The future is now

Editor's note: Carlos Denton is general manager of CID/Gallup, S.A., a San José, Costa Rica research firm.

In 2000, Costa Rican workers were required to select a pension service provider from a list of nine banking and financial institutions. Research conducted for Banco Interfin, a relative newcomer, permitted the San Jose-based bank to develop a competitive strategy which overcame the fears of many potential clients.

Two waves of quantitative research permitted the bank to identify its target customers and to determine what might motivate them to choose its pension program over those offered by competitors. Today the bank manages a respectable share of the $5.6 billion collected nationally each year from workers for this program, and much of its success comes from the research-based promotion and advertising strategy.

The challenge

In 1999, the Costa Rican government signed into law a national pension program for its 1.5 million workers, a program to be funded by a 3 percent contribution of total wages paid. There is no deduction from paychecks - the total cost is covered by employers. Workers do not make financial contributions to this program, but they were required to select a service provider from a list of nine no later than November 2000.

The deadline posed a unique challenge for those conducting the research and creating the marketing program. It meant there was no room for coming back another time if research data was deemed insufficient.

The nine potential service providers, including Banco Interfin, were selected by the government based on a variety of criteria, including financial stability and demonstrated administrative ability to run a large program such as this one.

The competitive challenge for the bank was threefold:

First, once the worker signup period was completed, all those who had not selected a provider were to be automatically assigned to the government-owned Banco Popular. It was necessary to recruit as many clients as possible during this period, because after November, the market would essentially be limited to new workers.

Second, between 1949 and 1990 private banking was banned by the national constitution of Costa Rica. Private institutions such as Banco Interfin, at the time that the pension law was enacted, had only existed for about 10 years. Government-owned banks continued to receive 75 percent of all deposits made in the country because Costa Ricans in general were wary of non-state-owned institutions.

Third, there could be little or no difference at the financial level between the pension programs of the nine competitors. Interest paid, withdrawal policies and administrative costs were all established in the legislation. Customers had to be attracted on the basis of institutional image and service.

Gather basic information

The objective of the first wave of the research program conducted by Banco Interfin was to gather basic information about Costa Ricans and their relations with the national banking system. Using national omnibus survey questions, two important findings emerged. The first of these was that 61 percent of adult Costa Ricans had, in 2000, no relationship of any kind with the national banking system. Of the 36 percent of the adult sample which reported working (either independently or as an employee), more than half claimed to be earning the minimum wage, which at that time was around $200 a month. Many of these were paid in cash, and those who received paychecks visited a bank every 15 days, but only to cash the checks.

Second, top-of-mind recall on a national adult sample of bank names was in the single digits for Banco Interfin, while total spontaneous and aided recall for the bank was in the low 20s.

This data was produced some five months prior to the November deadline for signing up workers for the pension program. On the basis of this information and the short timeline involved in marketing the Interfin pension program, management and the research team decided that it was not possible to convert Banco Interfin into a household name and to successfully build trust in the brand among the population as a whole. Instead, it was decided that the best target for the program would be those workers with a banking relationship and earning over the minimum wage.

Informally it was decided that private enterprise workers were preferable, because of their higher wages as compared to those working in government, and, of course, no applicant would be turned down regardless of salary (in fact the law did not permit refusing anyone).

For the second wave of research a survey of 400 workers, 18 to 45 years of age and residents of the San Jose metro area, was conducted to determine what could motivate them to select one institution over another to manage their pensions.

The sample was designed to be upscale and results revealed that, in fact, only 22 percent reported monthly incomes at or around the minimum wage. Half of the sample was surveyed over the telephone, thus ensuring middle-class or better respondents (lower socioeconomic households in Costa Rica generally do not have telephones, although this is now rapidly changing). The other half of the sample was selected using quotas in demographic segments which had been pre-classified as at least middle-class. In these households, interviews took place face-to-face.

When respondents at this socioeconomic level were asked to name pension program operators, about 7 percent mentioned Banco Interfin top of mind, but 40 percent were able to remember the name of this institution spontaneously.

Nonetheless, two of the government-owned banks enjoyed recall by workers of 72 percent, in the case of the Banco Nacional, and 53 percent in the case of the Banco Popular. When respondents were asked why workers would be likely to select a government-owned bank to handle their pension, the majority cited the security that these institutions provide. Under Costa Rican law all deposits in the state-owned banks, regardless of their size, are guaranteed by the government. This is not the case for private banks like Banco Interfin.

Unlike the FDIC in the United States, which places a limit of $100,000 per depositor, in Costa Rica a client with $10 million in Banco Nacional has the guarantee of the government for the full amount if the bank were to fail.

When asked what were the most attractive characteristics of the private banks as operators of the pension programs, the largest group of respondents (44 percent) stated that they provided a better quality of service. Quality of service was determined by short lines (state-owned banks were cited by respondents as working at a slow pace), personal service and for not making mistakes on statements, in transactions, and in decisions involving customers.

Three-part strategy

Based on these and other findings, Banco Interfin developed a three-part strategy for attracting clients to the pension program. First, all mass media advertising was to focus on the excellent service a client receives at Banco Interfin, coupled with information about its financial stability. Some of the advertising was testimonial and other focused on specific services provided to clients.

Next, the bank approached its corporate and other private sector clients and asked permission to visit them during working hours, and to make presentations to their employees, both collectively and individually. The premise was that if the corporations were using the bank, they must be satisfied with the service and that a personal contact might make the difference when making a decision.

Finally, a direct mail campaign was developed, based on a variety of databases. (Only Costa Ricans in the middle or upper socioeconomic levels can receive mail; household delivery is virtually non-existent). Personalized letters were sent to workplaces and to post office boxes.

Largest percentage

Banco Interfin is now an important operator in the national pension program. In fact, it is the private bank which obtained the largest percentage (11 percent) of the total pension market. The funds captured through this program by law cannot be invested outside of Costa Rica and Interfin has now established a special analytical-operational unit to handle workers' savings.

All of this serves to show that the strategy developed by Interfin was a success and the research program was a major underpinning for all management decisions. Modern thinking based on market research drove the process - the payoff for the bank was satisfactory beyond expectations.