Bank Technology News
MARCH, 2005
Citi Taps the iPod Crowd Gifts for on-line accounts go high-tech
The wisdom of offering freebies to induce consumers to open bank accounts might be a matter of debate, but at least give Citibank credit for choosing to give away nothing less than the hottest consumer electronic device currently on the planet: the Apple iPod.
Kicked off in November as the Christmas shopping season began, the Citi offering benefited from a shortage of the iPods in stores, giving the marketing strategy even more oomph. Apple shipped nearly 4.6 million music players last quarter, more than six times the number a year earlier. And the red hot music must-have is expected to continue robust sales in the quarter ending March 31, driving a tripling of profits at Apple.
It’s a new spin on the old free toaster perk, one that’s tech-savvy and geared toward a younger audience. It’s a play that’s gaining raves from branding and marketing experts. Jim Dettore, CEO of Miami-based Brand Institute, says “it’s a brilliant move.” He says the bank is targeting the 24- to 48-year-old market, which is a “cool, good demographic. There’s big money there, with good disposable income.” The offering could also work as an effective push strategy through teenagers to their parents, who might open the account in order to get the iPod for their child, Dettore says.
The Citibank offering requires that a consumer open an account on-line, fund it with $2,500 and pay two bills on-line each month for 12 consecutive months. The Apple iPod Mini retails for about $250 and is sent to customers after they pay their first month’s bills on-line. Citi did not make an executive available to Bank Technology News, but a spokesman says the offering had “exceeded expectations.” The offering is schedules to end in February.
The spokesman declined to identify an age demographic targeted by the campaign, saying that the recent iPod offering is just one in a procession of marketing campaignes – Citi gave away Palm Pilots several years ago – meant to attract on-line customers whatever their age. “It’s no secret that our on-line customers are among our most loyal, most profitable customers, and that they tend to deepen their banking relationship.” Once they begin on-line banking “they love it,” he says. The goal is getting them on board.
An expensive campaign like this is not without its risks. Dettore notes that Citi ran into trouble with its Palm Pilot promotion because there was no time frame involved; some people took the Palm Pilot and ran. While there is a 12-month time commitment to the iPod offering, if Citi ships the iPod after one month, how the bank will respond should a customer cease paying on-line bills after six months, for instance, is hard to gauge.
Allen Schiffenbauer, chief research officer at the Brand Consultancy, based in Washington D.C., says “iPods appeal to a younger, well educated, affluent person. The kind of people who would like an iPod are just the kind of people a bank wants as a customer. It’s a good match. It’s well targeted and well thought out and a very expensive campaign. …It’s the demographic all banks hunger for it.”
But there are several problems with even the best conceived give-away campaign, he says. “One of the things that’s historically true is that it trains people to switch vendors. You’ve attracted the people most likely to switch, people who follow incentives.”
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And while the Citibank spokesman extols the loyalty and profitability of on-line customers, Schiffenbauer says that loyalty through incentives is far from assured. “It’s an expensive way to attract customers, but it won’t make them stick. Ultimately, if everyone starts giving away incentives it cheapens the whole category and it becomes difficult to enforce loyalty.”
Schiffenbauer concedes that the process of setting up an account that will pay certain bills on-line is likely to induce people to stay more than a giveaway that just requires an account be opened. However, he argues, Citi must make the process of signing up as painless as possible to get people in the door and that, he says, is a double edged sword: the easier it is to sign up, the more likely a disgruntled customer will think switching to another bank will be just as easy.
In the end, Schiffenbauer says, even with the most creative and timely gift giveaway – and like Dettore he gives Citi high marks in this department – Citi must ultimately deliver a product that is at least as good as competitors. “ I don’t think that Citi offers anything different than anyone else,” he says. “One of things we’re finding more and more is that consumers view banks more and more as commodities,” Schiffenbauer says. “The things that matter are things like who’s got the best ATM network. So you’ve got to be careful. Giveaways are useful to attract. But you’ve got to have good service and make sure that technology works well. And you’ve got to keep up to date with the competition. The lifetime value of customers is what makes an expensive promotion like this make sense. You don’t want so much churn.”
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- Michael Sisk
