The Globe and Mail, Keith McArthur, 13 November 2006
The free toaster is back -- with a 21st-century twist.
Banks today are giving away everything from free trips to iPods in an effort to boost market share in the increasingly competitive world of retail banking.
The nineties' focus on long-term brand-building activities led banks to abandon the product giveaway, popularized in the fifties when they passed out toasters and other small appliances to new customers who opened accounts.
But younger consumers are less loyal and unlikely to be swayed by traditional branding techniques, according to Alan Middleton, a marketing professor at York University's Schulich School of Business.
"You've got a new generation coming up that is less susceptible to classical kinds of image strategies and much more prepared to say: 'They're all the same, so I might as well go to the one that gives me something,' " Prof. Middleton said.
Bank of Nova Scotia saw a 300-per-cent increase in the number of new customers opening accounts during its recent "Fly Free" promotion. Customers who opened a Scotia One account received a free round-trip airline ticket.
"I wouldn't necessarily consider it a 'toaster' initiative," said Rick White, the bank's vice-president for brand and marketing programs. "I think it's a lot more sophisticated than that."
The promotion was something of an experiment for Scotiabank, an effort to make a big splash to promote its Scotia One account, which offers unlimited personal banking services for $9.95 a month.
Scotiabank wasn't expecting consumers who were happy with their existing bank to switch for the free flight. Instead, the promotion targeted those who were already looking around.
"There is a lot of churn in the marketplace at any one time. This was about: How do we get people to think about Scotiabank when they're switching banks," Mr. White said.
To qualify for the free flight, consumers either had to have their paycheques deposited directly into the account or use it to make automatic bill payments.
Toronto-Dominion Bank incorporated similar conditions when it gave away iPod shuffles for customers opening new accounts and Nanos for those who also signed up for a TD Gold Visa card.
Dom Mercuri, TD's chief marketing officer, said the conditions are important to protect against "low-value, low-profit relationships," since the price TD pays for the iPods is not heavily discounted. TD also gives away portable DVD players to lure customers into new branches.
Mr. Mercuri said Canada Trust used free product promotions regularly in the eighties, giving away teddy bears and other merchandise. "Those ideas had become a little dormant for some period of time and some of those ideas have been dusted off," he said.
Until recently, most banks favoured draws as the preferred method of promotional marketing. Today, consumers appear to respond better to promotions where everybody wins.
The original toaster giveaway came out of the U.S. in the fifties, when regulated interest rates led banks to look at new ways of differentiating themselves.
Virginia-based Northern Neck State Bank ran a nostalgic, fifties-style marketing campaign last month, where the bank gave away free toasters to consumers opening chequing accounts.
But today's freebies tend to be even more valuable. U.S. banks have given away everything from flat-screen televisions to Sony PlayStations.
In 2004, New York Community Bancorp even gave away free Cadillacs to customers who invested $400,000 (U.S) into a five-year certificate of deposit paying 1-per-cent interest.
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The free toaster is back -- with a 21st-century twist.
Banks today are giving away everything from free trips to iPods in an effort to boost market share in the increasingly competitive world of retail banking.
The nineties' focus on long-term brand-building activities led banks to abandon the product giveaway, popularized in the fifties when they passed out toasters and other small appliances to new customers who opened accounts.
But younger consumers are less loyal and unlikely to be swayed by traditional branding techniques, according to Alan Middleton, a marketing professor at York University's Schulich School of Business.
"You've got a new generation coming up that is less susceptible to classical kinds of image strategies and much more prepared to say: 'They're all the same, so I might as well go to the one that gives me something,' " Prof. Middleton said.
Bank of Nova Scotia saw a 300-per-cent increase in the number of new customers opening accounts during its recent "Fly Free" promotion. Customers who opened a Scotia One account received a free round-trip airline ticket.
"I wouldn't necessarily consider it a 'toaster' initiative," said Rick White, the bank's vice-president for brand and marketing programs. "I think it's a lot more sophisticated than that."
The promotion was something of an experiment for Scotiabank, an effort to make a big splash to promote its Scotia One account, which offers unlimited personal banking services for $9.95 a month.
Scotiabank wasn't expecting consumers who were happy with their existing bank to switch for the free flight. Instead, the promotion targeted those who were already looking around.
"There is a lot of churn in the marketplace at any one time. This was about: How do we get people to think about Scotiabank when they're switching banks," Mr. White said.
To qualify for the free flight, consumers either had to have their paycheques deposited directly into the account or use it to make automatic bill payments.
Toronto-Dominion Bank incorporated similar conditions when it gave away iPod shuffles for customers opening new accounts and Nanos for those who also signed up for a TD Gold Visa card.
Dom Mercuri, TD's chief marketing officer, said the conditions are important to protect against "low-value, low-profit relationships," since the price TD pays for the iPods is not heavily discounted. TD also gives away portable DVD players to lure customers into new branches.
Mr. Mercuri said Canada Trust used free product promotions regularly in the eighties, giving away teddy bears and other merchandise. "Those ideas had become a little dormant for some period of time and some of those ideas have been dusted off," he said.
Until recently, most banks favoured draws as the preferred method of promotional marketing. Today, consumers appear to respond better to promotions where everybody wins.
The original toaster giveaway came out of the U.S. in the fifties, when regulated interest rates led banks to look at new ways of differentiating themselves.
Virginia-based Northern Neck State Bank ran a nostalgic, fifties-style marketing campaign last month, where the bank gave away free toasters to consumers opening chequing accounts.
But today's freebies tend to be even more valuable. U.S. banks have given away everything from flat-screen televisions to Sony PlayStations.
In 2004, New York Community Bancorp even gave away free Cadillacs to customers who invested $400,000 (U.S) into a five-year certificate of deposit paying 1-per-cent interest.
