By Toni Lapp
Small businesses have long been a mainstay for community banks – and vice versa. After all, community banks’ loan portfolios are often a who’s who of local businesses. And now, some community banks are tapping into their customers’ desire to “buy local” by developing hyper-local loyalty programs that drive consumer behavior and enable merchants to market themselves as local businesses.
Take, for example, Bangor Savings Bank, a $3.7 billion asset institution in Maine. In August 2015, Bangor Savings established a marketing partnership with Portland, Maine-based Buoy Local, a local gift card program that was planning to expand into the Bangor area. Last fall, Bangor Savings acquired the startup.
“A strong element of our brand is to ensure the success of locally owned businesses in Maine, as well as the communities they serve,” says Jamey Doughty, Bangor Savings head of product management and digital banking. “We see it as tapping into the anti-big-box, anti-large-retailer sentiment in our state.”
Merchants pay an annual fee to participate in the program unless they have an account with the bank, which added an in-house staff person to recruit retailers to the network. The program has been so well-received that Bangor Savings is working on an app to support it. Doughty envisions the app leveling the playing field for independent retailers, enabling them to better compete with app-equipped chains such as Starbucks. The app would offer rewards for shopping at participating businesses and utilize geo-fencing to recommend nearby participating businesses.
Doughty concedes it is still in the early stages of development and is more of a value-added service for small-business customers rather than a profit center for the bank.
Austin, Texas-based Buzz Points launched its community-focused rewards and marketing platform in 2009. The platform awards points every time cardholders use their debit or credit card, and customers can redeem points for gift certificates or donate points to charity.
CEO Dwayne Spradlin says “Buzz Points reinforces the value of local,” by awarding double points for card use at participating local businesses. The program is paid for by a combination of fees: FIs pay a fee per active card as well as redemption fees for the points redeemed by users.
Richwood Bank, a $461 million asset bank in Ohio, is among 59 financial institutions using the program, which provides data analysis and targeted marketing technologies to merchants. Buzz Points has a web interface as well as a new iOS mobile app that utilizes geo-targeting to identify and recommend local merchants.
Heather Wirtz, chief development officer for Richwood, says bank customers enrolled in the Buzz Points program averaged 10 more card transactions a month (33 vs. 23) than non-users, and have provided $5.08 more value per user than non-users.
But more importantly, the program generates “buzz.”
“New businesses could participate in Buzz Points without becoming our banking customers,” says Wirtz. “Yet because of the program’s utility as a conversation starter and proven success, working on Buzz Points promotions with these businesses enabled us to build bridges and develop those close relationships that developed into full banking relationships.”
Toni Lapp is senior editor of BankNews.