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Banks’ Future Hinges On Sharpening Digital Marketing Skills

In the next decade, bank and credit union marketing will look very different than it does today, as traditional media surrenders its position of dominance to digital and online channels. That much is clear. What’s less certain is how — indeed if — social media will play a central role in growing new relationships.

The year is 2017. No longer can bank and credit union marketers hide behind the vague and ambiguous ROI that plagued the traditional marketing campaigns of years gone by. That’s because everything (that matters) is happening in the digital universe. And that means everything can be monitored, measured, quantified, defined and tracked.

“Why are we running generic billboards on the highways,” CEOs will ask their CMOs, “when we can deliver targeted product offers with specific relevance to a unique market segment?”

in other words, how can financial institutions justify traditional marketing investments when offers can be delivered with measureable pinpoint accuracy in digital channels?

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Huge Unrealized Potential

A study from the European Financial Marketing Association (Efma), in partnership with tech vendor Wipro, has released a study examining how digital technologies, social media and the explosion of online data are redefining engagement models in the retail banking space.

In the Global Retail Banking Digital Marketing Report, Efma and Wipro assert that the proliferation of banking channels has rapidly changed the way consumers use financial services, and will continue to do so at a breakneck pace. Digital will promptly be the reigning champion for many (most?) financial interactions, forcing banks and credit unions to evolve their marketing efforts from broad brand-based and branch-focused campaigns to a true, integrated, multichannel approach. One big question looms in the background: Why haven’t financial institutions done this already?

Researchers from Efma and Wipro were dismayed by how long it’s taken financial institutions to develop their digital marketing capabilities… that is, as far as they have to this point. There’s clearly still a long way to go, and the potential for improvement at most banks and credit unions is huge.

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Efma and Wipro say that only one in eight banks currently possess the digital marketing acumen that will be de rigueur in tomorrow’s online wonderland.

“Banks everywhere are putting online and mobile banking at- or near the top of their agendas,” says Rajan Kohli, VP/Banking and Financial Services at Wipro. “There is still a high degree of uncertainty because banks are still learning, and the digital environment is constantly changing.”

And this hyper speed, hyper fluid dynamic is precisely why testing will be a central theme dominating marketing’s future. In the online and digital world, there’s no excuse… You can test everything: products, offers, rates, fees, incentives, giveaways, headlines, design executions, etc. You’ll have to run experiments and find a winning approach quickly just to stay competitive.

Testing, segmentation, data analytics. These are the cornerstones of a digital marketing strategy… and concepts financial institutions struggle with today, slogging around with the most primitive tools imaginable. This will make the learning curve steep for most financial marketers — huge deficiencies to overcome in a short period of time — but banks and credit unions must conquer their (digital) marketing weaknesses in order to survive.

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Tighten Those Segmentation Skills

Segmenting the customer base is not a new idea in the banking sector. It’s been around — at least in theory — for decades. While some banks have restructured their entire retail business around various customer segments, most financial institutions still use crude models to breakdown their audience (e.g., “adults ages 18-55 living within 5 miles of branch X”). When working in digital channels, bank and credit union marketers’ segmentation models will need to be much more sophisticated than they are today. In the Efma/Wipro study, a commanding 90% of banks said customer segmentations strategies will be on the rise in years to come.

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Return on Marketing Investment

Measuring the return on marketing investment (ROMI) has always been a CMO’s goal. How else could they decide how to allocate their marketing spend, or justify to the CEO you need more budget to work with? Measuring the direct financial benefits of activities like brand advertising is a challenge, but measurement is much easier for direct marketing campaigns. In the digital world, it should be even easier because of the number of ways that responses and reactions can be tracked.

In practice, what the Efma/Wipro study shows is that only one in four banks measure their ROMI for more than 75% of their digital marketing campaigns. Half seldom measure digital ROMI, if ever.

Researchers conclude that banks mostly fall into one of three categories:

  1. No effort to measure results of traditional campaigns
  2. Measure a small sample of campaigns
  3. Measure everything they spend on traditional marketing to justify the investment

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While researchers concede that there are several banks in the third category — those measuring everything offline — who are otherwise not particularly sophisticated in their approach to digital marketing. The conclusion? There is low level of digital marketing maturity among banks and credit unions.

In the Efma/Wipro study, banks noted problems tracking the very large number of small campaigns they run, the cross-channel nature of many of the campaigns, and the need to measure different stages of the sales funnel to get useful data. Banks also admit that they can’t track results in real time, so the feedback loop is usually quite slow. It’s hard to pivot when it takes three months (or more) to calculate the final tally for each campaign.

There is also a question about what to measure when calculating ROMI. Typically, a bank will use a product value calculation, so the number of products sold can be translated into a quantifiable return. Efma and Wipro say it would be much more effective to use customer lifetime value (LTV) when factoring ROMI, but according to their survey, only 15% of banks are able to do this.

Perhaps the most surprising comment from participants in the study was the opinion that there was enough “low hanging fruit” ripe for picking in digital channels that it was not really necessary yet to measure the effectiveness of each campaign. If that is the case (and it’s disputable), it almost certainly won’t be true in the future when everyone else in the banking game catches up.

Getty Images | Content Marketing

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Struggles With Social Media Continue

Involvement in social media is now standard practice for banks, though typically this is limited to marketing communications and monitoring of complaints on bluechip social media platforms, primarily Facebook and Twitter. The big challenge is to achieve “digital customer engagement” — developing more meaningful digital interaction with customers as an effective replacement for traditional face-to-face banking interactions.

The Efma/Wipro study revealed that social media was not yet a part of mainstream marketing and is still not considered a key customer interaction channel. In the survey, researchers discovered that social media efforts were mainly managed by the marketing department with help from the branding and communications teams (when available). 80% of the banks surveyed said their social media spend was less than €500,000 annually ($662,500 USD). And keep in mind: these are among the world’s biggest banks we’re talking about here. Half a million is nothing to these guys.

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There are very mixed views about extending transactional capabilities (such as accessing a bank account or making payments) to social media, and most banks are not pursuing this as a strategy. The general preference is to lead customers back to the bank’s proprietary online and mobile services where security can be ensured and better service provided.

“Social media introduces lots of new issues for banks in their digital marketing activities,” notes Kohli from Wipro. “Most banks have some form of presence on social media but how far should they develop transactional capability, and how deep should they make customer engagement?”

Download The Complete Report Now

The Efma Marketing Survey and the Efma Digital Channels surveys were conducted between November 2012 and April 2013. Over 100 banks from 38 different countries participated in two surveys. 62% were from small banks and 38% were from medium/large banks. 58% were from low/medium income countries, and 42% were from high income countries. Interviews were also conducted with senior marketing or digital channels executives at 14 banks from a range of different countries,

The complete 34-page report, inclusive of views from leading digital banking professionals on the changing contours of digital marketing can be accessed by clicking here (immediate PDF download, no registration required).

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FMCG Direct | Focused Excellence in Financial Services Marketing

Comments

  1. Great insight and now is the time to prepare as consumers continue to shift and adopt digital channels. Social media should fall under the umbrella of digital marketing strategy.

    From our on going research, many credit unions are grossly unprepared for this shift and will require them to destroy the box on current marketing models and business development systems.

    From a recent survey of marketers attending the Marketing Association Conference in Vegas, 65% responded they currently have no digital engagement budget or have a budget less than $30,000.

    This follows a similar pattern found from the same survey taken by marketers attending the Marketing Association of Canadian Credit Union conference where 56% responded they do not currently have a digital engagement budget or have a budget less than $10,000.

    It will take a real monetary investment to develop digital marketing and sales systems that align people, product and process around purpose (http://www.ptpnewmedia.com/people-product-process.php).

    I view the “trifecta” of digital marketing and sales systems revolving around three platforms:

    1. Web/mobile/tablet UX (user experience) platform

    2. CRM (customer relationship management) platform

    3. Automated marketing platform tapping into data gleaned from the CRM

    However, once again, our recent research has found 48.3% of credit union marketing respondents do not have a CRM in place at their credit union. This echos research you have done finding “64.1% of financial marketers noted they have inadequate MCIF/CRM database(s) as a challenge for 2013.

    At the end of the day, all roads will continue to lead to digital. The banks and credit unions who figure out how to humanize digital marketing and sales systems now will have a head start while all other FIs play catch up: http://www.ptpnewmedia.com/video-digital-member-journey.php

  2. The same is true of British Banks and financial institutions. A quick check of the High Street banks shows that most have a limited social presence and are slow to react. http://www.twitter.com/FirstDirectHelp – the UK’s first original telephone banking service, has a support channel on Twitter averaging less than 2 tweets a day with less than 1% replies. (They don’t follow so they can’t be DM’ing either.)

    Last year saw Natwest caught out as its banking system (IT infrastructure) collapsed for days. The social media reaction was instant, the banks response [on social media] was anything but.

    http://birdsongdtt.com/social-media-white-papers/

  3. When moving towards digital marketing, financial institutions (FIs) need to be prepared for the added maintenance it takes to control the quality of customer service they provide through digital channels. FIs must not only use social media as a marketing tool, but also as a means to resolve customer issues and complaints. The use of Twitter to provide customer service is a prime example. This exemplifies the public relations, customer service, and marketing potential of utilizing social media and other digital media tools to enhance the overall banking experience. But FIs need to be prepared to monitor their social channels on a regular basis if they are going to truly embrace social media.

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