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Business to Business Marketing Case Study
The Check's in the Mail: The Transformation of Deluxe Financial Services Is the Stuff of Business Legend

By Kevin J. Clancy and Kevin Hartley, January/February 2005

Ask the average case-bred business school student about revolutionary marketers, and you'll most likely hear about Amazon, Dell, and perhaps Saturn—all companies that turned industries on their ears by dumping the conventional business model and taking an entirely different approach. Some might mention IBM or Intel, two companies that transformed their businesses and successfully resuscitated their brands. But there's a new case on the block, one so inspiring it may match the popularity and instructional value found in these other notable examples.

In the Beginning
The story of Deluxe Financial Services (DFS) has humble beginnings. Founded in 1915 in St. Paul, Minn., in a one room print shop with $300 in start-up funds, DFS today is a division of Fortune 1000 Deluxe Corporation, serving some 8,000 banks, credit unions, and financial services companies across America. The division's all-consuming obsession and motto: printing paper checks "better, faster, and more economically than anyone else."

While commendable, Deluxe's focus on becoming the world's best check printer could not prevent growing consumer preference for electronic payment options. As it had done to hundreds of other industries before, advancing technology threatened the future of check printing. Consumers increasingly used ATM debit cards, online bill pay, wire transfers, and other electronic methods to pay for goods and services. The result: Demand for paper checks began to decline, shrinking at the rate of 3%-4% a year with no going back.

Though consumers represented the ultimate end user of Deluxe's paper checks, financial institutions (FIs)—banks, brokerages, and credit unions—represented the division's primary customers. Historically, consumers ordered checks for personal and business needs through the FI, and the FI sent the order to a selected check printing vendor. The consumer and check printer never interacted. While check printing represented a basic service their customers required, FIs generally viewed it as unimportant, boring, and a commodity; they saw little difference between Deluxe and its competitors. Decision makers at FIs looked for vendors who would provide mistake-free checks for their customers at the best prices-end of story. They certainly didn't view their checking programs as a vehicle freighted with boxcars of potential profits.

With an industry in decline and primary customers who treated check printing as a commodity, the twenty-first century did not look all that bright for Deluxe. It had to do something, but what?

Starting From Scratch
To change what, at the time, seemed a certain and unpleasant future, DFS's president, Chuck Feltz, and his senior management team took an unusual step: They decided to throw everything they thought they knew about the check printing business—its customers, its end users, the best marketing approach—out the window. Driven by a relentless pursuit of new ideas, they refused to allow old thinking and entrenched habits to box them in and even went so far as to scrap the company's long-standing motto.

Starting from scratch, Feltz first acknowledged that DFS could not stop the decline of the check printing industry in general. Paper checks faced competition from credit and debit cards, as well as from new electronic payment methods, so check usage wasn't likely to grow, no matter what. That conclusion, however, begged the question: Was there something that checks offered (or could offer) consumers?

Next, the team wondered, given the gradual decline in the core check product, how could they help FIs solve issues larger than just running a strong check merchandising program—improving the FIs' image in the eyes of their clients, for instance, or improving their customer's satisfaction—and thereby move DFS up the value chain? They knew that, like any other business group, its FI customers wanted their companies to grow and thrive. They wouldn't think of Deluxe as anything more than just another check printing vendor unless the firm offered a solution to a significant problem. So Feltz et al wondered how they might work on behalf of their clients to solve problems beyond just check printing.

After great debate and discussion, the entire team unanimously resolved to channel the energy and passion of the division toward answering these questions and more in a relentless effort to make its FI customers more robust competitors. Their vision: We will not rest until we have become the most trusted, valued business partner for FIs everywhere. With this new raison d'être as inspiration, Deluxe set about the next phase of transformation.

Courage of Convictions
Most companies, both B2B and consumer, tend to make assumptions about customers' wants, needs, problems, and motivations to buy. Some get lucky and their assumptions hold true. Most don't, however, and their businesses falter and fail. Unwilling to leave anything to chance—the future of the division and thousands of jobs relied on making the right decision, after all—Deluxe decided to test its assumptions by talking to consumers and FIs, and really listening to what they had to say. The clock ticked on, but Feltz and his senior management team had the courage of their convictions to take the time to make sure they got the marketing strategy right.

Working with their marketing consulting firm Copernicus, Deluxe launched one of the largest and most sophisticated strategic marketing studies ever undertaken in the financial services industry among consumers and FIs. Deluxe learned as much as it could about what consumers want when it comes to checks and other financial service opportunities. This research uncovered a sizable group of consumers who were very excited about buying more designer checks with different pictures, colors, animals, and prints that allowed them to express their unique personalities and interests (something electronic payment methods could not do for them). They lamented, however, that the "retail experience" at their FIs didn't entice or excite them. Indeed, most banks and savings and loan associations were pushing new customers into "basic blue" checks, sometimes offered at no charge. ("Free checks here! Come and get them!")

Meanwhile, research among FIs revealed that, while most didn't feel particularly excited about "world-class check printing," a large group of decision makers could barely contain themselves regarding their need for assistance in creating unparalleled customer experiences. Many FIs admitted they struggled with customer relationship management.

The results of this study overturned years of conventional wisdom about the commoditized state of check printing. A proportionally large group of consumers wanted more than just the standard checks and retail experiences offered by their FIs. And a large group of FIs wanted a vendor that could help them deliver exceptional customer experiences. Deluxe realized it could leverage its knowledge about consumers and check expertise and put an infrastructure in place to help FIs with their biggest want—creating better customer experiences. Deluxe believed it could handle more than just check printing and the fulfillment needs of FIs. It could "create" the entire customer relationship when it came to checks, delivering an experience so extraordinary that it forever influenced the consumer perception of an FI. Delivering what customers wanted with a phenomenal experience would bring in higher profits for the FI and ultimately win more business for Deluxe—all while simultaneously increasing the end users' satisfaction and perception of their financial institution's brand.

Strategy in Action
Deluxe immediately set about transforming itself from a check "printer" to a sophisticated check "retailer." The company maintained its methodical approach to transformation, deciding to test new service concepts before a real-world launch. Deluxe presented a breakthrough concept dubbed DeluxeSelectsm to a sample of FIs. Powered by the richly detailed consumer segment profiles that included information about what kind of check products different consumers wanted, how they wanted to order them, how they wanted to be communicated with, and what price they were willing to pay, Deluxe would handle consumer orders and the entire customer check purchase experience. The concept explained how financial institutions could streamline their operations by letting Deluxe provide "the right check products, through the right channels, and at the right price." It also demonstrated how the service would increase the profitability of the FI's check buying program and improve the customer experience with the FI.

FIs greeted DeluxeSelectsm with open arms during the testing period, so Deluxe rolled out the service in 2002. The company planned a series of expos featuring talks by leading thinkers in marketing and change management to underscore the importance of understanding customer needs. There was also a multimedia presentation that introduced the consumer segment profiles, including check needs and proclivities, as well as their profitability to the institution. A comprehensive explanation was given of how DeluxeSelectsm worked and the benefits it provided to financial institutions, such as increasing profitability. FIs felt so confident in Deluxe's capabilities after attending an expo, they signed up for the service and allowed Deluxe to speak directly to customers on their behalf—an impressive first in the financial services industry. DeluxeSelectsm quickly exceeded sales objectives and today exceeds the $100 million mark.

Deluxe Didn't Stop There
If, by some miracle, a B2B firm develops a compelling positioning, the marketing communications program usually falls flat. Usually the program includes a new trade show booth with artwork and posters, new collateral materials (e.g., brochures, fact-sheets, and the like), and a training program for sales reps—pretty ho-hum for the customer or prospect. Deluxe, however, was determined not to let the strategy fall flat because of a business as usual marketing communications program.

Once again, Deluxe's senior management threw out everything they thought they knew about marketing communications. Feltz asked: What if we took that same 1%-3% of sales we put toward trade show booths, collateral, and so on, and did something that benefited our customers? What if our marketing programs made our customers better competitors, all the while reinforcing our positioning as the creators of exceptional customer experiences?

Taking an entirely new approach to B2B marketing, Deluxe decided to produce a gripping array of events exclusively for its FI customers where they learned about building better customer relationships. The Deluxe Knowledge Exchange Series (KES), launched in late 2003 as the cornerstone of the company's marketing program, combining an ongoing series of events and hands-on activities, including insightful articles, web seminars, and quarterly audio conferences written and given by leading marketing authors and customer experience consultants. "Deluxe is committed to making your brand the best it can be in the eyes of your consumer," explains the KES Web site where customers can download articles and register for the seminars.

Building on KES, in March 2004, Deluxe held the first Knowledge Exchange Collaborative, bringing together a select group of customers and leading academics to discuss approaches and tools for improving customer experiences at FIs. Held at Harvard Business School and other leading universities around the country, and hosted by leading academics in marketing and service quality, the collaborative will tackle different customer experience issues, develop solutions, and even do some in-market testing of solutions before sharing findings with the larger Deluxe client base.

Results again exceeded expectations. After attending a KES event, 87% of customers have indicated they view Deluxe as a strategic partner, as opposed to a commodity vendor, and 89% report they are more likely to do business with Deluxe.

Business Transformation
Thanks to brave, forward-thinking managers, Deluxe Financial Services transformed itself from a lowly check printer to a powerhouse check retailer and valued partner to FIs across the country. The willingness of company management to start with a completely clean slate is truly something for the record books. Deluxe could easily have become yet another casualty of a shrinking and commoditizing industry, but instead it's driving the future of the company and becoming the stuff of business legend.

Copernicus works with consumer and business to business marketing companies in a variety of industries. Click here for more on our approach to consumer marketing and business to business marketing.

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