Evening star., 1932-01-16

Morris Plan Bank Of Virginia in Rich
mond analyzed the cost of the banks
Christmas Club and reached the con-
clusion that the club was not a source
of profit to the institution, according
to Rosser Reeves, manager OF the
banks Research Department, In an ar
ticle In the current issue Of the Amer
ican Bankers Association Journal. A
summary of the data uncovered by the
analysis Is given below.
In 1881 the Morris Plan Bank OF
Virginia found itself in possession OF
the largest Christmas Club in the
state. 1t asked itself a question:
What is the actual worth Of these
$4,000 accounts?"
A preliminary cost analysis revealed
n fact which Is, in all likelihood, true
for any bank with Christmas Club,
namely. that the average amount of
Christmas money on deposit Is not OF
sufficient volume to make profitable
the cost of handling the accounts.
Three Sources of Value.
That left only three ways that a
Christmas Club could be Of direct value
to the bank. First, as q means Of in
stitutional advertising, creating among
depositors q feeling of loyalty and
good will for the bank; second, as q
developer Of regular savings volume
through the opening OF regular savings
accounts by club members, and third
as a developer of loan volume. Then
the Research Department got to work
in earnest. The cash loss on Christ
mas Club accounts was certain Gas the
fuller analysis later proved conclu-
-, 1uN hn thron
values purely fictitious?
The first question was that of the
number of repeats" as opposed to the
number Of "non-repeats." How many
of the club members came back and
how many went to other banks? In
order 10 get some idea as how best to
proceed, small preliminary analysis
was made which indicated that 68 per
cent of the accounts in the 1880 club
did not come back In 1891, although the
1881 club was larger by several thou
sand membersl In order that the
causes underlying such strange con-
ditions might be reached, 1000 &C
counts were selected at random, di-
vided into repeat" and "non-repeat'
groups and they in turn were divided
into size groups $50 cents, 81, So, So
because truths valid for one group
might be neither valid nor applicable
to others,
6S.s Per Cent mon Repeats"
OF the 1000 accounts, 40.8 per cent
were In the 50-cent class, Alb per cent
in the 81 class, 14.1 per cent In the 81
class and 3.3 per cent In the S. class
This gave an average cross-section OF
the entire club. Work sheets were then
printed and data relating to every con-
ceivable angle of the club set down
The object was to discover the academic
IS well as the practical truths, because
In the course Of events academic truths
frequently become urgently practical
ones.
The large analysis bore out more
accurately the findings of the small
preliminary analysis, showing that 68.e
per cent of the 1880 club did not repeat
in 1881 despite the increased member
ship. 1t showed further that the larger
percentage of "non-repeats" was in the
smaller-size groups. For example, til
per cent of the 50-cent class did not
repeat, and only sos per cent Of the
was less valuable IN this respect than
each higher-size group. The figures
made it further obvious that, as far a:
the public Is concerned, the Christina:
Club Is what advertising men term 9
convenience conmodity"-in a class
with cigarettes, soft drinks and
matches.
The evidence an the way through
points to an improbable contact when
pressure Is brought to bear in procur-
ing accounts, and particularly when the
club member has his sole contact with
the bank through third party.
Larger More Valuable.
To sum up, 1t was found that more
Of the 81 class came back into the
bank than did the 50-cent class; that
more of the 50 class came back than
did the 81 class, and that more Of the
SIS class came back than did the 81
class, proving that the larger accounts
are more valuable on loyalty basis
than the small. An outside analysis
showed also that accounts secured
through pressure were Improbable on
the loyalty basis and that many per-
sons did not know the names Of the
banks that carried their Christmas Club
accounts, and that many store and fac
tory employees, in the habit of turning
their deposits over to fellow employees
for deposit, had never been in the lobby
of the bank even when their ledger
cards showed 80 and 40 deposits.
The next question taken up was the
value of the Christmas Club as a source
for regular savings accounts. In this
connection, the names of the members
were checked against the savings files
It was found that as per cent Of the
members in the 50-cent class had
opened savings accounts since they be-
gan as club members, IA per cent OF
the 81 class, 1913 per cent OF the 81
class and 10.7 per cent of the $5 class
This made total Of 6.6 per cent Of all
the members who had opened regular
savings accounts. 1t should be noted
that as far as regular savings deposits
are concerned, the larger club accounts
are more profitable than the smaller
accounts.
Balances Under S100.
The average balances of these saw
ings accounts were then analyzed In
order to find out whether this 6,6 per
cent was constituted of profitable o.
improbable average balances. The sc
per cent constituted 131 savings ac-
counts, meaning that 131 out of every
1000 club members had opened regu-
lar savings accounts after they hac
enrolled as club members.
OF this number 80 accounts had an
average balance under $40, 33 had a
balance between $40 and $50 and &c
had balances ranging from $50 to $1O0
This makes total of 6947 per cent
of these savings accounts which had
balances of 500 and were of question
able profit to the bank. Out of the