Summit Bank CEO Terrance M. Davis knows being socially responsible can pay off big in customer loyalty, but he never realized how big. In 2003 the $230 million-asset bank in Sonoma County, CA, faced a migraine familiar to other community banks in a hyper-competitive market: how to differentiate itself in a commoditized market.
Then Davis stumbled across COMMUNITYsmart, reportedly the first automated loyalty, rewards and philanthropy program that electronically collects and distributes cash for schools and nonprofits from transactions through debit, credit and cash purchases with a "community card." The program, which uses a patent-pending platform by Nietech Corp., is expected to generate $1.5 million in net donations in 2005, or a year after 15,000 cards are issued.
The bank is only about 25 percent toward that goal, with 4,000 cards on the market now. Most of those are community and debit cards issued since October, but credit cards were offered starting in April. The community card is swiped at the point-of-sale to trigger donations when paying with cash or check. All three cards provide the cardholder another option, too: converting points to personal rewards for airline miles or gift certificates.
The program pledges to be a win four times over-for the bank, the nonprofit, the merchant and the customer, says Davis, who says he hopes the program will be a key customer-retention tool. "When we first heard about it, we thought, 'What a great concept,'" he says. "There isn't anyone we've talked to who has had any reservations. It's a triple win. Once people find out about it, it's 'Oh, wow. That's unbelievable.' Everyone we talk to about it wants a card."
Consumers can designate up to four nonprofits on the approved list of about 100 to receive the quarterly rebates, which range from 1.5 to 6.5 percent cash on each purchase, depending upon bank-merchant arrangements. Nationally, about 850,000 organizations are registered as non-profits. About 25 percent of net merchant rebates goes toward processing costs. Merchants, whose fees fund the program, have been particularly enthusiastic because they are constantly solicited for donations by schools and nonprofits, says Nietech CEO Barbara Rambo.
The community card, which helps those without a credit history to accumulate points toward personal or community rewards, was a sleeper deal, but more than 2,000 cards have already flooded the market, says Davis. "It was easiest to distribute," he says. "What was important to us was to be able to say 'yes' to everyone, regardless of credit history."
Pricing includes an initial set-up fee for designing, establishing and testing the program and a monthly administration fee, all on a sliding scale based on number of cards issued. "It's a tremendous bargain at twice the price," says Summit's Davis, who notes that the MasterCard-embossed cards are cobranded with Nietech.
Larry LeMaitre-Roberts, Nietech's co-founder and chairman, says a key motivation was to help merchants deal with the myriad requests from nonprofits in their community for donations. "Most corporations are community-minded, but there hasn't been a good vehicle to respond to all the requests they receive," he says. "What inspired this was to find a way to enrich community groups that are in and out of funding crises and to find a way to help consumers support their community."
The marketing opportunities are huge. Indeed, about 75 percent of the current 4,000 cardholders were not original bank clients, Davis says, noting that "most modest-sized community banks would struggle a long time to get them." He couldn't guess how many of that percentage actually set up checking or savings accounts at the bank.
"The system is definitely linked to revenue generation and customer acquisition and retention," says Rambo. "We looked very, very carefully at the key factors that drive consumer behavior. They are incredibly cost-motivated and will change behavior if a merchant supports a cause they care about."
Davis hasn't been blindsided by the success of the program, which warms the heart of LeMaitre-Roberts, a long-time Bay-area community activist who devised the idea after noticing how much time organizations wasted on fundraising-and knew there had to be a better way.
Guess there was.
