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Marketing Must Evolve or Banks Face a ‘No-Growth Death Spiral’

Banks that don't fundamentally reevaluate and retool their approach to marketing strategy, budgets, ROI and data analytics are doomed.

A research report from management consulting firm Cornerstone Advisors, Inc. reveals that mid-size banks have made negligible progress on revenue growth in the past two years, and have not changed their marketing strategy to adequately address the changing landscape. The research shows that the 20th century models in place today at the majority of mid-size banks are a direct threat to their competitive futures.

The Cornerstone Performance Report: Benchmarks and Best Practices for Mid-Size Banks asserts that dominant models in banking are failing to generate top-line revenue, and warns that the biggest threat mid-size banks now face is backsliding into a no-growth death spiral.

ROI & Budgets

The marketing department at a typical bank spends seven times more on donations and community sponsorships than it does on marketing in digital channels.

Most banks are still not assessing impact or measuring ROI for most of their marketing efforts. With competitive pressures requiring effective marketing for a bank’s long-term survival, marketing departments should be held accountable for marketing budget impact. Some of that impact should take the form of hard ROI targets, and other aspects might have softer ROI impacts. Granted, ROI measurement is easier said than done. ROI for traditional media, social media, corporate donations, etc., is often difficult to measure, but direct marketing and other promotions are relatively simple. Growing investments in analytics should help.

“The marketing department at a typical bank spends seven times more on donations and community sponsorships than it does on marketing in digital channels,” says Sam Kilmer, Senior Director at Cornerstone Advisors. “It’s hard to transform your financial institution with this type of budget mix.”

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Bank marketing departments should be challenged to justify spending on every item with debatable ROI (donations, merchandising, etc.) that could otherwise be invested in efforts such as direct mail with a solid path to ROI measurement.

Cornerstone says banks need to manage their outside advertising agency as they would a vendor in any other business line. Agencies should be forced to continuously prove their worth. Agencies should show increasingly more leadership in analytics and social media while speaking in a language of results and impact vs. awards and artistic creativity.

Measure the effectiveness of campaigns by polling via telephone and Web surveys. These can be directed at both potential and existing customers. While improvements in exposure recall rate and customer satisfaction are welcome, also look to drive growth in measures of actual referrals, market share and wallet share through competitive replacements.

Org Charts & Reporting Relationships

At 56% of banks, marketing reports to the CEO, while another 35% say marketing reports to the COO. Cornerstone says marketing should be viewed as a strategic revenue-center, not just a cost center. Functional reporting to the CEO increases the chances of that outcome.

Marketing departments that report deeper into the org chart tend to be far less effective and often focused only on promotional activities. Product development in such a case is relegated to other lines of business, which is not optimal.

From a talent perspective, marketing directors need to understand
and design products, drive search engine optimization and lead generation while coordinating through online origination, branch support, onboarding and cross-selling, all the way through to renewals and retention.

Data, Technology & MCIF Systems

Marketing Customer Information File (MCIF) systems have long been the foundation of research and data mining for banks. As banks increasingly drill for more effective and timely behavioral insights, MCIF systems are increasingly one of many sources of data.

Cornerstone says solutions in marketing automation and marketing analytics are starting to converge into a singular sales and contact management solutions. Given vendor consolidation and most existing MCIF providers adding some kind of sales, referral and contact management capabilities, Cornerstone says it will be an interesting space to monitor in coming quarters.

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The best marketing software in the world can be useless if starved of qualified personnel to drive and support it. Consider this when determining the amount and quality of human resources you utilize to support systems like MCIF and social media.

Cornerstone recommends banks shift more talent and spending to analytics. With online and mobile channels skyrocketing, bankers now see their customers less and need to analyze and act on data more. Primary research and direct customer feedback are vital, in addition to a review of secondary research on demographics and segmentation.

Behavioral data is becoming increasingly more important than demographic data. Analytics on payments behavior and lending demand triggers are extremely valuable. It is critical that the bank position itself closely to the life- and spending decisions that commonly drive demand for financial services.

Marketing & Communications Strategy

To reach customers and prospects, banks have invested in single-channel approaches (branch, ATM, Web, mobile). In the near future, consumers will be utilizing multiple channels to research, buy and access financial products and services. How will bankers reach and service these future customers?

For both marketing and sales purposes, Cornerstone says bankers will need to better understand and predict customer preferences (including channel choices) to provide more targeted and consistent messaging. This means understanding that marketing, sales and service will be driven by the intersection of the bank customer’s location, context and channel (or where am I, what am I doing, and through what device). Bank employees will need to become “digitized” and “live” in the bank channels in order to provide leads, cross-sell additional services, and provide “service excellence” based on the channel and context. This will lead to increased sales reach, effectiveness and retention.

Ensuring a satisfactory customer service experience across all bank channels will translate into higher retention and cross-sales opportunities. Cornerstone says effective customer communications solutions will be necessary to organize superior servicing capabilities and deliver them consistently across multiple products and channels, especially in a competitive marketplace where service can be a differentiator.

In order to provide this higher level of service, bank service representatives will need to more effectively understand their customers’ requirements. By utilizing customer data and tools, service reps will leverage the bank’s customer base to optimize operations, improve customer service, build customer relationships and up-sell customers on relevant products and services.

All content © 2017 by The Financial Brand and may not be reproduced by any means without permission.

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Comments

  1. Great example of innovative retail bank marketing (focused on loan market) from Dutch ABN-AMRO: http://rassak.com/observations/coolest-way-show-house-ever/5316/

  2. I agree with a lot of the conclusions above, but it needs to be taken a step further. Marketing needs to be integrated with sales, service, and product offerings/development. Marketing the given products and solutions in a vacuum does not lead to the best results. FIs need to develop their strategic approach and marketing is just one part of that.

  3. “Bank marketing departments should be challenged to justify spending on every item with debatable ROI (donations, merchandising, etc.) that could otherwise be invested in efforts such as direct mail with a solid path to ROI measurement.”

    This presumes that the marketing department is responsible for “planning” this type of spending. In my experience, many of these soft expenditures are dictated from the top of the organization, outside of marketing. The marketing team is simply executing the dictates of the CEO or another member of senior management. When marketing reports the lack of return or that return is difficult to measure, marketing’s media budget (digital included) gets slashed to compensate.

    Unless things change at the top of the organization (yes, I’m talking to you, CEOs), this misdirected spending will continue to drain the resources of bank marketing departments, ultimately leading to the bottom of the “death spiral.”

  4. Mike, you are so right…

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