Author: Jim Bruene

Citibank’s Comprehensive Loyalty Program

By Jim Bruene Posted on
Categories: Advertising & Promotion, Citibank, Rewards Programs

Definition: loy·al  (loil) adj. Steadfast in allegiance

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Citi_thankyou_3 When I was a graduate student 17 years ago, I did a lot of research into so-called loyalty programs. At that time, other than the airlines and grocery stores (think S&H Green Stamps); it was a relatively new concept.

Now, just about every modern retailer has a loyalty program of one form or another, from pizza joints (our favorite spot has a “frequent pier” discount), to book stores ($25 annual fee for at 10% discount at Barnes & Noble), and even pet stores. The programs typically provide discounts, VIP services, and/or special programs for frequent customers.

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Many financial institutions provide loyalty features such as relationship pricing, rewards for credit/debit card usage, personal bankers, and events for high-net-worth clients. But Citibank is breaking new ground with its Thank-You Points program.

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The new rewards program has been featured in media campaigns for the past several months (thank you Citibank for focusing on the positive rather than continuing to over-publicize the identify theft problem). The program delivers points both for the depth of the Citi relationship and the amount of debit card spending. Spending on the many of the bank’s credit cards, including the new Simplicity card, also count for points.

Debit card spending is straightforward, earning 1 point for every $2 spent on signature debit and 1 point for every $3 spent on PIN debit. Credit card spending earns 1 point per dollar.

Citi_rewards_chart_1Relationship points are earned for anyone having 3 or more accounts with the bank, and range from 25 points per month with 3 products and a Citibank Access checking account to 1200 points per month for someone with 7 or more products and a CitiGold Account (click on inset for more detailed information). An online tool is available to help users estimate the reward points they will accrue.

Customers are NOT automatically enrolled; they must call a toll-free number to enroll. There is no online enrollment option. Points can be redeemed by phone or through a dedicated website, <ThankYouRedemptions.com> which is currently closed for remodeling and due to reopen next week.

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Example rewards:

  • 20G iPod = 50,000 points
  • round-trip coach air fare = 25,000 points
  • make a wish = 25,000 minimum
  • gift certificates: $5 = 1000 points; $10 = 1500 points; $25 = 3000; or $10 per thousand for larger amounts

Analysis
Loyalty programs can have a significant impact on customer retention and purchase behavior. However, the programs have three inherent problems:

  1. Cost of communicating the incentives and member reward status
  2. Consumer disinterest/apathy/fatigue with the program
  3. Cost of the incentives

Online delivery helps solve the first two problems. With email and web-based delivery the cost to communicate the details of the loyalty program are negligible, other than the fixed cost to create the communication. Second, the program can be kept fresh with continual feedback to the user when logged in to online banking. A progress chart along and program news serves as a constant reminder of the program benefits.

However, online delivery does little itself to impact the cost of the incentives. In fact, by making it easier to track and redeem rewards, you may be actual increase incentive costs due to higher redemption levels. On the other hand, if you increase interest and awareness, you may be able to get equivalent lift from lower-cost rewards.

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The final word: Online delivery has the potential to greatly increase the impact of bank loyalty programs. So, expect other major banks to enact programs similar to Citi’s. If you have a loyalty program, you may want to look at how it’s delivered online. If you are not doing anything to systematically reward your best customers, you may want to add this to your 2006/2007 plans.

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—JB

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Reference: Citi ThankYouRewards screenshot (links do not work)

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Trendspotting: Capital One’s No Hassle Credit Card Accounts

By Jim Bruene Posted on
Categories: American Express, Capital One, Credit/Debit Cards, Strategies

Capone_nohassle_cardDavid Spade’s "no guy" has helped make Capital One’s No Hassle credit card customer service parody one of the most-recognized consumer advertising campaigns of the year. According to the company, the commercials have helped lift the Capital One’s name recognition to 98% (see note 1).

Along the same lines,Amex_clear_1
American Express is test marketing a no-fee automatic-rewards card called Clear. The card, which is available through its website (click on inset for closeup), features no fees (late, overlimit, annual) and an automatic rewards fulfillment, a $25 cash card every time you spend $2500 on the card. Cardmembers also receive a free credit report and credit score each year.

Finally, Citibank is about to jump on the back-to-basics movement with its no-late-fee Simplicity card expected to debut this week at an event in New York City (note 2). The card will come in three flavors: plain, cash-back, and rewards. The bank’s website does not contain information on the card yet, but there is a separate customer service number listed that features a "press 0" option to be immediately connected to a live service rep.

Analysis
Although many consumers put up with penalty fees, there is always a point where they just won’t take it anymore, especially if lower-cost options are readily available. That’s why Blockbuster, faced with increasing competition from NetFlix, eBay, and WalMart, took a significant revenue hit when it eliminated late fees in its core movie rental business.

Citibank and the others are looking to win back consumers that have migrated to debit cards and/or credit unions to avoid penalty fees and interest charges. The cards also appeal to those with a strong aversion to fees either because they’ve had problems in the past or because they simply cannot stomach bank fees of any type.

—JB

Notes:
1. USA Today, 13 March 2005
2. Citi Simplicty was launched 14 October 2005
    – read the press release
    – see the website, www.citisimplicity.com

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Scottrade to Use PassMark Security

By Jim Bruene Posted on
Categories: PassMark Security Inc., ScottTrade, Security & Privacy

Passmark_loginIt's been four months since Bank of America surprised the industry with its endorsement of PassMark Security <passmarksecurity.com> for multi-factor consumer login (see NB 26 May 2005). Since then, we've talked to a number of industry participants that claim to have a better mousetrap, which they may.

We are not in a position to pass judgment about the technical merits of one system compared to the next; we'll let the market sort that out. And true enough there are weaknesses in the PassMark system as we noted in our Online Banking Report article (OBR 119).

But we still believe PassMark will be one of the survivors as it builds upon its BofA relationship and adds other customers down the road. The first new win is discount broker Scottrade <scottrade.com>, which announced yesterday that it will install PassMark to improve login security for its 1.4 million consumer accounts (see inset above). The broker also becomes the first client to say that they will also add the PassMark identifying image to outbound emails so recipients know the message is legitimate.

Added to the 13+ million BofA accounts, PassMark now boasts that it will be "protecting 15 million users in 2006," a powerful marketing message for the startup. Separately, the company announced v2.0 of its two-factor authentication system.

Passmark_marketingOff-Topic
Speaking of marketing, you should take a peek at PassMark's website if only to see how it markets to financial institutions (see inset left). The company provides a 4.5-minute comprehensive audio briefing done in Macromedia Breeze along with a series of three short demos showing how the system works for: a) new users; b.) users logging in from a known computer, or; c.) users logging in from an unknown location.

The company's website is remarkably brief and to-the-point, especially for a B2B tech vendor. If you are looking for ideas on how to spruce up your online marketing to businesses, this is a good model.

—JB

 

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Everbank Markets to SmartMoney List

By Jim Bruene Posted on
Categories: Deposits, Checking, Savings, CDs, Email Marketing, Everbank

Everban_asiancd_email_previewEverbank <everbank.com> dropped an email solicitation (click on inset for closeup) to the registered users of SmartMoney.com. The message featured the bank’s newest specialty CD, the Asian Advantage which rewards depositors with above-market Everbank_asiancd_basket_2returns IF the dollar falls against a bucket of Asian currencies.

Last week, the Internet-only bank dropped an 8.5 x 5.5 inch postcard mailer with a similar theme. Recipients could respond by calling toll-free 800.926.4922 or going online to www.everbank.com/asiancd.

Analysis
This is a great example of deposit product email marketing.

  • Focuses on the unique selling benefits
  • Good graphics and copy
  • Landing page with a minimum of distracting navigation choices
  • Visible call-to-action with Apply Now! button

We like the opening sentence in the postcard better than the email (see below). With an advanced investing strategy, the direct statement of how the user will earn a profit is more understandable. However, without the results of the bank’s testing, it’s difficult to know which pulls a better response.

   Email: "There’s a great new way to invest in the active and healthy Pan-Asia currency market."
   Postcard: "Do you want to profit if Asian currencies gain on the U.S. dollar?"

Screenshots (links will not work):

  1. Everbank’s Asian CD full email
  2. Everbank Asian CD landing page
  3. Previous article on Everbank foreign-currency deposits

–JB

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The CEO Spokesperson

By Jim Bruene Posted on
Categories: Advertising & Promotion, Email Marketing

You may have noticed the new Chrysler ads using former CEO Lee Iacocca. The company revived the 1980s ad campaign because it was so effective at the time. However, it takes an especially charismatic company leader to make a television pitch pay off. However, through email, all it takes is a good copywriter, a striking graphic or two, and an interesting message.

You have to be careful not to overuse this technique, but once a year or so, an email from the CEO/President could be an effective relationship-builder and marketing technique.

Ceo_email_networksolutionsFor example, today we received a message from the CEO of Network Solutions, the original domain-name registrar (click on the inset for a closeup). We’ve received hundreds of message from the company over the years, but don’t recall one from the CEO before. It got our attention and we looked at it long enough to determine it was selling services we weren’t interested in.

But the first goal of direct marketing is to gain attention, and this technique is a sure-fire method to do that.

—JB

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ID Theft Prevention Services in the News

By Jim Bruene Posted on
Categories: Credit Reports & ID Theft Protection

Identityguard_logoBased on the calls we’ve been getting, you’ll see a raft of stories like the one in the Wall Street Journal today, New Services Guard Against ID Theft, by reporters Kevin Delaney and David Bank. The article described new services from four companies that go beyond simple credit report monitoring, and track personal info in a raft of online databases. The goal of the services is to identify potential fraud earlier in the cycle, minimizing its impact.

The article was inconclusive over the value the individual services provided, but it generally was positive about the concept. This type of press coverage helps raise awareness among your security-minded consumers about potential solutions. Banks that can vet these services and provide reasonable assurances that by using them the consumer hasn’t created yet another security vulnerability, will be rewarded with a nice stream of fee income.

Companies mentioned in the WSJ article:

  • ID Watch from Intelius
  • FraudProtect from Intersections
  • MyPubicInfo
  • DeleteNow from UniPrivacy

We’ll cover this area in more detail in an upcoming Online Banking Report. For an overview of the market see OBR 83/84.

—JB

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Bank of America’s Unusual Automated Savings Plan

By Jim Bruene Posted on
Categories: Bank of America, Credit/Debit Cards, Deposits, Checking, Savings, CDs

Bankamerica_keepthechange_graphic_1We’re not sure whether this is incredibly brilliant or insanely stupid, but Bank of America gets high marks for creativity with its latest debit card enhancement. The bank’s "Keep the Change" program allows debit card users to round up their purchase transactions to the nearest dollar, with the difference added to a savings account automatically.

To give it a bit more excitement, BofA will add a 5% bonus to each savings deposit. Since the average round-up amount is 50 cents, the bonus costs the bank just 2.5 cents per transaction, a very cost effective incentive program, if it works.

To kick things off, Bank of America will match the round-up amount 100% for the first 3 months. That will be like giving everyone a 50-cent discount on each transaction. That should spur signups for the program.  Bankamerica_keepthechange_math

Analysis
The overall concept of automatic or forced savings is excellent. The bank’s press release tosses out stats on the recent negative savings rate and quotes David Bach, the relatively well-known author of "The Automatic Millionaire," a best-selling book that espouses automated investing.

The webpage touting the program is attractive and well written. There are few items in the fine print that users will find potentially disturbing:

  1. You must visit a branch to enroll (ouch!)
  2. The savings account pays just 0.50% and will likely have a service charge unless a minimum balance is maintained (e.g., $300 minimum for Regular Savings)
  3. The savings account has a $100 minimum opening balance requirement
  4. The bank’s contribution will be made annually, and only if you keep your account open for a year

But despite the fine print landmines, we like how "Keep the Change" introduces consumers to the concept of automatic savings and helps them store away a few bucks a month. However, most people need more than nickels and dimes going into their savings account. To be more effective, this program needs an easy way for consumers to add to their savings amount beyond the monthly debit card cash.

For example, a month-end email detailing the total debit card change deposited could include a mechanism that allows users to designate an additional amount to be transferred into their savings account.

We don’t expect anyone else to copy this program, so it gives BofA a unique selling point for their checking accounts and debit cards. It should make a little money for the bank from increased debit usage and savings account growth, and it will give users a few extra dollars at the end of the year, so what’s the harm. But if you are truly interested in spurring automatic savings among your customers, there are more straightforward approaches that should be equally effective and far less complicated (see Online Banking Report, 120/121 for more on automatic savings).

Ref: Screenshot of Bank of America’s Keep the Change page on 5 Oct 2005

—JB

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Key Bank’s New ID Theft Service has Flawed Implementation

By Jim Bruene Posted on
Categories: Credit Reports & ID Theft Protection

Privacymatters_logoOn Sept. 19, Key Bank <key.com> announced a new fee-based identity theft and credit bureau monitoring program powered by Vertrue’s Privacy Matters service. It’s the first major U.S. bank to market a comprehensive service through its website. Most major card issuers have been selling similar services via statement insert and direct mail for years.

Price: $14.95/mo ($180/yr) for a couple or $9.95/month ($120/yr) for a single

Key’s presents the benefits in four groups:

1. Prevention

  • Firewall, anti-virus and anti-spyware software
  • Free personal document shredder

2. Detection

  • 24-hour credit monitoring
  • Weekly email fraud alerts credit bureau changes occur
  • Three-bureau credit report

3. Protection

  • Emergency funds transferred to your credit card if the account is frozen or your card is stolen, with approved credit
  • $25,000 of insurance against losses

4. Restoration

  • Professional investigator to help restore your identity and credit record
  • Credit card registration

Analysis
I believe the area of credit bureau monitoring and fraud prevention are ripe for long-term profits and growth (see Online Banking Report 83/84). However, Key Bank’s offering is too expensive and not well explained, especially with respect to who provides the listed benefits.

First, the price. This is a service you want your customers to use, both for their protection and yours. You can and should sell it for a profit, but don’t get carried away. In our view, it should be priced less than $10/mo for a couple and no more than $7 or $8/month for a single.

Keybank_idtheft_pageSecond, you need to be completely upfront and transparent about who is offering and administering the service, especially one that deals with sensitive issues such as identity theft and credit records. And there needs to detailed explanations available for all features and benefits.

Key Bank and its partner’s implementation leave a lot to be desired on both these fronts. The benefits are not well explained on Key’s website (click on inset for a closeup). This is a new offering for many and there will be many questions, especially at $180/yr. For example, prospective customers are going to want to know:

  • How often will I receive a 3-bureau credit report?
  • How do you add cash to a frozen credit card and why is it "subject to credit approval"?
  • What types of expenses are reimbursed with the $25,000 insurance policy?

Keybank_privacymatters_signupEven more damaging to the bank’s credibility is the lack of disclosure that the service is being administered and delivered by an outside company. Even though savvy users may suspect they are signing on with a third party the name of the entity Privacy Matters, is so generic, it’s difficult to know for sure if that’s another company or a service mark of Key Bank. The signup form does NOT explicitly say one way or the other (click on signup form, left).

Even more problematic is that Privacy Matters is not really a company at all. Even though it’s the only name used on the signup form (see inset), Terms and Conditions, and Contact Us pages, it’s a service mark of Adaptive Marketing LLC, which according to the privacy policy pop-up, is wholly-owned subsidiary of Coverdell & Company. What’s not said anywhere is that Coverdell & Company itself is a wholly-owned subsidiary of Vertrue <vertrue.com> which until recently was known as MemberWorks.

Put yourself in the customer’s shoes. Wouldn’t you wonder why the benefits aren’t clearly defined? Why the ownership of the service is so vague? Why I would trust a service mark of an entity owned by another entity owned by a company that just changed its name, none of which I’ve ever heard of. And really, why is Key Bank making this offer to me in the first place?

Grades:
Product features and benefits: A
Pricing: C-
Website implementation: D

–JB

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Provident Bank Launches Premium Option

By Jim Bruene Posted on
Categories: Epayments, Premium-level Products, Pricing

Provbank_premium_featuresBaltimore-based Provident Bank <provbank.com> with $4 billion on deposit from 590,000 accounts, is the largest U.S. bank to segment its online banking access into two levels, My Account Online and Premium Internet Banking with Bill Payment.

As the name suggests, the primary difference is bill payment. But also the premium version provides a combined statement whereas the basic version still requires separate logins for
each product. Premium also allows downloading into Quicken/Money (click on inset for an account comparison).

Basic online banking is free; premium is priced at $5.95/month, a popular price point in the days before bill payment became free. The bank encourages trial of the premium service with a generous 6-month fee-free period.

Analysis
It’s a good start, but it would be more effective if the premium version had more benefits such as extra service, more security, longer archives, and so on. The bank also needs to support the product better with website graphics, copywriting, and imagery that reinforces the premium image.

Reference: See OBR 109, for a report on online banking segmentation.

—JB

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Top 20 Banks Worldwide

By Jim Bruene Posted on
Categories: Metrics & Market Research

In case you need a stretch goal for your 2006 business plan, here are the 20 largest banks in the world, ranked by assets (in US dollars on 31 Dec 2004). By country there are 4 U.S. banks, 3 UK, 3 Paris, 3 Tokyo, 2 Germany, 2 Amsterdam, 2 Swiss, and 1 Spain. The biggest bank outside North America, Europe or Japan is #53 National Australia Bank in Melbourne ($282 billion).

  1. UBS AG (Zurich): $1.53 trillion
  2. Citigroup (New York): $1.48 trillion
  3. Allianz AG (Munich): $1.36 trillion
  4. ING Group NV (Amsterdam): $1.36 trillion
  5. Mizuho Financial Group (Tokyo): $1.30 trillion
  6. HSBC Holdings PLC (London): $1.28 trillion
  7. Credit Agricole (Paris): $1.24 trillion
  8. BNP Paribas (Paris): $1.23 trillion
  9. JPMorgan Chase (New York): $1.16 trillion
  10. Deutsche Bank AG (Frankfurt): $1.14 trillion
  11. Royal Bank of Scotland Group PLC (Edinburgh): $1.12 trillion
  12. Bank of America (Charlotte): $1.11 trillion
  13. Barclays PLC (London): $992 billion
  14. Mitsubishi Tokyo Financial Group (Tokyo): $980 billion
  15. Credit Suisse Group (Zurich): $963 billion
  16. Sumitomo Mitsui Financial Group (Tokyo): $897 billion
  17. ABN Amro (Amsterdam): $829 billion
  18. Societe Generale (Paris): $819 billion
  19. Santander Central Hispano SA (Spain): $784 billion
  20. Morgan Stanley (New York): $775 billion

Reference: American Banker, 29 Sept 2005 for the 100th largest banks in the world

For the top 150 largest U.S. financial institutions, refer to the resources section of our main website.

—JB

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Loan Landing Page Design

By Jim Bruene Posted on
Categories: Advertising & Promotion, Forms & Loan Applications, Loans & Credit

Google_homeequitydc_searchOver the next few months, we will take a long look at the marketing of loans and credit lines online. The information will be summarized and analyzed in an Online Banking Report scheduled to be published in fourth quarter. However, as we find interesting examples, we’ll report them here first, along with links to the live sites.

The first example is a good one from HomeLoanCenter.com. We ran a search on Google for "home equity Washington DC." One of the two AdWords banners on the top (click on inset for a closeup) was titled "DC Home Equity."

Homeloancenter_landingpageClicking on the link took us to the lender’s landing page (click on inset for closeup). Although, the page doesn’t reinforce the geographic element of our search, it otherwise does an excellent job in reassuring the user and leading them into the application process.

Along the left side are three important elements:

  • Third-party endorsement from CNBC
  • 3-point "what happens next" instructions
  • Customer testimonials

The middle of the page includes a toll-free phone number, several brief benefits, and a prominent Start Here to begin the application process. Prospects are only asked to provide a few key data points:

  • name/email/phone
  • state
  • home value/mortgage balance/desired borrowing
  • self-evaluation of payment history from a drop-down list

The page contains virtually no clickable links. Other than the prominent Submit button, the only links offered are in fine print at the bottom (About Us, Contact Us, Business Hours, Our Guarantees, Tools & Resources, Privacy Policy). This is a good trade-off. You don’t want to lose loan prospects by distracting them with navigation choices, but you want to give those that need more information an outlet.

Overall score: A

—JB

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New Federal Fraud Education Website

By Jim Bruene Posted on
Categories: Security & Privacy

Onguardonline_gov_sponsors_1
If you are looking for a spam/spyware/phishing resource for your online customers, OnGuardOnline.gov is a good resource, especially for novice users.

Onguard_spywareThe site is sponsored by The Federal Trade Commission, Dept. of Homeland Security, U.S. Dept. of Commerce, and The United State Postal Inspection Service. They also had some help from the private sector, with some content provided by Microsoft and The Internet Education Foundation www.neted.org. The site also lists a number of other partners, but does not disclose their contribution. None of the listed partners are closely associated with the financial services industry.

The main content areas cover:

  • ID theft
  • Spam scams
  • Phishing
  • Spyware
  • Shopping
  • P2P file sharing
  • VoIP

Onguardonline_homeAnalysis
The information is thorough and presented in a audio-visual format that is easy to digest (click on inset to see a closeup of the homepage). The videos from Microsoft are particularly well done. And surprisingly there is no plug for the software giant, they don’t even have a logo on the site.

The interactive Flash games are a little on the hokey side, but they get their points across. The Stop-Think-Click: 7 Practices for Safer Computing is very well written and hopefully will become widely circulated in the popular press.   

Action items
Financial institutions should use the site either as a direct resource for customers or as a blueprint for the material which should be presented in a bank’s security and privacy area. The 7-point Stop-Think-Click material is especially useful to present to users.

The only slight hesitation we have about referring customers directly to OnGuardOnline.com is that it may be somewhat overly frightening. We think it’s better to cover these issues yourself so you can provide reassurances along the way as to how you are helping solve these vulnerabilities.

But for those who haven’t the resources or budget to create your own security center, this is a good reference point.

–JB

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