Database marketing increases prospecting effectiveness at Merrill Lynch

Establishing new client relationships is critical in the financial services industry. Merrill Lynch uses database marketing to enhance its prospecting efforts. The management science group developed a discriminant model to identify high quality prospects using U.S. household demographic data. High quality clients, known as priority households, were used as the target group and the resulting priority model was field tested along with three alternative models. The performance of all the models was evaluated after six months, using the performance of Merrill Lynch’s existing prospecting program as a baseline. The priority model significantly outperformed the baseline, with 167 percent higher assets, 39 percent higher revenues, and a 43 percent higher conversion rate. This success led Merrill Lynch to adopt the priority model in its ongoing prospecting efforts. Annual benefits are estimated at $3.5 to $6 billion in incremental client assets and $200,000 to $450,000 in incremental revenues.