Citibank is going against some conventional marketing wisdom with a strategy aimed at reeling in new customers off the street.

Until May 31, about 200 Citibank employees will be working the sidewalks of New York, handing out vouchers worth $25 when a checking account is opened and certain other conditions are met.

Such mass solicitations have been out of favor in an industry that has been turning to data warehousing and data mining technologies to be selective in marketing and to maximize the profitability of existing customers. KeyCorp, Royal Bank of Canada, and Fleet Financial Group are among those seen as successful with these approaches for selling additional products to current customers, not for acquiring new ones.

Some observers think Citibank would be better off doing the same. "Citibank should put the emphasis on ways to capture a higher share of wallet with existing customers," said Peter J. Carroll, managing director of Oliver Wyman & Co. in New York.

Citibank has pointed to its success in cross-selling insurance products of the former Travelers Group, which merged last year with Citibank's parent, Citicorp, to create Citigroup. Yet Citibank also has a history of going against the industry grain, often to great advantage, as it did with the first nationwide credit card solicitations in the 1970s.

A Citibank spokesman said the voucher promotion is specifically aimed at the middle-income market-people who are not big savers and might be attracted by the $25 offer.

Once potential customers step into a branch to open the AutoSave account, they would be paired with relationship managers who could suggest additional products based on the depositor's financial situation.

Dawn Foster, a consultant with Action Systems Inc., a Dallas-based firm that provides customer profitability and sales software, said Citibank has picked a "solid method" for establishing relationships with middle-income consumers.

She said she liked the fact that customers receive the $25 only after making two consecutive transfers of at least $50 a month to a savings or insured money market account between March and July this year.

By offering an incentive to save, Citibank is playing a "trusted adviser" role and introducing the possibility of discussing additional account purchases, Ms. Foster said.

"Customer relationship management is all about uncovering the needs of customers and then navigating them toward profitability," she said.

Some banks, while following the same philosophy, have taken a different tack.

In line with others that have installed data warehouses and customer profitability software, KeyCorp discovered that 20% of its retail customers produced 90% of profits. Now, Key's 2,750 relationship managers are focused on nurturing these 440,000 most profitable customers.

KeyCorp figures it can boost profitability by $306 per household, or about $135 million in total, if it sells one additional product to each of these customers, said Jack L. Kopnisky, president of retail banking.

"Our objective is to be all things to targeted clients," he said in a speech last month at American Banker's best retail practices conference in Orlando.

Using software that identifies individual customers' profitability and suggests new products to sell them, Key delivers 25 to 200 leads a month to its relationship managers.

"If our relationship managers are to succeed, they must have superior customer knowledge," Mr. Kopnisky said.

In contrast to Citibank's giveaway, KeyCorp has eliminated free, no- balance-required checking accounts.

"We found that generally free (demand deposit) accounts are just losers," Mr. Kopnisky said. He estimated the move would help the bank "reduce profit destruction" by $30 million in 1999.

One observer suggested that for Citibank, sophisticated customer segmentation techniques would be far more effective than the current marketing hype. "It's not effective in substantially growing the business," this source said.

Mr. Carroll speculated that Citi's vision could be "clouded" by its stated goal of a billion customers worldwide by 2010, which necessitates mass marketing.

The New York bank's proclivity to hire employees from the consumer goods industry could also be playing a role, he said.

"In that business, if you get 100 people to buy something, you make money off of 100 people. But in financial services, you probably only make money on 40 to 50 people who make a purchase," he said.

Citibank has often used low prices to attract customers, said Bill Bradway, research director at Meridien Research in Newton, Mass.

To introduce its EZ Checking account, for example, the bank handed out bagels on the street. The Citibank spokesman said the strategy proved profitable, resulting in the opening of more than 100,000 EZ Checking accounts after one year.

Price-driven promotions may be ideal for Citibank, given its organizational structure, Mr. Bradway said. Its internal divisions make it difficult to use conventional cross-selling tactics, he added.

The bank's credit card and consumer lending groups, for example, are separate business units with different accounting systems, making the sharing of information difficult.

And Citi's merger with Travelers added even more of a data management challenge, he said.

But Citi soon may have a better handle on its data. Mr. Bradway said the bank has been building a data warehouse to overcome internal segmentation.

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