Royal Bank of Canada has
kicked off the New Year by announcing one of the most significant
retailer partnership deals for many a month, partnering with
Shoppers Mart. RBC head of Canadian banking Dave McKay tells
Douglas Blakey that the deal with Shoppers represents a ‘marriage
made in heaven’.
Go deeper with GlobalData
Canada’s largest
retail lender, Royal Bank of Canada (RBC) has teamed up with the
country’s largest retail drug store group, Shoppers Drug Mart, to
offer its debit cardholders more ways to earn points via a new
co-branded debit card.
RBC and Shoppers will launch the
RBC Shoppers Optimum card on 17 March.
The multi-year deal has been in the
planning for two years and represents an eight-figure marketing
investment from RBC to bring to market.
Cardholders will earn double
Optimum points every time they make a purchase at a Shoppers Drug
Mart store (Pharmaprix in Quebec) and earn points on purchases made
at other retailers.
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By GlobalDataMembers of Shoppers’ Optimum
loyalty programme currently earn 10 points for every C$1 ($0.98)
spent in-store.
RBC head of Canadian banking Dave
McKay told RBI: “We are so excited by this deal. It brings
together two great retail brands to enhance the customer experience
around convenience and value for money and advice.
“It is the perfect partnership and
represents a unique offering in the market place, in particular the
way we are thinking about distribution and product together.”
The distribution aspects of the
deal are primarily two-fold: increasing the size of RBC’s ATM
network and the bank placing employees within Shoppers’ stores.
RBC will install 300 ATMs within
Shoppers Drug Mart/Pharmaprix 1,198-strong-retail network across
Canada, with scope for even more to follow in due course.
RBC already operates the largest
ATM network in Canada with 4,626 units.
McKay adds: “We will have some of
our best employees in the Shoppers’ stores talking to
customers.
“We will use the innovative digital
media already being rolled out across our branch network, such as
Microsoft touch technology, to wow the customer.
“We might show a 30-second demo to
customers and then encourage them to follow up online, by phone or
in an RBC branch.
“For us, it will be a golden moment
of truth to sell ourselves and create sufficient initial interest
to enable a sale to be closed at a later date.”
Last year, McKay told RBI
of the exciting possibilities offered by expanding the use of touch
technology.
“It opens a whole world of
possibilities. You can split the screen into two, so you have an
adult working out mortgage calculations while a child is doing a
puzzle.
“Surface technology can be used in
every branch. Also, there is scope to use branch floor space so
much more efficiently.”
Deal complements
multi-channel strategy
The tie-up with
Shoppers complements RBC’s existing multi-channel investment: a
doubling of spend on its revamped online channel; the country’s
largest mobile sales force; further investment in Canada’s biggest
telephone banking service, RBC’s new Retail Store Concept and
mobile banking offering.
RBC’s belief in the mobile channel
was marked last October by rolling out an Android banking app,
making RBC the first Canadian lender to offer fully integrated apps
across the three most popular smartphone platforms: iPhone, Android
and Blackberry.
The last named investment is
already paying off with RBC the first Canadian bank to hit 1m
downloads of its mobile application
In 2012, RBC will continue to open
or refurbish a new branch every week with each unit based on the
Retail Store Concept.
“The Store concept is progressing
very nicely and we are extremely happy with it,” McKay says. “But
as part of our prudent cost management strategy, in a lower rate
environment in 2012, we will not open as many perhaps as we would
like to.”
According to RBC, Shoppers’ Optimum
loyalty programme is the most successful such programme in Canada
both by membership and in terms of customer engagement.
Since its launch in the late 1990s,
the programme’s membership has exceeded 10m.
More than 8m customers to
target
Of those, more than 10m, 85% are not
currently RBC clients, giving the bank access to more than 8m
potential new customers.
RBC and Shoppers will promote the
deal via an integrated marketing campaign, including in-branch
marketing activity.
On the product side, future
products are already at the planning stage.
“There is a suite of products we
can roll out under the shoppers programme and we are thinking about
mortgages insurance, for example,” says McKay.
“While there are other loyalty and
co brand programmes out there, this partnership is quite unique in
Canada.”
For its part, Shoppers will benefit
from increased footfall in stores where new ATMs are located.
Shoppers gains a new revenue stream
with RBC paying the retailer for the points accrued by RBC
customers joining the programme.
McKay adds that the retailer also
gains from its customer base becoming more engaged with
Shoppers.
“On an ongoing basis, we will put a
lot of effort behind the programme and can, for instance, piggyback
on Shoppers’ existing promotional activity,” he says.
RBC expects to tap into Shoppers’
highly successful promotional days when 10 or 20 times the normal
number of loyalty points are on offer.
“Very efficient, high-return
marketing tactics can maximise RBC’s return on investment here. We
have high hopes for it.”
In fiscal 2010, Shoppers’ posted
sales of around C$10.2bn; it also operates 63 Shoppers Home Health
Care stores.
RBC rival offerings include BMO’s
partnership with Air Miles: BMO debit cardholders receive one Air
Mile for every C$40 spent on their debit card.
Last October, BMO also launched a
co-branded online checking account with the 1,300-branch-strong
food chain, Sobeys.
Scotiabank’s product range includes
its Moneyback account, offering 1% cashback on debit card
purchases, up to a maximum of C$300 a year.
Record year for Canadian
unit of RBC
Another year, another
record performance at the domestic unit of Royal Bank of Canada
(RBC).
Net profit at the Canadian division
of RBC increased by 14.7% to C$3.49bn for the 12 months to 31
October, boosted by market share gains in retail deposits, retail
lending and business deposits.
“We are absolutely thrilled. We
knew we had done well but then we saw our competitors’ results and
we felt even better about how we had performed relative to the
street. It is a testament to 35,000 people.”
One of the core differentiators for
RBC was its stable net interest margin in fiscal 2011, down by two
basis points to 2.73%.
“We outperformed the market in
terms of volume growth by 65%,” adds McKay.
“We enjoyed volume growth of C$41bn
year-over-year while our nearest competitor did C$29bn.
“So while we posted huge volume
growth at a very stable margin our competitors did less volume at
lower margins.
“It comes back to our core
differentiating value proposition: delivering advice through the
modern convenience of the multi channel experience we have invested
so heavily in.”
At group level, RBC posted earnings
from continuing operations of $6.7bn for the 12 months to 31
October, up 16% Y-o-Y.
Notable highlights included a 120
basis point increase in RBC’s market share for retail deposits, up
from 20.6% to 21.8% at the end of fiscal 2011
Retail deposits remains the one
major metric by which RBC does not rank first by market share, but
McKay says it is now close to achieving that goal.
“We are now breathing down the neck
of the market leaders for retail deposits and believe we are only
about C$3bn or five to 10 basis points behind in deposits,” he
adds.
RBC strengthened its market share
lead for retail lending, gaining 20 basis points to 23.6% while
business deposits and personal investments market share gains of 20
and 10 basis points respectively were also posted.
18% FTE productivity
increase
Of particular
satisfaction to McKay was an 18% rise in employee productivity in
2011.
“Total employee numbers were flat
but we managed to increase branch opening hours by an average of
500 hours during the year: a 10% increase in hours,” he says.
“Increased incentives and improved
performance by our team drove an additional 8% increase in
productivity.”
Less positive was a 70 basis point
fall in market share for small business loans during 2011, although
RBC retains a healthy lead in this sector, with a 25.2% market
share.
McKay says he was not happy with
that aspect of the bank’s 2011 performance and it is a weak spot
RBC needs to improve.
“We lost clients we do not want to
lose but it is tough to retain a 26% market share. We exited the
year with 8% growth, compared to zero growth 12 months ago. So we
are fighting hard for customers and had better momentum towards the
end of the year.”
The only fly in the ointment for
RBC at group level related to its ill-fated foray into US retail
banking: RBC took a C$1.6bn hit from its US retail arm sale,
primarily a write-off of $1.3bn of goodwill and intangibles.
Looking ahead to 2012, McKay is
committed to the group wide drive to lower costs.
A number of initiatives were
launched towards the end of 2011, such as migrating customers’
redemption of Travelocity rewards points from the contact centre to
the online channel.
RBC will continue its drive to
convert more customers from opting to receive paper statements in
favour of online while the continued growth of digital channels
will result in calls to the contact centre.
“In 2012, we will continue our
strategic investment in modern convenience; we will continue to
invest heavily in advertising to highlight our core value
differentiators and continue to grow our mobile sales force.
“It can be summed up as simplifying the business and growing our
distribution advantage.”
