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Operations

The slippery slope of sign-up bonuses and some better alternatives for community banks

It’s a common marketing tactic that is used in a variety of industries—the sign-up bonus. Buy our product or service and we’ll offer you a bonus of some kind, generally cash or some desirable product. Banks are certainly not immune to the allure of attracting new checking, savings and business account customers by dangling carrots in the form of cash bonuses. But big banks may have an advantage here.

The big banks leverage their brand names and vast financial resources to advertise widely online, develop in-branch marketing campaigns and target audiences through direct mail.

It’s an approach that may not be as feasible for regional banks or credit unions, though. And, in truth, that may not be a bad thing.

Why sign-up bonuses may not work well for community banks

Community banks are small and serve very well-defined market areas. Unlike their big bank competitors they often lack the agility, technical expertise and capital to offer sign-up bonuses and other incentives to compete in real-time and fuel growth.

But that’s not necessarily a bad thing. What smaller banks have that the big banks don’t is a strong tie to the community and the ability to be nimble and creative when considering ways to build new business. What smaller banks lack in size they’re also able to bring on board through the services of third-party organizations that can help them increase efficiency, develop innovative programs and attract more customers.

The slippery slope of sign-up bonuses

When it comes to sign-up bonuses, how much are we talking? Amounts can range widely across different geographic regions and account types. Very large banks may promote nationally; others may limit offers to a specific region, state, or based on key consumer demographics—like age, income or type of business.

It’s not unusual, though, to see sign-up bonuses from larger banks of as much as $750 to open a checking account, or $500 to open a savings account. Business accounts can yield even larger incentives.

But, what’s to stop a consumer—or business—from signing up for an account, meeting the minimum requirements and then moving on to take advantage of another offer? Nothing. In fact, the issue of “churn” is common for banks that use sign-up bonuses as a means to grow their business. That can represent a significant cost to banks as these bonuses need to be built into marketing budgets—and as banks see account holders ebb and flow as they continually chase the next available offer.

Loyalty matters and loyal customers are precious. They need to be treated that way, though. As many types of businesses including financial institutions have found, trying to lure in new customers with special offers can sometimes backfire and serve to create dissatisfaction—even anger—among existing customers.

The bottom line: for the overall benefit of your bottom line, sign-up bonuses may not be the way to go. Fortunately there are other offers that can be used both to keep existing customers loyal and to land new customers.

More engaging alternatives to sign-up bonuses

It’s important for banks to both build new business while continuing to delight and engage their current customers. Banks need to be continually building awareness so they can attract younger audiences who are beginning to make banking decisions on their own. These younger markets can be most effectively reached through digital channels—they value convenience and 24/7 access to their accounts. An important first step before reaching out to grow new business is making sure that the services you offer are meeting new consumer preferences—that may mean restructuring checking products, waiving fees and considering more innovative options.

Once you’ve evaluated and, potentially, made improvements to your offerings, it’s time to consider some creative ways to get the word out and build interest and demand. Here are some creative ideas to consider.

  • Wellness campaign. The New Year, and the annual creation of resolutions is an obvious time to initiate a financial wellness campaign. But financial wellness is appropriate at any time of the year. Combine financial and physical wellness to appeal to health-conscious consumers by offering a personal finance and physical health package – a free three-month membership to the local health club when you sign-up for a new combined checking and savings account. Consider partnering with one of your commercial clients to make this a “win-win-win” for you, your commercial clients and your new customers.
  • It’s Tax time. CPA’s are looking to build long-term relationships with their clients. Putting money into a checking or savings account is a lead generator for the local CPA firm and a step toward financial security for the customer. Think about holding these campaigns not only during annual tax season, but as a way to reach out to business prospects and customers during quarterly tax times.
  • Christmas Club and Vacation accounts. While you may think that these popular accounts from the 1970’s are no longer relevant, the fact is that consumers still value the opportunity to put a little money aside on a regular basis to use for Christmas—or a special vacation. In fact, credit unions still champion these types of savings accounts. According to the Credit Union National Association, 72% of credit unions run Christmas clubs. The biggest advantage they offer is to encourage savings – at a time when interest rates are low and other financial products such as money market accounts have lost some of their appeal.
  • Deposit matching program. Similar to a 401(k) plan where employers match employees’ contributions to their 401(k) accounts, community banks can offer a deposit matching benefit up to a certain amount and duration. This type of ongoing offer incentivizes customers to set up direct deposit and builds long-term loyalty instead of a short-term payout.
  • Giving back to the community. Leveraging community banks’ strong ties to their communities, banks can offer donations and other support to local organizations of choice when consumers open a new bank account.

Clearly there are a wide range of options available to community banks when seeking to engage both existing and potentially new customers. It’s important, though, when running any kind of campaign or special offer to carefully track results and analyze what works, what doesn’t, and the impact on your bank. That can mean a lot of administrative and logistical effort which can be time-consuming.

With today’s technology, though, that doesn’t have to be the case. Automating the process of setting up new accounts can help you save time and money—and glean important strategic insights on what types of offerings are preferred by your target customers.

Learn more about MANTL’s cutting-edge account opening software that helps community banks and credit unions grow deposits faster.