Puerto Rican Bank's Loyalty Effort Aims to Protect Business

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To defend its turf against encroaching banking competition, 106-year-old Banco Popular de Puerto Rico will roll out a new customer loyalty program for the U.S. territory in the first quarter of 2002.


Called Premia, it aims to strengthen the bank's relationship with its best customers across all product lines and distribution channels.


The program is based on Frequency Marketing Inc.'s loyalty solutions platform.


The move was forced by threats to the bank's Puerto Rican market share from Banco Santander, Banco Bilbao Vizcaya and Citibank as well as smaller institutions.


"They found themselves being the one with all the heritage and the right continuum with a business that they thought was theirs, [and then] they saw it being eroded at both ends," said Bill Hanifin, director of international business at Frequency Marketing, Fort Lauderdale, FL.


With Premia, Banco Popular seeks to reward customers for spending across the bank's retail lines such as checking and savings accounts, credit cards, investment products and consumer loans. Based on certain measures, including building balances, Banco Popular will reward its best customers with points that can be exchanged for merchandise, travel or experiential benefits.


"We've constructed a reward offering that very much speaks to their historical connection with Puerto Rico -- lots of exclusive things," Hanifin said.


These exclusive offerings in Puerto Rico are the star attraction of the program, which tentatively bears the tag line "Te Lo Has Ganado," or "You've Earned It."


The bank will tie with sports teams, bed and breakfasts, and spas in Puerto Rico, for example. It is here that Banco Popular hopes to lock out competition.


"There're only so many of [local leisure-related businesses] and they're well known, and if they become partners in this program, then they're exclusive," Hanifin said. "It's tough for someone to come in and say, 'We can do the same thing.' "


Deals are being worked out. The bank is readying direct mailers to 100,000 of its better deposit and credit card customers for a first-quarter drop. Another mailing, almost three times the size of the original effort, will follow. Mailers will be in Spanish and English.


Banco Popular's program is designed to differ from those of competitors. For most banks in Puerto Rico, a loyalty program is simply a co-branded credit card, Hanifin said.


"The downside of the co-branded model is that they reward you for spending, but what they're really hoping to do is have you build a balance that revolves," he said. "We would question whether or not that benefits the consumer ultimately, but Banco Popular will be rewarding you for your business overall."


Banco Popular has a dominant 36 percent share of Puerto Rican bank deposits, 1.3 million customer accounts and 196 branches on the island. It has a strong presence in the loans business, including Small Business Administration, middle-market and consumer lending.


The Puerto Rican operations account for 89 percent of parent Popular Inc.'s consolidated profits, according to a Moody's Investors Service document of last year. But Puerto Rico is a small market, only 3.8 million people, and the bank cannot afford to lose ground there.


"They've done a lot of analytical work on people that have their credit card and checking account, but they know based on demographics and income levels that these consumers will probably have other balance accounts in other banks," Hanifin said.


"The question is, why aren't they at Banco Popular?" he said. "So what they're hoping to achieve is by saying, 'Listen, we'll award you points for your checking account, savings balance, if you take a personal loan, so if we can consolidate a relationship and have more of it, then you'll be rewarded.' "


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