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Retail Banker International

Making Relationships In Banking More Than Just A Talking Point


August 21, 2003
Copyright ©2003 Lafferty Limited. All rights reserved.

Financial institutions, like high street shops, are beginning to realise the value of successful loyalty schemes to attract and retain customers. Kelly Shermach looks at some of the major innovators in relationship banking

REWARDS PROGRAMMES have become so prevalent that they now represent the cost of entry to a relationship with consumers. The consumer feels a sense of entitlement to discounts or freebies at high street shops, and to a greater voice with bankers at their local branches as well as through centralised customer service channels.

Loyalty marketing efforts certainly, then, can and should be extended within banks outside of credit card programmes. Points need not apply - as long as a focus on the relationship between bank and consumer remains viable, and as long as bankers can calculate the value of their customers and deliver services to them compensatory to their determined worth. Recognition therefore becomes the reward.

Creating barriers to customer defection

Financial institutions have talked since the early 1980s about relationship banking, getting closer to customers. Initially, many thought the solution was as simple as purchasing technology that would compile and store the minute details of customer interactions with their retail bank accounts and the people selling and maintaining them.

Yet technology alone could not achieve the closeness that bank marketers envisioned and consumers increasingly demand. "I know of people who've pulled [out of] accounts ... because the left hand doesn't know what the right hand is doing," says Russ Schoper, president of Business Development International Inc. of Alpharetta, Georgia. "Banks are very divisional and very turf oriented. It's just the way they're structured, and they don't interact."

In April 2002, Banco Popular of San Juan, Puerto Rico, broke the mould of flat loyalty efforts that claimed an intimacy with consumers but did not know how many or what kind of bank products they used. Banco Popular announced Premia, an enterprise-wide rewards programme that reflects the bank's vision of loyalty marketing: a strategy that means more than friendly greetings on a first-name basis at branches or points accrued with credit card purchases. Premia thanks customers for their retail deposit, loan, lease and investment relationships with Banco Popular, consolidating the institution's knowledge about individual customers and elevating service levels, because from line of business to line of business, the priority on customer retention reigns.

Redemption options such as down payments on financed purchases increase penetration of the Popular brand and seduce consumers into long-term commitments to the Popular Inc. properties that have an emotionally warm reputation in the Puerto Rican community. However, as the brand umbrella expanded to cover more business units, more retail lines of business and more consumers, Banco Popular risked becoming a large, cold institution.

To counter this, every time Banco Popular's customers make a transaction or use the services of the bank or its subsidiaries, they receive points redeemable for the tried and true - merchandise from brand-name retailers, airline tickets, lodging, meals or cash stored on a gift card - or the innovative down payments on new homes financed through Popular Mortgage or down payments on vehicles financed through Popular Auto. Customers need only hold a deposit account or credit card with Banco Popular and pay a $15 annual fee to participate in the programme, but because points accompany all transactions, single- product customers become multiple-product customers.

With Premia, customers accumulate points when opening a deposit account. The points are partly based on the average monthly balance in their current accounts but are also accrued every time they use their ATH bank cards, the TelePago Popular telephone banking service or MiBancoPopular account access on the Internet. Points are also based on the balance in customers' individual retirement accounts (IRAs) and their certificates of deposit, and are awarded every time they purchase or transfer balances with a Banco Popular Visa, MasterCard or American Express card.

In addition, points are accumulated when customers take out personal loans, buy or lease vehicles, initiate mortgages or open an account with Popular Securities.

As long as the relationship between bank and customer remains at the forefront and the bank has metrics to gauge its success, relationship banking can succeed.

By setting as one of its primary goals the consolidation of customers' banking accounts under the Banco Popular roof, a metric naturally emerges, and quantifying results requires only a tallying of incremental product adoptions by Premia customers.

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