RMS in the News
Banks sweeten the pot for customers
4/21/2006 — Dallas Business Journal
By Lisa Tanner - Staff Writer
Shopping for a bank has taken on a new meaning as a growing number of competing banks throw everything but the kitchen sink at prospective customers.
In gimmicks that hearken back to the days of "open an account, get a free toaster," banks large and small are offering gifts and premiums to lure those contemplating a banking change.
On any given day, a future customer may be attracted by offers of free cash, free certificates of deposit, free camping lanterns, free milkshake makers and more. Almost everything goes except the toaster, which was a popular giveaway item before deregulation, when banks couldn't differentiate themselves by paying different rates on accounts.
Bankers know that most people won't make the switch simply to land one of the gifts. But, they do want to build brand awareness to reach someone who might be unhappy with their current bank and is already considering a change.
Then, the gift offer just might nudge the consumer in their direction.
Both giant banking companies and independent banks are getting into the game.
The stakes are high. Texas' strong economy has drawn a slew of new banks to the market, while homegrown banks have continued to expand, which has stepped up competition for all.'
With a focus on business lending and providing a range for services for high net worth individuals, leaders at NexBank S.S.B. wanted to stand out from the pack. The bank traces its roots to Heritage Bank, chartered in Terrell in 1922, which was purchased in 2004 by Dallas-based investors, who moved the headquarters to Dallas, changed the name and recently sold the Terrell operation.
NexBank decided to give away $2,000 gift certificates to the first 1,000 customers who invest at least $75,000 in a 3-year, variable-rate certificate of deposit and open a checking account with direct deposit. Those new customers may choose between a $2,000 gift card from Saks Fifth Avenue, Bachendorf's, Red Door Spas or Cabela's.
NexBank, based in Galleria II Tower in Dallas, chose the gift card offerings to reinforce its image of rapidly responding to the needs of customers accustomed to the best.
"It's to show people what we're about," said Mike Rossi, senior vice president and chief financial officer. "These accounts don't target everyone, but we want to be a partner more than just a bank."
The aim is to be a high-touch business bank, said Davis Deadman, NexBank's president and CEO.
The response to the offer, introduced in January, has been good. And in a nod to the bank's support of the 2006 MS Walk, it also offers new customers another choice: a $750 gift card to the same merchants for themselves, with a $750 donation made to the National Multiple Sclerosis Society in the customer's honor.
Banks are in the retail business, and are beginning to recognize the importance of retaining customers, hence the introduction of longer hours, more convenient locations and more ATMs, said James Gresham, CEO of Rennhack Marketing Services. The Grapevine-based company has managed merchandise-based incentive programs for banks for 30 years and recently unveiled a new plan called "BankingBonus," which will offer incentive rewards not only for a bank's existing and future customers, but for employees as well.
About 20% to 25% of bank customers are up for grabs at any particular time, Gresham said. They've moved, changed jobs, gotten divorced or have some other situation that makes them open to a bank switch.
It's hard to unseat someone who is in a comfortable banking relationship. But luring those who are in flux is a way a bank can build market share.
In addition to new account gifts, banks are also providing account switch kits, to make it easier for a new customer to make the changes required with a new account.
Checking accounts are a foundation, and once the bank has put that relationship in place, it's free to build on it by cross-selling other products to the customer, from loans to mortgages, Gresham said. Each additional service strengthens the bank's hold on the customer.
RMS has conducted extensive studies on how gifts, and each type and price range of gift in particular, bring in customers. That research, for example, tracks the differing results when offering a $50 gift card and a $75 gift card. That's important because a bank's marketing budget has a limit and the best use of that money for gifts is essential.
Some things are a given. Customers want to leave the bank with the gift, not wait, and they don't want the bank's name or logo on the item, in case they want to re-gift it.
So the gift offered is often a tie-breaker, helping a new customer make the decision to pick a particular bank.
"The gift should be the final thing. The convenience has to be there, the right banking products have to be there, along with good customer service," Gresham said. Heightened competition
Texas is an extremely competitive banking market, and has only become more so, with larger banks beefing up their efforts and independent banks becoming more aggressive in attracting customers, said Mark Gibson, chief marketing officer for Birmingham, Ala.-based Compass Bank, which was on the leading edge of out-of-state based banking companies moving to the Texas market. With the completion of the acquisition of Fort Worth-based TexasBank, Compass has 163 banking centers, including 69 in the Metroplex.
To compete in that environment, it's essential to offer banking products such as checking and other accounts that are as strong as they can be, Gibson said. And it's important to offer premium items such as a free gift or other promotion to attract customers. Targeting particular customer groups, such as Hispanics, with special services is also a key to growth, he said.
"You can't just do what you did last year," Gibson said. "You need to always look for something new. Banking can be boring for the consumer. They don't get too excited over it."
The company recently offered a Jeep brand camping lantern to customers signing up for its Compass free checking accounts.
But some generous offers previously available from competing banks, such as a free Apple iPods or $100 cash, seem to have disappeared. It's possible that those offers were just too costly.
"You want to spend enough to attract customers but not so much that you make no profit," he said. "And convenience is still the No. 1 reason people pick a bank."
ltanner@bizjournals.com | 214-706-7117