According to the OECD Oslo Manual, a marketing innovation is “the implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing”. Research and development to create new marketing innovations in the services industry, and in particular, the financial services industry, is largely experimental compared to the tested scientific processes that have been created for product innovations. This is because a service is intangible, meaning that it cannot be readily displayed before it is bought. Brainstorming, trial and error and innovation teams are some of the informal methods used to develop occasionally successful marketing campaigns for the services sector.
Bank of America: “Keep the Change”
Bank of America has been at the forefront of product and marketing innovations in the financial services industry. In an effort to encourage more customers to open a bank account and to use its products and services, it wanted to break away from its competitors and the structured products of the conservative banking industry. It started by experimenting with products and services conducted live with real customers engaged in real transactions. Twenty branches in Atlanta were set up with different gimmicks and promotions to determine what appealed to customers. The results were then measured, developed, re-tested and compared with control branches much in the same way as a scientific laboratory.
In the month of October, 2005, after a number of years of experimentation, Bank of America had a breakthrough. It released a unique and radically different banking concept that broke the traditional product mould. This breakthrough concept was called “Keep the Change”. While investigating and researching methods by which the bank could improve its services to women with children, one major observation was that these women tended to round up their financial transactions mainly for speed and convenience reasons. The researchers also noticed that this target demographic also had the lowest savings rates amongst the American population.
As a result of these observations, the Bank of America released a banking package that included a visa debit card that when used would round up the transactions to the nearest dollar amount and then transfer the difference between the actual purchase and the increase to a linked savings account. A number of additional incentives were added to this package to attract customers such as a promotion that the bank would match the savings transfers up to $250 per year.
The main objective and subsequent marketing strategy of the bank was to encourage as many people as possible to open new accounts. By doing this, the bank aims to dominate the American retail banking sector and strive to become a market leader amongst its competitors by obtaining the largest market share through better value for money banking products, better customer services, tailored banking solutions that suit customer needs and high promotion spending.
Anne Finucane, the Chief Marketer at Bank of America, further highlights this strategy by stating that:
“Our ongoing work is meant to evolve Bank of America from a brand everyone knows to a destination brand that everyone –consumers, businesses, and communities chooses and uses repeatedly because our innovative solutions and understanding of their financial needs create opportunities for them that no other financial services provider can match.”
Given that all banks essentially sell the same services and products, namely savings and checking accounts, debit cards, offer customer branches, phone banking and online facilities for banking services, Bank of America needed to differentiate itself from its competitors in order to gain a...