RMS in the News
To gather in more bread
2/25/2006 — San Antonio Express News
William Pack, Express-News Business Writer
Banks are battling for customers with shiny new branches, extended hours, competitive pricing, better technology, friendly employees and, increasingly, giveaways.
In a throwback to the free toaster incentives of the 1970s, banks and other financial institutions are enticing customers with free money, iPods, maybe even a chance to win a car.
It's a reflection of how competitive the banking landscape has become, how institutions rely heavily on checking accounts for profits, and how intoxicating the word "free" can be.
"Banks are doing back flips to attract customers away from their competitors and to hang on to their existing customers," said Tracey Mills with the American Bankers Association. "Freebies are seen as an effective way to get a prospective customer's attention."
A gift is probably not the main reason an individual chooses a particular bank or credit union, but it can tip the balance when convenience, product line and other factors are equal, officials said.
"It's not the decision-breaker. It's the tie-breaker," said James Gresham, president of Rennhack Marketing Services in Grapevine, which for decades has helped banks expand their customer base through giveaways. "Offering a free gift provides that sizzle. It shows the customer that these guys appreciate me, and they physically get something that has value."
San Antonio is among the nation's 25 most competitive banking markets, so numerous institutions have offered incentives to win customers over. Even existing customers can benefit if they refer a new account.
Last year as it was merging with Bank One, Chase offered an iPod to anyone opening a Premier Checking Account. It's currently offering $50 to $75 in cash for opening different types of accounts or a home equity line of credit at its new branch at Blanco Road and Loop 1604.
Wachovia, one of San Antonio's newest megabanks, gives all new customers 5,000 Visa bonus points when they open a checking, money market or other deposit account.
San Antonio-based Frost Bank for about three years has given gifts, including a stadium blanket and an umbrella, to anyone opening a checking account.
Security Service Federal Credit Union, a San Antonio company that is one of the nation's 10 largest credit unions, has membership drives offering incentives for new accounts. Last year it featured a chance to win one of six cruises. Head of corporate communications John Worthington said the promotion helped the credit union add several thousand accounts from new and existing customers.
"You've got to find a way to differentiate yourself," Worthington said. "That's what giveaways do."
Not everyone agrees that the promotions accomplish what the institutions want.
Citibank, Wells Fargo and Jefferson Bank do not offer gifts for personal checking accounts, but commercial accounts at times earn a Palm Pilot or other wireless device from Citibank.
Officials at those banks said they prefer to offer more personalized banking products with better returns for their customers rather than freebies for an account that might not be the best fit for a customer. They also worry that gifts might attract customers who will move to a different institution when another offer comes along.
"They could produce temporary activity, but in the long term it's not a great strategy for us," said Don Kendrick, Wells Fargo's regional president in Central Texas.
Giveaway programs featuring toasters were the vogue before the banking industry was deregulated in the 1980s. For a little more than a decade, banks dropped the merchandising approach to account building and turned their focus on setting more attractive rates.
But since competition has left banks with less rate flexibility, giveaways have made a comeback.
Gresham said there has clearly been a resurgence in bank merchandising since the late 1990s and his company's growth is proof. Rennhack, which has 328 banks as marketing clients, has seen double-digit growth each year since 2000, Gresham said.
Wade Sanders, Sheshunoff Management Services' vice president of sales and marketing, said financial institutions have offered giveaways because of the value of consumer checking accounts. They not only produce fee income for the banks, but also lay the groundwork for the sale of an array of banking products.
Sanders said checking accounts can produce about $900 in revenue over five to seven years. So a marketing effort that costs about $40 per account means gifts make sense.
"They flat out work," Sanders said.
Email: wpack@express-news.net