The newest trend in small-business loyalty relationships may carry the rather bland moniker of "enterprise awards" or "enterprise loyalty," but the terms belie the importance of the one-two punch in perfectly grooming a group for cross-selling.

Citigroup's "Thank You" plan, which ties together several banking services geared to the small-business owner, is a great example of this next-generation twist, says Red Gillen, senior analyst at Celent. Fewer than two percent of banks are doing this kind of customization. "It's on the very cutting edge of loyalty programs," he says.

A Citigroup executive was not available to talk, but according to the company's literature, the program allows a customer to earn points for using a credit card or a bank account, or even shopping at retailers that participate in the program.

Small firms have long been eligible for awards points whenever they use various bank products-usually a debit or credit card-but now a few banks are expanding the programs to enable those businesses to reach point thresholds quicker, and build loyalty among small businesses faster.

The points accumulate in a joint account to be redeemed later. For a small-business owner, the attraction is in seeing award points accumulate from various services, so it takes them a shorter time to reach the set threshold, as opposed to just receiving points for, say, a credit card, Gillen says. It also allows banks to try to market the services that aren't "sticky," he says, like a business-checking account. Banks are also adding payroll, direct deposit, checking accounts and cash-management services to the list of point-eligible products. This idea, Gillen says, may be what makes cross-selling to small-business customers a reality at long last. "It takes into account the whole relationship with the small-business customer," he says.

Those elusive small-business customers are getting harder for banks to snag, largely because they have so many payment options besides banks. Big retailers like Home Depot, for example, offer payment terms to small businesses via store cards.

Carlos Dunlap, vp of strategic services at Maritz Loyalty Marketing, helps banks evaluate the effectiveness of their awards programs. The ubiquity of programs has made them commoditized. "Every point program out there can de duplicated," he says. "Customer loyalty is the goal. The points are just the mechanism."

The elusive part is still in establishing a real relationship with a small-business customer. The biggest challenge in that regard is offering a "reward" the small-business owner actually agrees is a benefit, he says.

Consumer programs offer airline or hotel benefits, but small businesses need something more specific to them, and less conventional, like free meeting space or networking opportunities. Dunlap expects more banks to begin creating networks of small-business customers to provide various services for redeemable points or discounted services, such as cleaning services or shuttle services. "All the pieces are there," he says. "It's just a question of bringing them all together." He guessed that it would be 2008 or 2009 before that happens on a wide scale.

Small businesses are indeed a tough crowd for cross-selling, says Christine Barry, research director at Aite Group, a financial-services research firm. The 30 largest banks have had only "moderate success" in cross-selling and establishing deep relationships with small businesses, according to a recent Aite study. This is despite the fact that 62 percent of small businesses bank with large banks.

Moreover, she says that a bank's online capabilities are the top priority of small businesses when choosing a bank. She notes that banks will seize on that opportunity over the next 24 months by offering many more online tools to make their online offering more attractive to small businesses. The goal, she says, is to create a more vibrant Web site so the small-business customer will not feel compelled to leave the site, and, consequently, build deeper loyalty.

Small-businesses customers are tricky because of the imbalance of their demands. Barry says they want the best service possible, but they want a deal. "Small business like to have their hands held, but they are also price-sensitive." (c) 2007 U.S. Banker and SourceMedia, Inc. All Rights Reserved.

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