Banks’ Digital Marketing Hyperopia

Don’t bother looking it up. Hyperopia is a term that refers to far-sightedness–for the purpose of this blog post, it’s important to know that it’s the opposite of myopia.

Myopia being the term used by Kevin Tynan, CMO of Liberty Bank for Savings, in an editorial in American Banker titled Banks Have a Case of Digital Marketing Myopia. In it, Mr. Tynan writes:

“In the rush to embrace all things digital, many bank marketers have bypassed critical thinking and strategic planning. The truth is that digital solutions are ideal for some marketing challenges but a poor choice for others. In the financial services industry, digital marketing tactics can sometimes be too expensive, too limiting, or too impersonal.”

Too expensive? Since when are digital channels more expensive to advertise (or market) in than traditional media channels like TV, radio, or print? According to my research, banks and credit unions are moving their marketing dollars from traditional media to digital channels. You can’t possibly be telling me that they’re moving their budgets from low-cost media to higher-cost outlets.

Too limiting? I’m not sure what that means. If it means “more focused,” I thought that was a good thing.

Too impersonal? Since when is a TV commercial more “personal” than an email? I thought one of the major differentiating benefits of digital, addressable channels was the ability to personalize and customize messages.

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Mr. Tynan goes on to say that “there are three important customer groups that digital marketing tactics may fail to reach.” He lists three segments:

1) The 65+ crowd. As Mr. Tynan states, “high-balance, high-profit customers in community banks tend to be 65 or older. They are also less likely to have mobile accounts, use bill-pay services or even have email addresses. This critically important age group often controls a substantial portion of deposits. No amount of pay-per-click advertising or social media postings will reach them. They remain a segment that must be reached by mail, telephone or in-person visits.”

My take: According to my research 76% of banked consumers bank online. That’s two percentage points off of what the Federal Reserve Bank found in its 2013 study, so I don’t think my research is too far off. Among consumers over the age of 65, my study found that 70% bank online. That is a lower percentage than online banking penetration among the other generations, but still a pretty healthy majority.

In addition, although, compared to other other generations, a smaller percentage of Seniors pay bills online, a larger percentage of older consumers who do pay bills online pay them at a bank or credit union site than the percentage of Gen Xers and Gen Yers who pay bills online.

And while it may be true that older consumers control a “substantial portion of deposits,” who cares? What matters to a bank (or a credit union) is: 1) How much of those deposits get spent on a monthly basis (and consumer spending is still dominated by Boomers, and the two younger generations), and 2) Who opens new accounts. And today–as it has been historically–younger generations account for a disproportionately high percentage of the demand for financial products and services.

2) Financially-struggling consumers. As the article states, “Because people in this group may feel intimidated or uncomfortable using banks, they place a high premium on personal service. Digital technology and emails won’t address these concerns. Only personal service will.”

My take: OK, now I’m confused. I’ve been hearing for the past few years that mobile technology is the key to reaching the un- and under-banked (not that the latter group actually exists). So where is the proof that “only personal service” will suffice in reaching this segment? And are we confusing “marketing to” these consumers with “servicing” these consumers?

And look, I’m all for helping out the needy, but why would a bank–who makes the overwhelming majority of its revenue and profits from other consumers–build out its marketing competencies, and spend its marketing dollars, trying to reach this segment? C’mon.

3) Millennials. Again, from the article: “Millennials would seem to be prime candidates for a digital strategy. Since millennials are constantly on their smartphones, they are assailed with hundreds of daily emails. And what do we do? Send them more emails. A better alternative may be to go with old-fashioned snail mail. According to a December 2011 Nielsen report, 92% of millennials said that direct mail was likely to influence their choice of stores, while 78% said the same of retailer emails. Millennials regard a personalized letter (not a mass mailer) as a novelty. It grabs their attention and makes them feel special. But it’s more expensive for banks to send printed material, so emails are what they get.”

My take: First, not all “digital” marketing is email. There are other digital forms of marketing–like social media–which can be used to reach millennials. Second, citing a report that found what (self-reportedly) influenced choices of retail stores may or may not be applicable to financial providers. And  third, if you do want cite that study, then I could cite the Gigaom study that found that email was the most effective digital channel. So why wouldn’t marketers want to use the most effective channel?

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Mr. Tynan concludes the article with this statement:

“There’s still a place for direct mail, public relations, billboards and newspapers in most marketing plans. You’ve just got to know how to look for them.”

My take: I couldn’t agree more–well, kind of. The first sentence is spot on. The second is worded funny. You don’t have to “know how to look for them.” You have to know when to put them there (there’s an active vs. passive thing I’m trying to point out here). It’s about right-channeling the marketing mix–figuring out how to match the marketing objective to the marketing channel best suited to achieve the objective.

I can’t help but think that Mr. Tynan’s concerns are unfounded. As I mentioned, my research has found that FIs are indeed moving marketing dollars from offline to digital channels. But traditional channels and approaches–the ones Mr. Tynan doesn’t want us to lose sight of–still account for the lion’s share of the spend (not quite half anymore, but pretty close).

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Bottom line: The charges of digital marketing myopia are misguided. There’s a good reason why (in Mr. Tynan’s words) “The rush to digital marketing has taken on a life of its own.” It’s because banks’ and credit unions’ digital marketing competencies lag their offline or traditional marketing capabilities (which, of course, begs the question how good they are).

The challenge for most FIs isn’t “how do we get better at writing TV ads, and placing them at the right time on the right shows?” or “where should we place billboards trumpeting our free checking?” Those are things that FI marketers do need to do well, but the focus on improving marketing competencies isn’t going to be in those areas.

The challenge is how to more effectively execute on digital marketing techniques. And allocating marketing dollars appropriately across digital and non-digital channels. Banks’ digital marketing hyperopia is what marketing needs.

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