Washington Mutual Savings Bank's chief, Kerry K. Killinger, was eating breakfast at a Seattle club recently when a stranger yelled: "I merged with Washington Mutual today."

It was music to Mr. Killinger's ears. The slogan "Merge with Washington Mutual" is the centerpiece of a two-month-old ad campaign that has touched a chord in a market shaken up by deals involving BankAmerica and KeyCorp.

Benefiting from Anxiety

Marketing pros believe that customers are up for grabs when banks merge. Washington Mutual's success shows how one well-positioned institution has capitalized on the confusion and anxiety caused by the fusion of rivals.

"People think it is clever and appealing," said Carole A. Aaron, marketing research director at Fisher Broadcasting Inc. in Seattle, about Washington Mutual's advertising. "[Washington Mutual is] saying, 'These megacorporations are merging--you little people can emerge with us.'"

The "merge" campaign, designed by the Seattle office of McCann-Erickson USA Inc., has given a burst of speed to what was already a successful drive to build checking volume at $ 7.3 billion-asset Washington Mutual, the Northwest largest thrift.

In May, the first full month of the "merge" drive, Washington Mutual signed about 6,500 new checking customers, more than 2 1/2 times the total in May 1991. At the end of last month, Washington Mutual had roughly 120,000 checking accounts, up about 45% in 11 months.

The thrift unveiled the merger theme shortly after Puget Sound Bancorp, Washington's largest independent commercial bank, announced it was selling out to KeyCorp of Albany, N.Y. and just before BankAmerica Corp.'s Seattle-First National bank completed its takeover of Security Pacific Corp.'s Washington unit.

BankAmerica's agreement to sell 86 Security Pacific branches to KeyCorp and Idaho-based West One Bancorp further roiled the banking waters.

Not surprisingly, competitors play down Washington Mutual's success.

Seattle-First said checking volume remains strong. "We are seeing some Security Pacific customers going to competitors, but we are gaining customers overall," a Seafirst spokesman said.

Strategy Questioned

Puget Sound president Don G. Vandenheuvel said Washington Mutual's checking surge was mainly attributable to heavy price discounting, not the merger theme.

As part of its promotion, Washington Mutual is offering free checking to customers who have another account with it.

Giving up service-charge income will cut deeply into profit margins, Mr. Vandenheauvel warned. "It's going to come back to haunt them."

Washington Mutual's marketing chief, Deanna Oppenheimer, said, however, that the requirement that customers hold another account to qualify for free checking makes the relationship as a whole profitable.

Until recently, Washington Mutual was a minor player in the Evergreen State's checking-account market. Last fall, just 4.8% of Seattle-area adults responding to a Fisher Broadcasting survey said they held a checking account with the thrift, far below the market leaders.

As part of a strategy to establish itself as a broad-based retail bank, Washington Mutual started an in-branch sales push on checking accounts about a year ago. Last fall, it unveiled its free-checking offer to customers with other Washington Mutual accounts.

No Brush-Offs

At the same time, the thrift launched a heavy media campaign projecting itself as a proconsumer "friend of the family." Television spots showed lilliputian-size husbands and wives getting the brush-off from commercial bank executives in pinstripes.

The sales drive bore fruit. Washington Mutual's opening of checking accounts rose from about 1,000 a month early in 1991 to roughly 3,000 a month in the first quarter of 1992.

Then, in April, the thrift unveiled its refurbished campaign based on the "Merge with Washington Mutual" slogan.

Marketers compare the promotion to a recent successful "Switch to Seafirst" saturation campaign, which pointedly asked people to move from their current bank.

Like Seafirst, Washington Mutual threw in as much hoopla as it could, supplementing advertisements with bumper stickers, coffee mugs, and other paraphernalia emblazoned with the merge slogan.

"We fashioned it like a political campaign," said Ms. Oppenheimer.

Print, radio, and outdoor advertising hammered on consumer anxiety about bank combinations, taking advantage of Washington Mutual's position as the largest institution in the state not going through a megamerger.

"If your bank is merging, send for this helpful book," blared the headline of one newspaper ad above a picture of a Washington Mutual checkbook.

As secondary themes, the thrift drew on its an image as a "friend of the family," stressing that it is a consumer bank that "doesn't do business with big business." And it highlighted its independence and local ownership.

Meanwhile, Washington Mutual has continued to run its "little people" television spots.

The merge ads were "more aggressive, but not a departure" from previous appeals, said Ms. Oppenheimer, noting the elements from old Washington Mutual campaigns. She said that new customers "are coming from a lot of other banks that are being merged," including Security Pacific and Seafirst.

Another Opportunity

Washington Mutual said it hopes for another surge in checking openings in the fall when Puget Sound is joined with Key Bank Washington.

Ironically, while it tries to lure customers whose banks have been sold out from under them, Washington Mutual has itself been an active buyer of smaller thrifts.

In the last several years, it has initiated eight acquisitions in Washington and Oregon totaling some $1.5 billion in deposits.

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