Advertising free checking can sometimes be a risky proposition.

Does free checking advertising work? That depends, according to a recent survey done by Howard Merrell & Partners, Raleigh, N.C. Under certain circumstances--new bank, new market--it makes sense. However, in general, such ads are not cost-effective and sometimes may be counter-productive.

The company based its conclusion on online surveys in two mid-sized southeastern U.S. markets.

Household banking decision-makers were asked about recent TV free-checking advertising by one of the nation's largest banks. The company obtained 2,206 completed surveys, and weighted the data to match U.S. Census age and sex distributions for each market. Both markets responded similarly.

The ads scored well on many conventional criteria, such as aided recall (respondents were shown images from the commercial); average believability; average likeability; and average uniqueness.

On the other hand, the ads didn't seem to have much behavioral impact. Only 6 percent of respondents who recalled the ad said they had contacted any bank in response, and 66 percent of those contacts were not with the advertising bank. In fact, some of those other bank contacts were made by current customers of the advertiser.

The company concluded that the advertising campaign was ineffective because there was little unmet demand in those markets for free checking. In particular, 79 percent of those who recalled the ad already had free checking somewhere, and most respondents had little prior interest in obtaining a new free checking account.

"Although these ads were fairly widely recalled and fairly well perceived, they generated very little incremental business for the advertising bank, while generating at least as much new business for its competitors," says Bruce Hall and Eric Small of the company.

While banks may need to offer free checking products to be competitive, and should make information on those products available (e.g., in branches and on websites), institutions should be cautious about the use of free-checking advertising campaigns. "Calling attention to the features of your free checking (or any other) product is risky unless yours is a clearly superior offering," says Hall and Small.