Marketing’s (Only) Three Challenges
By Ron Shevlin, Senior Analyst with Aite
My first job out of school was as an Assistant Executive Director of a large hospital. My boss, a good ‘ol boy from Alabama told me:
“Your job is simple, son. There are only two things for you to do: Protect and grow the business.”
My boss had no experience in the financial services industry, but it looks like some bank CEOs could learn something from him.
A financial marketing agency conducted a survey of 120 CEOs from small banks (asset size ranged from $45m to $3.5b, median size of about $500m). When asked about their biggest marketing challenges, the top three answers were: 1) difficulty measuring marketing ROI; 2) figuring out social media; and 3) insufficient budget. Here are the results from that survey:
| What is your biggest marketing and branding challenge? | |
| Difficulty measuring/proving results/ROI | 60.3% |
| Figuring out social media | 36.4% |
| Insufficient budget/manpower | 30.6% |
| Ill-defined undifferentiated brand | 25.6% |
| Regulation and compliance issues | 24.8% |
| Inadequate MCIF/CRM database | 23.1% |
| Too many initiatives | 22.3% |
| Employee support for marketing, branding, sales | 19.0% |
| Silos in the organization | 15.7% |
| Inflexible and limiting IT | 12.4% |
| Senior management | 11.6% |
| Takes too long to make decisions internally | 9.9% |
| Risk adverse/slow to adopt new ideas | 9.9% |
| Lack of consumer trust in the financial industry | 7.4% |
| Inferior products or pricing | 5.0% |
Source: Survey of 120 bank CEOs, Q2 2012
My take: There are three — and only three — challenges that Marketing faces: 1) acquiring the right customers; 2) retaining the right customers; and 3) growing the relationship with the right customers.
In other words, protect (retain customers) and grow (acquire new customers and expand the relationship with existing ones). Everything else — and I mean everything — is related to one of these challenges.
“Difficulty measuring marketing ROI” is a red herring. If your organization’s rate of new customer acquisition, improvement in customer retention, and growth in existing customer relationship was double what it was last year, and double the rates of your competitors, I’ll bet you $100 that your CEO doesn’t think the firm has a problem “measuring marketing ROI.”
Second, if a bank isn’t putting up strong new customer acquisition and existing customer growth numbers on the board, and its CEO thinks that “figuring out social media” is going to solve the firm’s marketing problems, then s/he should be fired.
And if marketing has an “insufficient” budget, then increase the budget! You’re the CEO! You can do that, you know.
For sure, the folks who prattle on about how the ROI of social media doesn’t need to be calculated (or compared to the “ROI of your mother”) should shut up. But ROI is a tactical — not strategic — measure.
It’s possible that you can run 10 campaigns in a year, generate an average of 250% ROI, and still fall short of overall marketing success if the investments were too small to generate significant growth in customers or profits.
ROI tells you how successful your investments were. But it doesn’t tell you if those investments were the right investments to make, or if you invested enough. I’ll take a 25% ROI on a $10m investment over a 50% ROI on a $100k investment any day.
Before the surveyed CEOs worry about the ROI of the marketing investments, they should be worried about the quantity and allocation of those investments. The research I’ve done at Aite Group suggests that community banks and credit unions are: 1) under-investing in marketing, and 2) not optimizing the allocation of what they do invest.
| Type of Institution | % of customers who referred FI |
% of customers who grew relationship |
Referral Performance Score |
|---|---|---|---|
| Large bank | 32% | 11.9% | 381 |
| Credit union | 47% | 7.5% | 353 |
| Community bank | 34% | 7.9% | 269 |
| Total | 36% | 9.8% | 353 |
Source: Aite Group
According to the research, 34% of consumers who consider a community bank their primary FI referred their community bank to friends/family. That’s two percentage points more than large banks turned in, but 13 points less than credit unions. If — as many people believe — referrals are an important driver of new business, this is a warning sign.
Both community banks and credit unions have a lower percentage of customers who expanded their relationships than large bank customers in 2011. This suggests that community banks and CUs are less effective at marketing to existing customers.
Improving the measurement of marketing ROI isn’t going to fix these challenges for community banks and credit unions. “Figuring out social media” would have to produce miracles in order to close the gap in customer relationship growth when you consider that the percentage of consumers who follow their financial institution on Twitter is in the single digit percentages and barely in double digits for Facebook. And throwing more money at marketing won’t help if that money isn’t put to productive use.
Bottom Line: Bank marketers need to begin marketing-related discussions with the senior management team focusing on the three challenges. Any discussion of tactics and strategies should be put in the context of how potential investments and initiatives address the challenges.
Ron Shevlin is a senior analyst at Aite Group, a Boston-based research and advisory firm serving the financial services industry. You can pick up a copy of Ron’s latest book, Snarketing 2.0, at Amazon.com. The book is a balance of keen, entertaining observations loaded with educational and practical advice that doesn’t pull any punches. Ron is a regular contributor here at The Financial Brand. You can read more from Ron on his blog, or follow Ron on Twitter.
All content © 2013 by The Financial Brand and may not be reproduced by any means without permission.
I disacgree with Ron, it’s not the job of Marketing to retain the right customers…once a person becomes a customer, it’s up to the rest of the organization to provide the level of service and products that the new customer wants…sure Marketing can help get the message out about those products and services but retention of customers is where the rubber hits the road.
Retention of customers and in my opinion growth of relationships should be measured by the service side of the organization – not marketing.
Ron, I’m reminded of Peter Drucker’s description of a business’s mission — to create and keep a customer. It’s a message that never goes out of fashion but is too often hidden in detail that diverts attention and focus.
Brian: The following is a fictitious conversation that could occur if your premise is true:
CEO: Attrition rose from 10% to 15% last quarter, Tom. What are you doing about it?
CMO: I’m not doing anything about it, Jerry. It’s not my job to retain customers.…Once a person becomes a customer, it’s up to the rest of the organization to provide the level of service and products that the new customer wants… To be sure, Marketing will help get the message out about those products and services but retention of customers is where the rubber hits the road.
CEO: I’m not sure you need to come in tomorrow, Tom. Or ever again for that matter.
——-
Sorry, Brian. I understand your point about the role the broader organization plays in keeping customers and growing the relationship, but Marketing takes responsibility for it.
Nice post. If someone was to come to me and ask me what my top challenges are, I think my list would look a lot like the one above; measuring ROI, social media, budgets, etc. would all be there. If that same person asked me what my goals are, it would be acquiring, retaining and building relationships with customers.
It is not that the three goals are not challenging for marketers — they are — we just break down these challenges into smaller challenges/tactics. While it is important to focus on the smaller challenges, it is even more important to know you are moving forward with those three goals.
Ron,
As you know, I’m no marketing whiz. But I see a critical flaw in how FIs perceive and subsequently use the Marketing function. The comments above seem to support this.
When products become commodities, as in banking, we can either be a cost leader or find a way to break the commoditization by uncovering a value proposition in the minds of our customers.
Fretting about the ROI of our next campaign does nothing to accomplish this.
~ Jeff
We try to get our credit union clients to have a retention, acquisition and prospecting strategy on every campaign. We believe you can’t plan for the future and adapt to a changing market if you’ve only got your eyes on the present. We agree, Ron, this is marketing’s job.
Ron,
I agree with you – the challenges are in attracting, retaining and growing relationships with the right customers. Everything else falls into discussions on tactics to accomplish these goals. Not seeing retention as a challenge is a crime in the marketing world – give any marketer with that perspective the boot!
I agree with both Ron and Nathan…
The “goal” of every FI is acquiring, retaining and building relationships with its clients. In order to accomplish this, marketing needs to support the business developers (BDO’s) and bankers to do what they need to in order to accomplish these objectives. We cannot just rely on one – the Marketing Dept. OR the BDO, OR the service providers. It needs to be a collaborated effort on all fronts.
Sure, the ROI, Social Media, etc. are great measurements and tactics, but it all boils down to…taking care of and placing your clients first! It is pointless to market to and bring in new clients, while the existing ones are walking out the back door. That’s exactly what will happen if the service providers and relationship managers are not taking care of them – and that takes marketing dollars. No business will ever grow that way.
-Steve
First Republic Bank
Congratulations Lauren. You submitted comment #4,000 here at The Financial Brand! (Sorry, no prize though.)
Ron
You just hit the ball out of the park! I ran the marketing of a finance company/merchant bank for 7 years and grew its fund from $90m to $1.3b. Initially I was asked by accountants for an ROI on our spend but we ditched the measure to acquisition, account growth and retention. By beating our competitors on these measures and investing in tactics which supported that growth we grew at stellar rates.
The fallacy is that big banks actually think in customer terms. For the most part they don’t. It’s why so often the their brand promise doesn’t match the customer experience.
Perry
Really good to see post GFC things haven’t changed!