost could use this opportunity to engage with clients and educate them about credit cards and how to use them responsibly with tips through tweets, blog posts or Facebook posts.

Social Media

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In determining the target audience, Domino Media concluded that people 22-27 years old are at a limbo stage; they are finally managing being on their own and away ffrom their parents’ financial support, and they are trying to manage their budgets due to their lack of disposable income. In addition, they are at a stage in their lives in which they need to break away from their parents’ bank accounts and decide whether to continue banking with the same company or find a new one. While they were in college, there was no real need to attain a credit card under their name because they had their parents to support them. But now that they are out on their own, this audience is looking to accommodate and supplement the things their income cannot through credit cards.

This audience of 22-27 year old recent graduates is the most ideal target market for Frost Bank. Post-grads are trying to sort out their finances as they try to balance a budget-friendly lifestyle, making credit cards a very relevant product for this audience. Frost Bank should embrace the opportunity to break through the clutter and reach out to this audience given their current stage of life. In conclusion, we are confident in our decision and look forward to continuing the campaign with our media vision:

Conclusion

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Media Vision

Fostering Financial KnowledgeWith hundreds of thousands of graduates beginning their financial lives, Frost Bank will become a trusted source of knowledge for these new professionals. By educating young adults about finance and banking, we aim to create a mass of loyal and smart investors to build Frost’s future.