Many Banks Push TVs, Travel, Even Road Tows

The offers come in one after another. A shop-by-mail program promising discounts of “10%-50% or more” from list price. Emergency road service. “Unlimited” telephone consultations with an attorney. Insurance covering lost credit cards, travel services including second and seventh nights free at some hotels and various life and health insurance policies.

Nothing unusual, except for the sponsor: Bank of America.

Even that’s not unusual. Many financial institutions now have such programs, billing membership fees and subsequent purchases to the customer’s bank card. Citicorp’s CitiShopper program offers not only brand-name merchandise but a guarantee of lowest price available or “double the difference.” Bank of New York’s travel program includes 10% off all hotel charges over $150, $1-million flight insurance and $2,500 collision coverage on rented cars. Almost everyone offers supplementary health insurance.

Bankers call these “enhancement” programs, benefiting the particular bank card and thus the card-issuer. Such programs, says Walter Roder, B of A senior vice president, “allow you to differentiate your product while adding value to it.”

New Marketing Tool

The concept grew out of the new competitive environment in which banks suddenly have a lot of rivals offering banking services--brokerage houses, savings and loans, even Sears, “which also sells you toasters and Kleenex,” as one banker notes. Banks assume that they must compete on the same level, offering myriad non-banking services provided by outside contractors. “It’s just a marketing tool,” says Los Angeles attorney Doug Ring, “like saying ‘Use our law firm and you’ll get a 15% discount at the drugstore.’ ”

New York-based Citicorp is considered the pioneer, having first offered its “Citidollars” in 1979--one Citidollar for every $5 charged on a Citibank card, to be used for purchasing special merchandise--plus group insurance, an auto club and credit card protection. Citicorp also changed the tone and approach of banking, hiring people from packaged goods companies, the quintessential marketers of consumer products. Citicorp’s roster of bank card managers has included people from Campbell’s Soup, General Foods and Sara Lee Corp.; similarly, B of A’s new “ValueAmerica” program (“TripAmerica,” “LawAmerica,” “ProtectAmerica,” etc.) was developed by a team with experience also in health and beauty products (Max Factor) and packaged goods (Nabisco).

Such people, says Thomas Thompson, professor of marketing at Virginia Commonwealth University, help the industry switch from “an order-taking culture to a selling culture.” To some, this means “that everyone has a gimmick,” sighs a veteran banker. “In fact, all the gimmicks you could imagine and none you really need.”

The offering bank profits by piggybacking on a very profitable product--credit cards. It may sell its card-holder lists, split membership fees and sales or just enjoy carrying all those purchases on its particular card.

Moreover, says Thompson, “many of the fee-based product lines are not really expensive to develop. They’re done on a pass-through basis.”

“We’re not selling them,” says Ilze Grace, B of A’s marketing director of bank card products. “They’re offered through us and billed by us.”

“You’re sending out a statement once a month anyway,” says Thompson. “It’s a perfect time to offer them insurance.”

Actually, anything will do. The offer may not be remotely related to banking or financial services; today’s banker, says Grace, is simply “the provider of products and services that are of need to the consumer.” Hotel stays and discount merchandise seem related to banking only by payment; emergency tows and lawyer consults not at all.

Some Prices Challenged

Many consumers feel it inappropriate for upstanding financial institutions to “traffic in some of this stuff,” as one California woman says. Banks may offer good buys but may also push merchandise that “anybody with any shopping sense can get for at least the ‘discounted’ price,” says a San Francisco banker. “They offer television sets list-priced at $500 for $400,” adds a lawyer, “and most people could get them for $290.”

They also sell those customer lists, perhaps separated according to credit limit, and some people like that even less. “I still think my banker has a fiduciary duty to me,” says the California woman, “and they lose a lot of credibility with this kind of customer exploitation.”

Others fault such marketing of bank cards themselves. “It obscures the principal item on which banks should be but aren’t competing--interest rates, grace periods and transaction fees,” says Elgie Holstein, associate director of Bankcard Holders of America, a consumer organization in Washington. “This is a credit loan, and what matters first and foremost is the terms.”

Even some bankers fear that the current emphasis may cut a bank’s inclination or ability to provide banking service. Consumers have voiced such fears for several years. “I want a bank that’ll provide me with first-rate banking services,” says lawyer Ring. “When I want toaster ovens, I’ll go to a discount store.”

The bankers’ real problem may not be consumer criticism but their own school-of-fish creativity. These new marketing programs are spreading fast now but, far from setting apart either the bankcard or the bank, says one industry executive, “the programs are virtually indistinguishable, except for the printing.”