Sales promotion and public relations have increased sharply in importance in recent years, especially in consumer markets. Promotion tools include a wide variety designed to stimulate or enhance market response which may be generated by other components of communications and marketing strategy.
Such tools include samples, contests, prices-off, premiums and demonstra¬
tions. Trade promotions may also be offered when bank services such as consumer finance are provided through third parties like retailers or automobile distributors. Such promotions include special volume discounts, free goods, cooperative advertising, dealer sales contests and dealer salesmen incentives. Within banks themselves incentives are being increasingly offered for superior performance. Many banks now offer bonuses for meeting sales
objectives or other incentives such as contests, free goods and holidays.
Promotion techniques tend to be faster in operation than advertising but the response to them is also usually shorter in duration and not especially likely to affect basic customer loyalty. As such, promotions attract deal-oriented consumers who are likely to switch banks rather than new long-term accounts.
By contrast, advertising is more likely to capture new ‘permanent’ accounts.
Promotion can be especially helpful, however, in increasing awareness and image of new services by existing customers and used in this way can form a valuable element in communications strategy.
Public relations is more of a background activity and is designed to enhance the bank’s position with specifically targeted audiences. Sponsorship has thus become an important activity in developing bank image. Such sponsorship can be directed to specific target customer segments such as accountants, farmers, culture lovers and sports players. The key objective of publicity is to obtain editorial coverage, as distinct from paid space, in media seen by the bank’s desired customer base. It may be used to promote services, places, ideas, people, activities and organizational image.
The results of publicity can, however, be especially important and close attention to public relations can lead to substantial strategic advantage. This is especially important for institutions with low communications budgets since publicity is generally much cheaper than direct mail and media advertising.
10.4.1 Setting Sales Promotion Objectives
It is important to establish what the objectives are for a sales promotion before it is introduced and to anticipate the likely competitive response. Such objectives might be to encourage more usage, to develop trials amongst non-users and to attract new accounts. For trade accounts objectives usually center on offsetting competitor promotions, building bank loyalty and gaining increased distribution coverage. Within the bank, objectives include preferen¬
tial development of specific services, encouraging new account openings and cross-selling additional services.
10.4.2 The Choice of Promotional Tool
The tools available for achieving these objectives are many and varied. In choosing specific tools the bank should consider the market target, prom¬
otional objectives, likely competitive reactions and cost. The major tools available include the following.
1. Samples, premiums and coupons. Samples, widely used in consumer promotions, are normally more difficult to use in financial services where physical products rarely exist. Normally samples are therefore provided by offering customers free use of a service for a trial period to enable them to test
its value to them and to become familiar with its usage. Examples would include the offering of its Diners Club service by Citibank to new users free for six months; the provision of free corporate cash management interactive terminals to corporate treasurers for several months; and free home banking terminals for trial periods by a number of banks.
Premiums are products offered at a relatively low cost or free as an incentive to use a particular service. Premiums come in a wide variety of forms, and although the use of consumer appliances and the like as incentives for opening different levels of deposits which developed in the later 1970s when interest rates were controlled in the USA has diminished, they are still widely used.
They include the provision of free T-shirts, specially shaped children’s piggy banks, low-price telephones, home computers, book vouchers for students and the like. Coupons, which are certificates entitling the holder to a specific saving on a specific service, are not widely used in the banking industry. They are, however, effective in stimulating sales of new services and have been used to increase penetration in specific segments such as student, young people and senior citizen groups, where free banking services may be offered to new accounts. The travel and entertainment card concerns American Express and Diners Club also make extensive use of coupons as part of tie-in deals with restaurants and airlines to stimulate extra card usage.
2. Point of sale displays and demonstrations. Point of sale displays are used as silent salesmen in most bank branches. In general, however, such displays are weak and rely on impulse selection of bank service literature. This is often unattractive, being in leaflet form and rarely advertised to stimulate consumer awareness or interest. Demonstrations are, however, becoming much more important activities in bank marketing via the use of seminars and out-of-bank displays presented to focused corporate and individual customer groups.
Professional demonstration teams and multimedia techniques are becoming common today and this area of activity is likely to increase in all market segments.
3. Contests, sweepstakes and games. The banking industry usually likes to consider itself above the use of such promotional devices. However, there is again growing employment of these tools to stimulate share and usage. For example, in the USA some banks have successfully endeavored to stimulate ATM usage by having customers record and submit transaction numbers as entries for sweepstakes. Others have developed contests for prizes in particular segments such as among young and senior citizen account holders. In the business market contests have also been use by Amex, again to stimulate card usage.
4. Distribution system promotion. Banks have used many techniques to stimulate the preferential use of their services with third parties. Tie-in
advertising allowances are common, especially by American Express, but also by other major card companies. Similarly Barclays, Citibank, American Express and others have provided special prices and allowances to participat¬
ing banks distributing their travellers cheques. Credit finance subsidiaries of the banks have offered push money bonuses and contests to dealers to push their credit services. Specialty advertising items carrying the bank’s logo such as pens, pencils and the like are commonplace. Some companies, notably American Express, will also reward account introductions by individuals with packs of wine and other free gifts. Overall, for services offered via third parties the banks have found it increasingly necessary to use sales promotion techniques to develop their market positions in the face of greater competition.
10.4.3 Developing Sales Promotion Programs
In designing the bank sales promotion program, determine the following:
1. Nature of audience participation. Decide precisely who the bank wishes to participate in the promotion and target on this customer segment.
2. Nature of incentive. Determine what form and size of incentive the bank should offer, aiming to establish one large enough to encourage the level of usage desired but bearing in mind that effectiveness diminishes beyond a certain point.
3. Nature of delivery system. Decide what delivery system the bank should use to disseminate the promotion. Each channel, branch, direct mail, press, in-store and the like will have different levels of reach and cost.
4. Duration of promotion. Ensure the length of time the promotion is offered is adequate for the selected audience to take advantage but still short enough not to lose impact.
5. Promotion timing. Most promotions are best undertaken at particular periods of the year. Thus home improvement loans might be best promoted in spring, student loans in the autumn.
6. Determine promotion budget. Normally sales promotion is treated as a component of the overall communications budget. The cost of individual promotions is calculated as the incentive cost multiplied by the expected usage plus the cost of administration. This can be compared with the expected gain in contribution from increased service usage.
10.4.4 Evaluating Promotion Performance
As a prelude to undertaking a full-scale promotion it is wise to attempt to pretest its effectiveness. Relatively few banks do this but alternative