B of A Gets a Dividend From Alpha Account
A big blue cannonball labeled “Citi-One” rolls onto the television screen and knocks aside a small wooden sphere bearing the word “Alpha.”
The commercial, which ended a six-week run in Northern California recently, was Citicorp Savings’ none-too-subtle means of asserting the superiority of its combined checking-savings account, Citi-One, over Bank of America’s ballyhooed new Alpha account.
Folks at Citicorp Savings, an Oakland-based thrift owned by the nation’s biggest banking company, call the commercial guerrilla warfare in the fierce battle for consumer business in California.
But instead of demoralizing the troops at Bank of America, the ad stirred their combative juices--particularly since the shot was taken by the California arm of Citicorp, B of A’s long-time, New York-based rival.
“Our people in the branches were ecstatic when they saw that ad,” K. Shelly Porges, head of retail product management for B of A, said with undisguised relish. “Here was Citicorp acknowledging that Alpha was the standard in California. And Alpha was on the screen for 28 seconds of a 30-second commercial.”
It has been a good while since Bank of America employees have had much to cheer about. For three long years, they grimaced over headlines about the torrents of red-ink flowing out of the San Francisco headquarters, and they watched customers turn up their noses at the state’s historically dominant bank.
While B of A remained California’s largest bank, it lost the top spot in the nation to Citibank, the principal subsidiary of Citicorp. California is the only market where the two banking giants compete for consumer deposits, although Citicorp Savings is a mere David next to Bank of America’s Goliath.
Top Morale Booster
The bad news has quieted in 1988, with the bank reporting modest but rising earnings each quarter and some industry analysts predicting reinstatement of the stock dividend early next year by the parent company, BankAmerica.
But the biggest morale booster for rank-and-file employees has been the resounding success of Alpha, billed as the bank’s “flagship product” and portrayed in ads as a spherical wooden puzzle that combines checking, savings and protection against bounced checks in a single account.
In the first two months after its introduction in July, bank spokesman John J. Keane said, 170,000 people signed up for the new account, surpassing the bank’s 12-month goal. Far more importantly, Keane said 40% of those people were new customers.
The bank refused to provide more up-to-date statistics on how many Alpha accounts have been opened. But when it comes to morale, perception can be as important as reality.
And the perception among B of A employees as well as industry analysts is that Alpha signals B of A’s resurgence as the top consumer bank in the nation’s richest state.
“The bank is in the throes of moving from a defensive to an offensive position and that is the underlying message of Alpha’s success,” said Donald K. Crowley, an analyst in the San Francisco office of Keefe, Bruyette & Woods, a New York investment firm specializing in the banking industry.
Dan B. Williams, banking analyst with Sutro & Co., a regional brokerage in San Francisco, agreed, saying: “Alpha is sort of a bellwether for the bank. It is successful in getting their own people enthused about something and actually bringing people back in with new accounts.”
Others Have Versions
As the Citicorp ad points out, Alpha is by no means a new product in the world of consumer banking. Many banks offer some form of combined checking-savings account to attract customers and generate income from the higher monthly fees charged for the accounts.
Wells Fargo in San Francisco offers the Gold account. At First Interstate in Los Angeles, it’s the United account. Both versions have been in place for years and offer options unavailable with Alpha, such as a discount on loans and free checks, at comparable fees.
Alpha is a no-frills product, combining checking and savings with a $300 line of credit that automatically covers bounced checks. The monthly fee is either $5 or $7, depending on the version of Alpha selected.
Although B of A and other banks pay interest on these combined checking-savings accounts, the rate is offset partially by the higher monthly fees and, more importantly, banks can lend the money at far higher rates.
Alpha really is a triumph not of innovation but of marketing and muscle.
The marketing was a corporate sleight of hand in which a common product received a patina of freshness through a massive television and print advertising campaign and the biggest push ever for a new product among employees in the bank’s branches. Nearly one-third of the bank’s total marketing and advertising budget for 1988 was used to promote Alpha.
The muscle was the way B of A used the in-house campaign to enlist its huge branch network in promoting the account.
When banks get in trouble, they often must sell their most profitable businesses to raise capital. The phrase that has developed in the industry in recent years to describe the process goes like this: “Losers sell their winners and winners sell their losers.”
Some Operations Sold
During three years of record losses from 1985 to 1987, Bank of America and its parent were forced to sell a lot of revenue-generating winners, such as its discount brokerage operation and individual trust department, and scale back other operations.
As a result, the bank’s current recovery is hindered because some of its most profitable operations are gone and it faces a tough time raising new revenue.
But B of A hung on to its biggest winner--the 850-plus network of branches spread across California. And those branches, which still make B of A the Goliath of California consumer banking, have assumed a greater role in determining the financial fate of the entire bank.
Alpha’s potential was not just that it could get people to open new, fee-generating checking and savings accounts, but that it could lure them back inside B of A branches and lead them to other products, such as auto and home-equity loans.
The trick was motivating branch managers and employees to use the best weapon in B of A’s arsenal by convincing them that Alpha was worth getting excited about.
“People in the branches felt strongly that the bank had had a number of product launches and they’d seen it all before,” said Porges in an interview. “We had to differentiate Alpha from what had come before. If they didn’t get excited, this wasn’t going to be the success it had to be.”
To accomplish that task, Porges, who came to B of A in August of 1987 after 10 years with American Express, and the rest of her team created the extensive in-house marketing program to augment the public campaign.
Branches were blitzed with literature describing the new account and its advantages. Simultaneous video conferences were set up at 23 sites around the state in June to tout the account to 3,000 key employees, something the bank had never tried before.
Richard M. Rosenberg, vice chairman in charge of California banking for BankAmerica and the man who had created the Gold account at Wells Fargo 16 years before, told the conference Alpha was one of the most important items on the bank’s 1988 agenda.
Ties to Incentives
If substance didn’t work, there were prizes. An outside firm was hired to run a sweepstakes for employees. Each time an employee signed up a customer for an Alpha account, the employee qualified for an entry in the contest. Top prize was a trip for two anywhere in the world.
Alpha may also have benefitted from incentive programs introduced by B of A in recent months that peg bonuses for branch employees to performance, including bringing in new business.
The public campaign was almost as aggressive as the internal one, with print and television ads portraying the new account as the answer to simpler, more convenient banking.
The idea was to force customers to confront so much Alpha publicity that they would have to ask an employee about the new account, in case the employee had not already gotten the message to ask the customer.
