New services, competition spur fresh bank marketing
At many banks, money and the financial services that go with it are being ''sold'' like so much grass seed or grape jelly.
For executives at Bank One in Columbus, Ohio, for instance, the advertising agency that writes copy for the grass seeds and fertilizers produced by the O.M. Scott & Sons Company is good enough for them. So is the radio and television announcer who lends his voice to the J.M. Smucker Company's jams and jellies.
''Money has become pretty much of a commodity,'' says John Fisher, the bank's senior vice-president. ''And it can be marketed like a commodity, like grass seed.''
Many banks, Mr. Fisher says, are taking that kind of attitude toward their business these days. In a world of decreasing regulation, increasing technology, and almost constant competitive advances from nonbanking companies, the banking industry is having to put a new emphasis on marketing services and products.
At many banks, long protected and restricted by both government regulation and geography, this means having to learn marketing ''on the run.'' They must find out who their customers are, what they want, what products or services the banks can best offer them, and how to package and advertise those products. Banks that do have marketing experience are looking for new marketing strategies to cope with the new world of banking.
Several banks are changing their names; others are more closely defining the kinds of customers they can best serve; and many banks and savings-and-loans are scrambling to keep abreast of the technological revolution, installing automatic tellers and equipment for banking by home computer; and they are selling all this with new, and sometimes inept, print and broadcast advertising and marketing.
''Marketing is a discipline,'' said Barry Deutsch, senior vice-president at the Mellon Bank in Pittsburgh. ''And as a discipline, it is an important component to successful banking in the '80s.''
''There's no question about it, marketing is new to the banking industry,'' said Barry Allen, a vice-president at the First National Bank of Boston. ''It's something many banks are still experimenting with.''
For most, those experiments were forced on them. The most profound change is the mushrooming competition from nonbanks and so-called ''near-banks.''
''Banking has lost its exclusive franchise'' for providing financial services , Mr. Deutsch said.
Today, the franchise is being shared by concerns like Merrill Lynch & Co., the Fidelity Group, Sears, Roebuck & Co., the Prudential Insurance Company, and even the Kroger Company, the nation's second-largest grocery chain. With asset management accounts, money market funds, commercial loans, mortgages, and insurance-mutual fund products, the nonbanks have taken in hundreds of billions of dollars that were once almost the exclusive preserve of banks and savings-and-loan institutions.
Many of the nonbanking competitors are not restricted by the kinds of regulations that have kept the bankers at bay. They can offer whatever interest rates the market demands and they can afford to pay; they can offer products and services anywhere, regardless of local or state boundaries; and they can add or eliminate products as they see fit.
Slowly, and occasionally with some government help, the banks are fighting back. After watching customers put their savings in accounts at brokerages and department stores, many banks earlier this year started offering ''sweep accounts.'' Ironically, one of the biggest allies in helping the banks offer these accounts has been one of the nation's largest mutual funds, the Fidelity Group of Boston.
With these accounts, money above a certain level, $1,500, for example, is automatically swept into a money market fund managed by Fidelity.
Banks are also finding ways to market the various new deposit certificates occasionally approved by federal regulators. All-Savers certificates, Small-Savers certificates, money market certificates, and repurchase agreements all require packaging and sales efforts unfamiliar to many bankers a few years ago.
The banking law passed by Congress earlier this month contains more challenges. Among other things, the new law gives the Depository Institutions Deregulation Committee 60 days to come up with a deposit instrument that is competitive with money market mutual funds. The new account will require another new packaging and selling effort by the banking industry.
Perhaps the most exciting area for bank marketing departments is in electronics and technology. The strongest move here has been in automatic teller machines. With some 24,000 ATMs strewn across the country, banks have quickly weaned customers away from the idea that every transaction has to be conducted with a breathing, smiling, human teller. Led by younger customers accustomed to dealing with high technology, bank patrons of all ages have been convinced of the ease and convenience of tellers with programmed friendliness.
Having accomplished that, the industry is embarking on several experiments to bring banking services to people who have home computers. More than two dozen experiments are going on around the United States, with major money-center banks and regional banks testing home computers as terminals for figuring account balances, paying bills, and transferring funds from one account to another.
All of these developments demand spending more money to win money from customers.
''I think you are going to see a new emphasis on marketing,'' said Roy Scoba, senior vice-president and director of marketing at First City Bancorp in Houston. ''I expect there will be an increase in budgets to communicate.'' Bank marketing really did not get going until the late 1950s or early '60s, Mr. Scoba recalled. And not many banks took it up until recently.
''Five years ago,'' recalls Mr. Allen at the First National Bank in Boston, ''I would meet with senior people from other banks and talk about marketing.'' Generally, he says, the reaction was that marketing was good for soap and cars, but not for banks. ''I said then that we'd all have to learn about marketing,'' Allen said. ''Now we're learning.''
At times, the learning process has been painful, sometimes embarrasing. Last year, for example, when Congress made individial retirements accouts (IRAs) widely available, the banking industry responded with a torrent of newspaper, radio, and television ads promising to make everyone a millionaire. The fact that the projected interest rates would require three decades of double-digit inflation, and that many people could not afford to save the $2,000 required to match the savings programs in the ads was often not mentioned.
And this year, bank and S&L ads for repruchase agreements, or ''repos,'' were often made to look like ''get-rich-quick'' schemes. One bank ad even carried a headline that said: Get Rich Quick.
Experiences like these, bankers say, mean they still have a lot to learn about marketing.
''The very notion of bank marketing is not all that developed,'' says Douglas Brown, senior vice president at Wells Fargo Bank in San Francisco. ''Banks are still looking for ways to meet the competition head on.''