Gifts, Games a Funny Twist for Banking
Never mind credit cards, loans and secure investments. Security Pacific National Bank in California is pushing games--specifically, a promotion with stakes of up to $25,000 cash and “millions of other prizes.”
This isn’t just California-style banking. Banks in less mellow areas of the country also run games and contests of the sort once found in supermarkets and gas stations, and savings and loans--never as staid--are again wooing new accounts with things such as free toasters.
Bankers, after all, are now retailers, having to market their wares against increased competition--their own saturated industry and all the other institutions offering investment funds, credit cards, even checking accounts. “Because there’s more competition, banks really need to distinguish themselves,” says Virginia Stafford, spokesman for the American Bankers Assn. in Washington. “They’re trying to make it fun.”
It’s probably premature to ask whether they’re successful. One might, however, wonder whether the fun distinguishes them in a favorable way from other, more serious financial institutions, or from supermarkets and gas stations.
Security Pacific’s game has a very specific goal: increased use of automated teller machines. According to Barbara Fallon-Walsh, senior vice president of marketing, the bank wants to get customers who’ve never used ATMs to try them, and those who do to use them more, and for more functions--deposits, loan payments, money transfers as well as withdrawals and balance inquiries. If the 66% of customers now carrying activated ATM cards increased to 80%, the bank would save on labor and overhead--well worth the $220,000 investment in prizes.
Two game coupons come on every special ATM receipt, provided for all transactions except balance inquiries. There are instant winners and four-stamp sets to complete, with prizes ranging from the $25,000 (two such prizes) down to coupons for a local fast-food chain (1 million) and $2 off Unocal 76 gasoline (another million).
Receipt Problems
It hasn’t been all fun and games. There have been complaints about the “$2 off” gas coupons--almost half of the 2 million-odd prizes--because it’s good only toward eight or more gallons of full-service gas, which totals over $2 more than self-serve. The ATMs themselves have aggravated eager game players. Some machines never have game receipts. Others sometimes have game receipts, sometimes plain receipts and sometimes no receipts of any kind.
“Some machines just don’t want to play the game,” confirms Fallon-Walsh; they simply would not dispense the shiny game receipts. A certain number became more willing when the bank reprinted 5.5 million of the receipts without shine; 10% still wouldn’t play. (Receipts are also given out in the branches on request.) Even machines that will dispense game receipts often run out and are restocked with plain ones until the branch receives another game shipment.
Eight weeks into the projected nine-week game, Security Pacific has given out none of the top six prizes (two $25,000 cash awards, two cruises, two $5,000 “shopping sprees”). ATM usage is up 20%, but only an additional 2% of customers are carrying ATM cards.
One might also question the efficacy of a game that introduces customers to only one bank service, and in such a way that their wish to use it is tied to, and may end with, the game. Furthermore, it seems to have confirmed a common suspicion that ATMs are capricious and ungiving even when most needed. Unfortunately, people may be less forgiving of glitches at their banks than at their supermarkets and gas stations, in promotions and in daily service.
The premium--probably somewhat more sophisticated than yesterday’s toasters--is another gift horse whose mouth could use some looking into. Take the offer to “Open a CD, get a free TV” from Los Angeles-based Fidelity Federal Savings & Loan. For every new certificate with a term of six months or more and a $5,000 minimum balance, customers are promised “a high rate and a free 82-channel 4 1/2-inch black and white TV.”
“We wanted to increase our share of market,” explains Albert J. Clemens, senior vice president-marketing. The goal--$100 million in new funds--required only 20,000 minimum depositors and seemed eminently reachable; two years ago, Fidelity Federal offered Continental Airline tickets to anywhere in the United States for $89 each and attracted more than 40,000 new accounts.
The alternative was to pay interest higher than the current 7.25%--a rate higher, as the ads say, than rates at “any major commercial bank” but lower than some S&Ls.; “We could increase our rate by 50 basis points (half a percent, or $12.50 on $5,000 over six months),” says Clemens, “or increase it by 50 basis points in the form of a premium.”
The premium itself is no Sony, but a real working battery-operated TV, a Bentley. It’s the quality of something offered free by land promoters. In fact, it is a land promotion premium, never sold at retail counters. The retail value is “established” (a word of art) by Bentley in national magazine ads offering it by mail for “just $169.95.” Fidelity, says Clemens, thought $60 was a fairer “fair market value.”
And $60 is the amount on which Fidelity’s depositor will get taxed, under federal regulations requiring that savings and loan premiums that aren’t printed, educational and worth less than $2.50 must be reported on 1099s as interest paid. Depending on one’s bracket, the taxes could be $25. “The average customer will pay between $12 and $15,” says Clemens. “The essence is the customer is getting a free TV for $12.”
Customers can ponder the meaning of “free” for themselves: Advertisements do mention that the TV is taxable as interest, and if people ask, they’re told that the penalty for early withdrawal is 30 days’ interest plus $25 for the TV. It’s quite clear who pays for this fun and how.
If enough people like the kind of fun offered in such promotions, there will doubtless be more of them. Perhaps both institutions and customers should decide how they feel before it’s too late.
