Bank Marketing Strategy + Ideas

A recent article in the Wall Street Journal talks about how banks that have given away incentives to new customers are now sending those same customers 1099’s.

As the banking industry has become more competitive, especially with bank’s paying very little on CDs and Money Market accounts, many banks are offering gifts that are more valuable than a toaster.

As a result, gift cards and frequent-flyer miles worth more than $600 are causing banks to send thousands of 1099 forms to their new customers! Even though the tax consequences are small, it is causing customers to complain and many are even closing their accounts.

The banks, which include Citigroup Inc., HSBC Holding PLC and the Citizens Bank unit of Royal Bank of Scotland Group PLC, claim they fully disclosed the tax implications to their customers. But will it be enough to keep their business?

Nessa Feddis, senior counsel with the American Bankers Association said that banks tend to be sticklers about tax rules because they operate in such a regulated industry. In contrast, gifts offered by retailers often aren’t subject to IRS reporting because they are classified as a reduction in the purchase price rather than income.

Bank marketing managers should continue to be creative when it comes to innovative ideas to lure potential customers into their banks, but they should also be mindful of the long term consequences.

What seems like a great idea could prove to be a public relations nightmare.

Speaking of 1099’s, I’ve heard a lot lately about banks and mortgage companies that are paying people to sell their homes for less than what they owe. Many banks are finding that it’s cheaper and faster to pay a homeowner who is not making their mortgage payments to do a short sale than it is to foreclose.

What the homeowners don’t realize is that they may get a 1099 for the payment and possibly for the amount that the bank forgives! And remember: the IRS doesn’t forgive or forget. Ex-homeowners could be paying taxes and possibly fines on the amount for a long, long time.

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Neal Reynolds has worked with hundreds of banks and credit unions around the country helping them to grow core deposits and market share without growing their marketing budgets. Contact him at nreynolds@eadshop.com.

Why do you call yourself a community bank?

Is it because your bank’s owners, directors and employees live in your community? Are they involved in the community? Do they belong to the Rotary Club? Do they sing in the church choir? Do they lead a Boy Scout Troup?

If not, why not? Being involved in the community is the only way to really be a community bank and it’s one of the best ways to market your bank – much better than newspaper ads, TV spots or radio commercials. Think about it: what’s more impressive – having one of your bank’s employees coach a community’s little league team or to have the bank buy a banner on the left field fence?

Is it better to have one of your commercial lenders lead a Girl Scout Troup or to just buy a few boxes of their cookies?

If you really want your bank to stand out in the community, get involved. Do some research and put together a list of all the community organizations, clubs and events in your area. Then decide – as a bank – which employee is going to get involved in each group. Make sure you have representation in the Rotary Club, Kiwanis Club, Girl Scouts, Boy Scouts, different religious organizations, homeowners associations, little leagues and city councils, to name a few.

To be a community bank you either have to put bank employees into the community or bring the community into the bank. There are multiple ways to do this.

Does your bank have a large boardroom or training room? Open it up for community meetings. Offer classes and training on marketing, financial planning, insurance, long-term health care and accounting. Local businesspeople would love to be invited to lead these types of events and most would probably sponsor a breakfast or lunch for attendees!

Many in your community are looking for information and expert advice from people they can trust. And they will do business with those institutions that can provide this type of information.

Think of ways your bank can get involved in your community. You’ll be amazed at the kind of response you’ll get. Instead of worrying about all the new “social media” out there, just concentrate on being social!

Have a great example of how your bank is involved in the community? We’d love to hear from you!….

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Neal Reynolds has worked with hundreds of banks and credit unions around the country helping them to grow core deposits and market share without growing their marketing budgets. Contact him at nreynolds@eadshop.com.

As you know, I spend a lot of time writing about marketing and advertising plans for financial institutions. The most common response I get is, “Great ideas, but where do I start?”  So, today I want to help you put these ideas on your calendar!

January: Start today promoting your IRA and SEP’s. Most people in America are starting to think about filing their income taxes before April 15th and many may be considering these types of products.

February: As the snow begins to melt, many cities hold their annual “home show.” This is a great time and place to promote mortgages and home equity loans.

March: When the weather starts to warm up, boat shows pop-up all over the country. It’s a great time to offer boat loans in all shapes and sizes. The local little league teams will be selling “sponsorship ads” in their programs, so promote the fact that you’re a community bank and there to support them.

April: As we close in on April 15^th, you can run your IRA ads a few more times to get those last minute filers. People are also starting to think about vacations, so you could begin promoting your Travel Clubs.

May: Many high schools and colleges will be holding graduations, so promote the fact that wherever these graduates go in the future, you’ll be there to help. Also this month, since people will be traveling more, it’s a great time to promote car loans. Many people are also thinking about remodeling their home, so promoting home equity loans could be profitable.

June: As kids get out of school, many families go on vacation. Credit cards and debit cards are extremely popular this time of year.

July: As the country celebrates the nation’s birthday, it’s a great time to talk about being a community bank or credit union that supports the local community. Plan a Customer Appreciation Day with a bar-b-que and invite the whole town!

August: As parents begin sending their kids back to school or college, it’s a great time to promote education loans. The local high school will also be selling sponsorship ads in its football programs, so personalize your message for that specific school.

September: Christmas seems to get earlier and earlier each year and September is a great time to start promoting your Christmas Savings Plans.

October: Since Roth IRAs have to be done by the end of the year, October is a great time to begin advertising these. You can also start promoting Health Savings Accounts, since many people will be researching them before the end of the year.

November: Car dealers start promoting their end of year deals – a great time to promote car loans!

December: Take time to say, “Thank You” to all of your loyal customers. It’s also a great time to remind everyone that you are a community bank. Their money stays in their community and any loan decisions are made by people who know them.

Put these dates on your calendar today and get started. You’ll be surprised what a little planning can do!…

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Neal Reynolds has worked with hundreds of banks and credit unions around the country helping them to grow core deposits and market share without growing their marketing budgets. Contact him at nreynolds@eadshop.com.

There is a great article in the latest edition of FastCompany.com titled Mobile Melee.

It describes the companies and industries that are fighting it out to turn smart phones into “wallets” and who could ultimately control the multi-trillion dollar U.S. payments industry.

The interesting thing about the article is that it predicts that banks will be the first ones out of the competition, even though they have millions of customers, existing merchant relationships and “dibs on most of our money.”

Nick Hollard, a mobile-tech analyst with the Yankee Group, explains, “They (banks) are risk-averse and they tend to be technology laggards…I can’t see them innovating here.”

The other problem I see is that most community banks don’t do a lot of marketing.

They’ll have to start getting more aggressive with their marketing or their “core deposits” will end up on millions of smart phones instead of in their banks.

Several merchants such as Chipotle and Starbucks have their own mobile-money app.

Chipotle has an iPhone app that allows users to order their favorite burrito and pay for it before even showing up at their local restaurant. Reports claim that over 600,000 of these apps have been downloaded.

The Starbucks app allows users to load cash onto their mobile phones, which then display a barcode that a baristas can scan at the register. The article says that merchants are too self-involved to lead the charge. They’ll probably just partner with a bigger player, much like they do with the credit card companies now.

Credit card companies are a major threat since merchants already tout thousands of Visa payWave and MasterCard PayPass terminals. This gives them an advantage if the mobile – payments standard becomes tap-to-pay. American Express launched Serve this year, a mobile platform that lets users send and store money – without funneling it through banks. (Community banks, please read that last sentence again.)

American Express, MasterCard, Discover and Visa recently joined a mobile – money venture, Isis™, which was formed by AT&T, T-Mobile and Verizon. They are claiming that the Isis mobile wallet will eliminate the need to carry cash, credit and debit cards, reward cards, coupons, tickets and transit passes, fundamentally changing how we shop, pay and save.

The mobile carriers like AT&T, T-Mobile, Verizon and Sprint are experts at processing payments, especially billions of cell-phone charges. While AT&T, T-Mobile and Verizon teamed up to create Isis with the top credit card companies, Sprint linked up with Google several months ago. The problem with the mobile carriers leading the charge is that they are not known for major innovation.

David Evans, founder of the tech consultancy Market Platform Dynamics says, “Just because there are partnerships doesn’t mean there’s anything real there.”

The leading digital payments platform PayPal, which claims 100 million users, could be a major contender. They processed $3 billion worth of mobile transactions in 2011 and have a suite of very useful smart phone apps.

My 25 year-old son and all of his friends use PayPal on their iPhones on a daily basis. PayPal also has a Facebook Connect-like feature called PayPal Access that aims to streamline the entire virtual-payments process. And it’s working on a cloud-based NFC (Near Field Communications) alternative that will allow customers to pay for products by using their phones to scan bar codes or by entering their mobile number and a PIN at existing payment terminals.

The problem with PayPal is that their ambitions require strong relationships with physical retailers, which has not yet been a top priority for them. This late start could put them at a slight disadvantage.

The tech titans are the predicted winners of this fierce competition. Right now Google and Apple are leading the charge, even though Amazon with its $34 billion online retail operation and Facebook with its 800 million users could easily make a sneak attack.

Google and Apple both have plenty of assets (in addition to plenty of cash). These include great relationships with consumers, more pull with physical retailers than PayPal, an active culture of innovation, and because they both outfit market-leading smart phones, control over when NFC chips could become standard.

There’s still more work to be done but most analysts agree that Google Wallet – with its sleek interface, ad-based business model, and rising adoption rate – is a big, bold step in the right direction.

My recommendation to financial institutions is to learn as much about this technology as possible and maybe even promote that you can show your customers how to take advantage of this new banking innovation.

Maybe even create your own version of a “Geek Squad.” You want to be perceived as the expert in all banking-related products and services. Be thinking about how you can use all of this new mobile payment technology to your advantage. I would love to hear your thoughts….

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Neal Reynolds has worked with hundreds of banks and credit unions around the country helping them to grow core deposits and market share without growing their marketing budgets. Contact him at nreynolds@eadshop.com.