In the August 17, 2009 issue of DM News, four charts appeared under the heading: DATABANK The week in stats. Among the four charts is one on back to school purchases. A survey for the National Retail Federation conducted by BIGresearch found that families are spending 7.7% less on back-to-school shopping in 2009. In addition, 74.5% of families said they'd be shopping at discount stores while 49.6% of families plan to spend less. And, 40% plan to increase their use of coupons (more on coupons below). The chart can be seen in the sidebar to the right.

News stories in early September reported retail sales fell 2.9% in August – making it the twelfth month in a row that sales declined. Traditionally, sales are brisk in August thanks to back to school shopping. This year the sales action occurred in the low-cost brands like Ross, Marshall's, the Gap, Old Navy, TJ Maxx, and Aeropostale. Brands like these are sought by the value shopper.

Also realizing growth in sales and revenue are value-priced stores like McDonald's, Family Dollar Stores, and Dollar Tree.

Bottom line, there are an overwhelming number of experts, articles, studies, and data reinforcing the changes being observed in consumer purchasing and saving behavior.

TAKE ACTION NOW

As a marketer, you know you must make some changes in the way your bank or credit union interfaces with customers and prospects. The questions are what to do and when.

The "when" is easy – the sooner, the better.

The "what" is a tougher issue.

Here are a few options you might wish to consider.

• Adding your corporate halo to your marketing materials.
• Offering free gifts and incentives for opening new accounts – especially checking accounts.
• Using coupons in your marketing materials where appropriate.
• Introducing a rewards program if you don't already have one.
• Product and service repricing on the asset and liability sides.
• Introducing new products and services.
• Complete repositioning.

These seven options are listed in order of complexity from the simplest to introduce to the most complex.

YOUR CORPORATE HALO

According to marketing to women expert Marti Barletta, "It’s no secret that women prefer to do business with companies that support the causes they believe in. These days, with so many companies trying to distinguish their products and services, your corporate deeds can be the distinction that makes the difference."

At ACTON Marketing, we've been writing corporate halo copy for many of our clients since 2003.

The halo copy we place in our clients' mail pieces refers to a good-news story about something the client has done to benefit the local community.

We've seen clients sponsor fairs and events, donate to fine arts, organize teams of employees for Paint-a-thons or Habitat for Humanity. They've held clothing drives, Toys for Tots campaigns, and contributed to women's and homeless shelters.

Sometimes they raise money for national causes staged locally, like Relay for Life or the March of Dimes Foundation.

Clients have helped refurbish libraries, renovated community buildings with beautiful murals, given time and money to schools, helped purchase animals for the local zoo, and held fundraisers to pay hospital expenses for local families.

Imagine how proud these businesses and their employees and families are when they help with one of these events.

So why keep it a secret?

A small item with a photo or two in the mail promotion spreads the word to people throughout the community and reminds them what a good citizen your bank or credit union is and what a great contribution it makes right there in their own hometowns.

When a prospect, or customer, reads about these goodwill contributions it paints your business in a good light. "Hey, that's the kind of place where I want to open a checking account, make a purchase, spend my money…be a customer."

Your bank or credit union probably participates in some community activity or sponsors some event. Add your story to your website, hang posters in your lobbies, include it in your advertising. It's good for business as well as for your community.

Another example of promoting one's corporate halo is CSX, the country's largest railway company. It's been running radio spots focusing on the 360,000 hours of volunteer work done by its employees each year. You'll find a "Responsibility" link in the banner across the top of its website home page.

Let your halo shine.

OFFERING INCENTIVES

Since 1982, offering a free gift to customers opening a free checking account has worked extremely well.

While the free gift continues to work for some banks and credit unions, today's value-oriented consumer is often more motivated by up-front cash offers, step-up cash offers, gift cards, and more expensive free gifts.

With a few exceptions, the cash offers originated with the bigger banks.

Unwilling to allow the big banks to "own" the cash bonus offer, community and regional banks have begun testing their own cash bonus offers.

One bank offers a $50 cash bonus for opening a free checking account. The $50 is credited into the new account the first business day following the date the account is opened.

Another bank is offering a $75 Housewarming Gift to new movers who open a new checking account. What makes this cash incentive superior to most banks' offers is that the customer walks out of the bank the day the account is opened with $75 cash in hand. No waiting!

Another bank offers a $150 cash bonus, $50 of which is credited to the account the day the account is opened. The next $100 is paid after the customer establishes a recurring direct deposit and the first deposit appears within 60 days of the account being opened.

In all three instances, the customer receives her cash bonus almost immediately…unlike the long waiting period encountered with the big bank offers.

What the big banks and smaller banks so far have in common is that they tend to see a cash bonus as an alternative to a free gift offer.

In reality, it doesn’t have to be an "either or" choice.

Free gifts and cash bonuses actually perform two totally different functions when it comes to "the offer."

We believe you can add cash to your free gift offer to create what we call a "Step Up" offer.

To ensure our turnkey checking account acquisition program continues to deliver the best possible results, over time we've made improvements to its components including the list, the mystery shops, the training, and the offer.

Our original offer included a free gift with a cost in the $7 to $10 range. As a result of increased competition and inflation, today we sometimes recommend spending more for free gifts. By raising the price point, we can recommend more brand name merchandise like Apple and Sony, with a much higher perceived value like the iPod, a deluxe model George Forman Grill, or a portable DVD player.

These enhanced gifts help our clients to differentiate their offers from free gift offers made by competitors.

In highly competitive markets, in addition to spending more for the free gift, now we also recommend adding a cash component to the offer.

Look at it as a "win now, win later" approach to differentiating your offer.

The free gift is the "win now" portion as the new checking customer can walk out of your branch with his or her free gift in hand. This "instant gratification" is extremely important and makes a free gift much more desirable than cash alone delivered weeks or months after the account is opened.

The cash bonus is the "win later" portion as the new checking customer receives it later after meeting qualifying criteria.

The goal of the free gift is to quickly convince customers and prospects to choose your bank over a nearby competitor.

The ultimate goal of the cash bonus is to ensure that your new checking customers activate quickly, using more of your bank's products and services. Such customers tend to be stickier, more loyal, and less likely to close their accounts when a better offer comes along.

Qualifying criteria to receive the cash bonus being used by some banks can be as simple as keeping the new checking account open for a specified period of time – say 60 to 90 days – while meeting a minimum online bill pay requirement and/or establishing direct deposit. Or it can be a bit more demanding, such as using online statements, paying one or more bills online, while making a specified number of debit card transactions in the first two to three months.

Bottom line, if you're not already offering incentives for new account openings – especially checking accounts – you should consider doing so. You have a choice of merchandise and cash which can be used alone or in combination as described above.

INTRODUCING COUPONS

Offering coupons to prospects and customers is an excellent way to deliver value while demonstrating your concern for their economic well-being.

The good news is that after 16 years of declining use, coupons are making a major comeback.

An increasing number of articles on the growth of coupon use are appearing in newspapers and magazines and on many Internet sites.

"Seventy-Two Percent of Consumers Have Increased Coupon Usage in the Past Six Months, According to Prospectiv Survey," reads the headline of an article appearing September 3, 2008, on the newsblaze.com website.

"Interest in coupons rises as economy falters," is the headline for an article on coupons appearing July 2, 2008, on the msnbc.com website.

The headline of an article in the August 30, 2009, issue of The Sacramento Bee reads, "Coupons are back, but no need to clip." According to the subhead, today's younger generation is getting coupons online. The article by Associated Press' Sarah Skidmore, notes, "Use of electronic discounts and coupons more than doubled in the first half of 2009 compared with the same period last year as overall coupon use rose 23%, according to coupon-processing company Inmar, Inc."

According to a 2008 Internet survey of 1,000 consumers by the Promotion Marketing Association (PMA) Coupon Council, "89 percent of the overall population report using coupons when shopping (for grocery, household and healthcare items at supermarkets), 97 percent of primary shoppers say that they use coupons at supermarkets, and coupon users report an average of 7 percent savings on their grocery bill with coupons."

Bottom line – more and more consumers are turning to coupons. And thanks to the Internet, coupons have become easier to acquire. Still, according to Prospectiv's 2008 Consumer Coupon Poll, when consumers were asked how they would like to receive coupons in the future, their number one answer was direct mail at 39%. E-mail and newsletters were next at 26%, websites were third at 16%, with newspapers fourth at 14%.

Banks and credit unions using direct mail – especially self-mailers and postcards – should consider adding one on more coupons in each mailing. Examples of coupon offers include:

• Discount on safe deposit box rental
• Free or discounted price for check reorders
• Rate reduction on an auto loan
• Preferred rate on a CD
• Cash bonus for opening a regular or money market savings account

Knowing the importance of coupons to today's consumers, it only makes good marketing sense to consider including them in your future campaigns. A monthly or quarterly newsletter is an excellent vehicle for distributing coupons as are teller handouts.

Most likely you love getting and using money-saving coupons. So why not reciprocate and give them to your customers.

ADDING A REWARDS PROGRAM

Rewards programs are proliferating to the point that they've almost become a necessity to achieve parity with competitors. Today the key isn't offering a rewards program but being innovative so your program is more desirable and differentiates you from your competitors.

Rewards programs run the gamut from the simplest cash-back for debit card usage to the sophisticated programs from the larger banks.

Bank of America's "Keep the Change" program is an example of an innovative approach to rewarding customers. Each time a BofA customer uses his or her check card to make a purchase, the bank rounds up the purchase amount to the nearest dollar. The difference is then transferred to the customer's linked savings account. The bank then matches 5%, up to a maximum of $250 a year.

American Express' new One®Card offers a Savings Accelerator® program. With each purchase, Amex deposits 1% of the purchase amount into an FDIC-insured high yield savings account at its affiliated AMEX Bank. Cardholders can also make their own deposits to this savings account.

When Wells Fargo acquired Wachovia Bank, it elected to retain Wachovia's "Way2Save" program which is similar to the program first introduced by Bank of America.

There are a number of companies offering rewards programs for banks and credit unions.

The decision isn't whether or not to offer a rewards program, but what type of program to offer.

PRODUCT AND SERVICE REPRICING

Now would be an opportune time to rethink your bank's pricing strategy.

You might decide to pay higher rates on savings deposits including CDs or you could elect to be a market leader on the loan side. Ideally, you could do both.

Every bank and credit union has some version of the ALCO committee (assets and liabilities committee) that meets weekly to set rates for the coming week.

At my last bank, our strategy on the deposit side was to be at the top of the market every week for one time deposit term. We varied the term frequently. This enabled us to consistently run newspaper ads offering a market-leading rate. Think of it as the umbrella effect – if XYZ Bank is offering the highest rate on a 12-month CD, then their other rates must be among the highest as well.

The goal is to be perceived as a market leader for rates…not necessarily the actual leader on all rates. The same strategy works on the loan side.

It's also the right time to rethink your pricing strategy on fees, particularly the fees charged for NSFs and Returned Items. With all the noise in Washington about abusive NSF fees and potential legislative action, perhaps lowering your NSF fee makes sense.

With today's high NSF fees, I'm not sure the decision makers are considering price elasticity anymore. It's possible that by lowering your NSF fee, revenue will remain constant as more customers find your lower fee less onerous.

In addition to interest rates and fees, you may want to reconsider your opening and minimum balance requirements.

Leading the repricing movement today is Ally Bank – formerly GMAC Bank. There's more on Ally Bank below under the repositioning subhead.

NEW PRODUCTS AND SERVICES

If you're not already offering free checking, now would be an ideal time to change your checking product line and build it around one or more free checking accounts.

Free checking is the single most popular checking account in the country.

According to Hank Israel, a director at the financial consulting firm Novantas, LLC., and an authority on checking and payments, the free checking account has contributed to a 10% increase in the number of U.S. households with a banking relationship since the 1990s. In addition, Israel states that the product is so popular over 60% of the population has a free checking account.

No other type of checking account comes close to this degree of product penetration.

Unlike most fee-based checking accounts requiring a minimum balance, free checking provides both value and utility – making it a smart choice for today's frugal consumers.

Another very popular checking account that is relatively new is Rewards Checking introduced by BancVue approximately three years ago. Based on a free checking account, Rewards Checking accounts pay a high rate of interest as long as the customer meets some minimal performance criteria from month to month. Like free checking, Rewards Checking provides value and utility – making it a smart choice for those customers wanting to earn interest on all their bank deposits.

Given Americans' renewed interest in saving money, one would expect to begin seeing more and more banks and credit unions promoting savings products via the mail, the Internet, on the radio, and in newspaper ads.

In addition, we should expect to see many of these same banks and credit unions introducing new savings products.

Such is the case with the American Express Bank headquartered in Salt Lake City, Utah. A self-mailer from the bank received September 10 by your editor promotes the bank's new line of FDIC-insured CDs and high-yield savings accounts. The self-mailer cover and one inside panel features the bank's new high-yield regular savings account currently paying 1.85% APY. This account has no monthly fees and no minimum balance requirement. Similar savings accounts today are paying on average about 0.78% APY. Mega-banks like Bank of America are paying as little as 10 basis points of interest on regular savings.

See the sidebar to the right for a sample of the American Express Bank self-mailer cover.

Now is an excellent time to review your current retail product line to determine whether or not you are offering products and services that appeal to more frugal, value-conscious consumers. Consumers who are spending more and more of their hard-earned money at discount stores.

COMPLETE REPOSITIONING

While undergoing a complete repositioning of the bank is a major undertaking, requiring a lot of time and money, it does happen on occasion.

The best example of a bank that has repositioned itself to take advantage of today's change in consumer behavior is the former GMAC Bank. Several months ago it changed its name to Ally Bank and launched a massive repositioning campaign around value and honesty.

For the past several months the bank has been running expensive full-page and double-page ads in major magazines as well airing a series of TV spots.

According to copy on the bank's website and in its advertising, the newly repositioned retail bank believes in straight talk and doing the right thing for its customers. It values integrity over profits and will do business in an honest, accountable, straightforward manner at all times. Doing away with typical banker jargon, the bank promises to use simple language when describing its products and providing disclosures. And to the extent possible, it wants to avoid those pesky mice-type disclosure statements that are ever-present on all marketing pieces and ads.

Customers are able to call customer service 24/7 and talk to a live person.

An entirely revamped product line means no monthly fees, no minimum deposit requirements, and no minimum balance requirements to avoid fees. In addition, the bank's goal is to offer rates – both deposit and loan – that are among the most competitive in the country.

It's hard to imagine that anyone reading this issue of the newsletter isn't already familiar with Ally Bank and how it is totally revamping the way retail banking is done. But for those readers not up to speed on Ally Bank and its new positioning, a good start is the bank's new website. Follow the site visit with a Google search on "Ally Bank" and click on a random sample of the articles that have been written to date on the bank.

While Ally Bank may be the first bank to launch a major repositioning strategy, it's doubtful it will be the only bank to do so. Over the next year or two we should see other banks introducing major changes in their product line, pricing, and method of interfacing with customers and prospects.

THE NEW NORMAL

If you believe that the end result of our current economic woes will be a new normal, then it's imperative that you consider making some changes in the way you do business. Most likely "business as usual" won't work with tomorrow's more frugal, value-focused consumers…consumers who will be paying down debt, borrowing less, and saving more. Consumers who will be focused more on living within their means than keeping up with their friends and neighbors.

The seven options discussed above are by no means an exhaustive list. They are simply ideas to get you thinking and planning for future changes.

You can learn more about these options, and others, by contacting the financial marketing experts at ACTON Marketing.