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Will Relationship Banking Ever Take Hold?

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Will Relationship Banking Ever Take Hold?
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I don’t take credit for much, but Total Relationship Banking (TRB) is a term that I created while working with the Colloquy consulting group around the turn of the Millennium. I recently had the chance to catch up with the “Patron” of TRB, Fabio Garcia and our talk spurred thoughts for where TRB might be headed in the future.

After working together to launch “Premia” several years back, I had a vision of how banks could finally take their card based rewards programs to another level and build enterprise-wide loyalty in the process. Excited about unleashing a new concept in retail bank marketing, we expected to see many banks follow suit.

Interestingly it took 2 years before Citi launched ThankYou! and another year or so for National city to launch its Points program. During the recent economic cycle, National City was acquired by PNC Bank and the PNC Points program remains in market today. An even longer respite occurred before Regions Bank introduced Relationship Rewards this summer.

With Regions’ new entry into the market, the question seems valid to ask again. Will TRB become the “next new thing” in retail bank marketing.

The answer: No – at least not by way of the model used by Regions Bank.

TRB has always been challenged by a short list of key obstacles:

1. Who Owns the Program?

Rewards in banking first took hold in cards and extending the currency to retail, mortgage and wealth management groups introduces potential conflict for program management. Only with Executive level support and a loyalty czar in place, do multiple product owners cooperate to the extent needed to achieve success.

2. How do we measure profitability?

The metrics used to track profitability in cards, retail banking, and loan areas are distinct. Appointing a standardized value for a loyalty currency and mandating its use across all product areas is not an easy task.

3. Who pays for the program?

The substantial cost of operations and allocation of financial liability is a sensitive topic. If I own consumer loans and only want to participate in my TRB program on a promotional level, do I accept cost allocation or do I just purchase points from the program owner as if I was a sponsor in a coalition program?

These organizational challenges are tough to solve, but the answers can be found. The place where attention deserves to be focused these days is on the customer.

I recently conducted a review of Regions Bank Relationship Rewards and, while it is clever and well thought out, the earning grid is too much for most consumers to understand. The temptation to over-engineer loyalty strategy is irresistible at times – I’ve been found guilty of it in the past.

The best strategies are those that can be implemented in a practical manner, are easily explained to customers, and pose the lowest level of friction for enrollment and participation. Establishing a bank-wide loyalty currency creates the foundation for an effective enterprise loyalty strategy, but its use should be apportioned carefully.

Credit and Debit Cards, Current and Savings accounts are high frequency products that are the glue for long term bank relationships. Loyalty currency can be applied in strong doses here. Every other bank product or service is tied to life-events and therefore loyalty currency should be used sparingly and on a promotional basis for best results.

The bigger question is how much customers care about bank rewards programs. I have not been able to confirm that consumers want to consolidate their banking relationship beyond a certain intangible threshold. The Boomer generation grew up hearing about the risks of “putting all your eggs in one basket” and the Millennial generation matured while living through the most frightening banking crisis in several decades.

As one wise banker recently shared with me, we don’t need to challenge the validity of TRB as much as we need to set realistic goals. Maybe we’re not after 80% + of an individual bank relationship, but simply want to establish a core group of products that defines a “primary bank” relationship. In other words, maybe 40% wallet share is 100% victory.

Enterprise loyalty is an achievable goal for retail banks. Striving to create bank brands that drive consumer loyalty, even passion, should be on banker’s lists of Key Performance Indicators for next year. Banks can still create a retail brand promise that is delivered holistically and complements reward with product innovation and outstanding service.

Now is the time to tackle the job, as consumers have never been more interested in transparency, safety and responsible financial management.


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