In the last several years, some banks have found that environmentally-themed marketing campaigns have been able to persuade customers to change their habits and even buy new products.  No doubt, you have seen banks offering a one percent discount on auto loans to consumers purchasing a hybrid vehicle or reduce home equity loan rates to consumers who make energy-efficient home improvements.  Such environmentally-themed marketing campaigns will continue to gain momentum in the financial services arena.  However, it must be pointed out that using “green” promotional benefits is a new frontier where there are only a few results or metrics to validate their use or effectiveness.

One RFG client — Exchange Bank based in Santa Rosa, Calif. — has jumped into this arena with its trademarked “Go Green!” Checking Account.  The bank believes the account will pave the way for their upcoming launch of iStatements.  This no-minimum-balance, no-monthly-fee account also offers a free check card, ATM rebates (up to $15 per statement cycle), and hybrid vehicle loan discounts (0.50 percent with an automatic loan repayment).  This checking account also offers free online banking and bill payment services, and account-holders can receive e-bills online.  Further, the account encourages going check-less: if customers opt to write a check from their accounts, they are charged a $0.50 per item fee.  Exchange Bank promoted the “Go Green!” checking account with a greenly themed premium:  a recycled (and reusable) grocery bag.  

From an environmental standpoint, the account promotes “greener” habits that include turning off paper statements and deterring check writing while promoting online banking and bill payment and the purchase of energy-efficient vehicles.   The difficulty that financial institutions will face when promoting green banking behaviors is in providing a compelling and tangible reason to go green.  So, for instance, an institution could convey to its customers facts like this:

A Javelin Strategy & Research report contends that if every U.S. household stopped receiving paper bills and statements, 687,000 tons of paper would be saved every year, which is enough to circle the planet 239 times.  Of course,  such a message must target an audience that is receptive to it.

From a product development/innovation standpoint, which is the focus of this piece, RFG would like to believe that Exchange Bank was cognizant of our Spring 2008 conjoint/trade-off research on checking product design.  That research asked consumers to compare and choose between various checking pricing configurations, which varied by requirements for free checking, ATM surcharge rebates and debit card rewards. 

The research concluded that a basic offer of free checking with no requirements or “strings” had the most appeal (total value of a “basic” free checking account was 163).  However, the checking account offer lost 100 points of value when a direct deposit or ACH payment was required.  The conjoint/trade-off application helps to identify a combination of checking requirements and benefits that appeal to a target audience.  For instance, if ATM surcharge rebates are added to a free checking account, the value of the offer increases to 188 points (163+25). 

Clearly, offering a free checking account with debit rewards or ATM surcharge rebates adds value to an account.  However, such additions will add cost to an account offer.  Consequently, with no requirements at all for eligibility, any cost increases (e.g., in the case of Exchange Bank, $15 worth of ATM rebates per statement cycle) will have to be made up with increased growth, better relationships and/or lower account/relationship attrition.

With respect to attracting better account relationships, in my opinion it is clear that Exchange Bank’s account was designed to attract a younger, higher income consumer (i.e., the credit-driven segment).  RFG research details that such consumers have a higher propensity or proclivity for using electronic delivery channels (e.g., ATMs, online banking, online bill payment and debit card).  Given the higher education level of this group, such consumers may even be more environmentally conscious.

I agree with Javelin Strategy & Research regarding green product development and marketing: availability, accessibility and complexity are the central challenges stalling the adoption of green banking behavior.

Consequently, financial institutions must focus on products and promotions that speak directly to environmentally conscious consumers, and reward customers for eco-friendly practices.

Because green marketing is a new frontier, consider David Wigder’s piece, “Testing Green Promotional Benefits to Drive Acquisition,” which appeared Sept. 16, 2007, on marketinggreen.wordpress.com.  In that piece, Mr. Widger advocated that marketers take a cautious approach to green marketing and test the efficiency and effectiveness of this type of program with a small, targeted audience before scaling more broadly.  Such tests should seek to answer key questions that can impact program design, target segments and types of offers:

• What value do consumers place on green benefits, either perceived or actual? 
• How does this value differ by target segment and product category?
• Who should be the recipient of this benefit — an individual consumer or a society (e.g., via a donation to a non-profit organization)? 
• Do green benefits expand the market or simply reward those who would already purchase a product or service?
• Do green benefits impact average customer lifetime value positively or negatively over time?
• Do green benefits generate brand value by positioning the company as more socially responsible?

This is part three of a three part series on product innovation; please feel free to read my previous submissions:

Product Innovation (Part 1): Trailblazer or Fast Follower

Product Innovation (Part 2): Customization

 

Need ideas, recommendations or solutions for product development?

Contact RFG for an assessment of your current product menu.  Call 800.827.3500 or email.

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