More often than not, business lending produces the largest share of the profits for financial institutions — except when interest rates are high, when retail banking has the edge. Recognizing this, credit unions have moved increasingly into business banking in recent years, seeing the potential for growth. Despite this dynamic — or possibly because of it — financial institution marketing mostly focuses on retail.
Yet the banking world has changed and this marketing imbalance impedes the profit potential of many banks and credit unions, maintains Chris Nichols, Chief Strategy Officer at Florida-based CenterState Bank. A regular presence on the bank conference circuit and a frequent blogger, Nichols is a well-informed voice on bank marketing, digital banking and other financial services issues. Nichols joined CenterState Bank six years ago, and as Chief Strategy Officer has a unique vantage point on not only the different parts of the $12.4 billion-assets bank, but the industry as a whole through his contacts with respondent banks of CenterState’s Correspondent Division.
With no direct responsibility for either Marketing or Commercial Banking, Nichols has an unbiased — and characteristically candid — view of bank and credit union marketing.
The Financial Brand sat down with Nichols to discuss the state of B2B marketing in financial institutions, and how to release the untapped potential there.
Is there a lopsided marketing emphasis on retail?
Chris Nichols: I am constantly frustrated by how much our industry pays more attention to B2C marketing instead of B2B, where the bigger money is. Most financial marketers know how to get consumers to use a checking account or to do a giveaway or to market CDs. Marketing to commercial customers is much more difficult and a less-well-known skill. It’s harder to find marketers who know how to go after a mid-market company or even a small business.
In my experience, few banks really invest in marketing to both sides. Most financial institutions emphasize marketing at the branch level, and don’t really think about the marketing they could be doing on the commercial side.
One reason for this is that typically there are more retail products than commercial products, so more marketing dollars get allocated towards retail.
What are some examples of business products that could benefit from marketing?
Nichols: Treasury Management is a great example of a product that gets overlooked. Most banks don’t brand their treasury management suite nor their payment platform and don’t go after that business with any great marketing rigor. Most bankers could probably name one or two retail-payment brands — Venmo, Zelle, for example. But they likely can’t name any business-to-business or business-to-consumer payment platforms. I’ve always scratched my head on that because that’s where the bigger money is, which will only be increasing.
Venmo and Zelle so far have been largely P2P, but I predict we’ll see most P2P players move into the B2B space — Square is already there.
There’s a huge opportunity for banking institutions to use their leadership and technical prowess to help businesses go cashless. If you think about your average business, probably 15% to 20% of their cost is dealing with cash and cash derivatives.
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Are sales and marketing more tightly aligned in B2B?
Nichols: Just the opposite. It’s rare that you see a bank pull off a focused B2B marketing campaign followed up by a focused sales effort. Whereas you see some good, tight marketing/sales efforts in retail banking. Zelle is a good example. Chase, for one, mentions it in their statements, in digital channels and in their branches. It’s hard to find that kind of coordinated effort on the commercial side.
What’s preventing that alignment?
Nichols: A couple of things. One is a lack of resources. You see money going to events, for high-level branding and maybe some print advertising, but you don’t see much money going to commercial marketing. A few banks do a good job because they have a specialty such as medical-practice loans. But that’s the exception.
The other major disconnect is that most financial institutions don’t have a marketing person embedded in their commercial lines the way they do in retail. And so you have market presidents or chief lending officers controlling B2B marketing budgets — and they don’t know what they don’t know. It’s rare for these officers to say, “Hey, let’s do a digital campaign for commercial products.”
Shouldn’t the CMO be leading the way in B2B as well as B2C?
Nichols: Ideally, yes. But with many CMOs there is a lack of experience, a lack of orientation or a lack of certain skills. B2B marketing is a little different. For example, for any retail product I can ask, ‘Who is our target demographic?’ and expect to get the answer. It’s much harder to get that on the commercial side. The data is a lot less known.
And unlike with small-business marketing, where the business owners generally are well known, once business gets above $10 million in revenue, it’s hard to figure out who the buying influencers are and how you target them. That’s where banks really fall down. There’s no concerted effort to go beyond the primary banking contact at the business — typically the CFO.
Is social media useful for business marketing?
Nichols: Absolutely. The CFO of a small or mid-sized business is researching treasury management products just as much as a consumer might search for a bank account. One big plus for financial marketers is that there is a lot less competition for things like Google keywords for business banking products than for retail products.
Financial institutions should have someone at least partially dedicated to using social media embedded on the commercial side. That way the commercial group doesn’t have to rely solely on the marketing department.
What are some things CenterState Bank is doing with B2B marketing?
Nichols: In the area of social media, five years ago we had one person in Marketing doing it. Now every lending officer, every relationship manager is responsible for at least some level of social media. We train them to do their own posting and generate some content. Our marketers may help with graphics and some content but much of it is really organic.
Here’s another example: Geo-fencing. [A location-based service that allows businesses to send relevant messages to mobile phone users who enter a predefined geographic area.] Banks and credit unions use geo-fencing in retail for things like concerts, but the practice is equally effective for business banking.
If we want to target doctors, for example, and there’s a medical convention in our market, we geo-fence the convention hall so everybody on their phone may see a CenterState ad. The response rates are a lot lower than for retail, but each impression or each conversion is worth much more.
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What will drive more focus on B2B by marketing?
Nichols: It’s a two-part issue. Financial marketers need to have a seat at the business table, which most don’t now. They need to bring their skills and qualifications and assert themselves. In addition, line managers need to recognize that “We need someone in Marketing to help us with this campaign.” That will impact everything from prospecting to getting your brand out there so that when you call up that that restaurant owner or head of a manufacturing company they’ve at least heard of your bank or credit union. They know your value proposition. Then the sale becomes a whole lot faster and cuts down your acquisition cost.
Which financial institutions are doing a good job with B2B marketing?
Nichols: In my book the leader is American Express. They do a fantastic job at providing products, services and marketing focused on small- and mid-sized business customers. San Francisco-based First Republic Bank also does some great marketing for business clients. Their ads grab my attention almost every time. BBVA Compass and Chase Bank also do very respectable jobs and are leaders in our industry in business marketing.