Today’s banks and credit unions are facing radical shifts in marketing. Customers are increasingly expecting personalized omnichannel experiences, many are value-driven and hyperconscious about where they spend money, and the maturing Gen Z population is actively showing that they’re interested in their financial future at a younger age than their predecessors.
Though financial institutions must adapt their strategies to align with these new market trends, one marketing fundamental remains the same: the need to have the right metrics to measure what’s working … and what’s not. As Alyssa Taylor, the AVP of Marketing from Guardian Credit Union, points out, “As budget season draws near for many, it is important to plan and prioritize your budget around your strategic goals and your ability to measure those goals.”
To prove value, financial institution marketers need to move beyond the more readily available performance metrics such as likes, clicks and impressions. Here are the top metrics for measuring quality and impact — and tips on how to calculate and optimize them.
1. Cost Per Acquisition (CPA)
What it is: CPA is the total amount of spend it takes to acquire a new customer or member. This includes all spend for ads, marketing campaigns, and other marketing efforts.
How it’s measured: To get a full picture of your CPA, you need to first determine what actions determine a successful “acquisition.” Most common actions to measure are approved or opened accounts, approved credit card applications, or funded loans. You can either set a target spend associated with that specific conversion, or take the total amount of spend over a given period and divide it by the total number of “acquisitions” that occurred during that time to calculate an average cost per acquisition.
“Affiliate marketing is a crazy underutilized channel. One of the things that banks do a poor job at is telling their story.”
— John Huntinghouse, TAB Bank
Why it’s important: CPA is an important metric because it is the metric that most directly ties marketing spend to bottom-line impact. It allows you to measure which channels, campaigns or messaging is resulting in the right type of customer for your financial institution and is the most cost-effective for achieving your goals.
How to improve it: Improving your CPA usually means looking at ways to lower spend as much as possible to ensure the right quality of customer comes through the funnel. The easiest way to control and optimize your CPA is to leverage tactics that are lower-funnel and run on a performance basis. One example is affiliate marketing, which allows marketing teams with limited budgets to partner with credible influencers and websites on a results basis.
According to John Huntinghouse, VP of Marketing at TAB Bank, “Affiliate marketing is a crazy underutilized channel. One of the things that banks do a poor job at is telling their story. And one of the things that these publishers and influencers do — outside of getting acquisition, having a low [CPA], and getting individuals through the door — is to be amazing storytellers. When you have a trusted third party or trusted source that is validating, it goes a long way.”
2. Approval Rate
What it is: Approval rate is a quality metric that measures the percentage of total applicants that are eligible and therefore successfully approved for a particular product.
How it’s measured: Approval rate is measured by dividing the number of approved applications by the total number of submitted applications.
Why it’s important: Approval rate is a benchmark that informs both targeting capabilities and impact of the channels you are deploying to drive new customer growth. Without measuring approval rate, you might find that your campaigns are generating applications for customers that cannot be approved for the product which they are applying for. This creates an unnecessary cost to the business, and also a poor customer or member experience if they are encouraged to engage in products where they may be ineligible.
Optimizing the approval rate of your channels will have positive impact on many of your other marketing metrics, such as decreasing CPA and improving ROI. Having a benchmark approval rate allows you see changes over time and the relative performance of your campaigns and channels.
How to improve it: Understanding what channels are delivering you the highest rate of approval is the key to unlocking this opportunity. By understanding where you can reach these ideal customers, you can take insights into your messaging, your targeting and your partnerships. Similarly, you might find areas of inefficiencies, where campaigns or channels are driving unapproved customers. By discovering where and how these applicants are being reached, you will be able to reallocate your marketing spend to the best-performing campaigns and channels.
3. Customer and Member Lifetime Value (LTV)
What it is: Customer or member lifetime value is the projected revenue that a given customer or member will generate during the full length of their relationship with the bank or credit union.
How it’s measured: How customer lifetime value is measured depends on the business and its offerings. For financial institutions, a common formula could be: (365 days of the year) * (daily average revenue per member) * (average member lifespan). Revenue figures can include items like interest payments, account fees and penalties.
Why it’s important: By being able to project how much revenue your bank or credit union can expect from one relationship, you can better budget how much the financial institution is able and willing to spend on acquisition and retention efforts. A healthy ratio of CPA to LTV is 1:3. At minimum, a financial institution should expect to generate revenue three times the amount it cost to acquire the customer or member.
A Ratio to Remember:
A good cost-per-acquisition (CPA) to customer lifetime value (CLV) ratio:1:3
How to improve it: A big part of extending a customer’s lifetime value is by prioritizing marketing and retention efforts. It’s important to remember that the marketing funnel doesn’t end at conversion — there are ongoing opportunities for engagement and advocacy as well as cross-selling other products and services. By taking a considerate approach to marketing to your customers, there’s more chance they’ll stick around and use more of the financial institution’s offerings.
4. Total Count of Conversions by Lead Source
What it is: A lead source is the influencing campaign or channel that ultimately turns an audience into a viable lead. The count of conversions by lead source looks at the total number of leads generated by a particular campaign or channel.
How it’s measured: Measuring lead sources can be done in a number of ways. For starters, you can set up omnichannel attribution tools that track when people engage with an ad or affiliate link, when they visit the bank or credit union website, and when they talk to a representative. That said, in some cases, privacy regulations and measures are making it harder to track this data accurately. The alternative? Use short post-conversion surveys to ask customers how they first heard about your financial institution.
There are numerous ways to keep track of new customer leads. Omnichannel attribution tools and post-conversion surveys are two common methods.
Why it’s important: Understanding what specific marketing tactics are successfully driving your brand’s lead generation is important in helping determine what is generating the most amount of potential opportunity for your bank or credit union. Conversion rates take this one step further by allowing you to measure quality of the leads generated, and allows you to look more closely at the where — and what — of messaging and imagery in your campaigns. In parallel, it also helps you divert funds away from tactics that aren’t working.
How to improve it: New and evolving audiences require new ways of attracting leads. It’s important to define the customer journey that makes the most sense for these audiences and use mechanisms that feed into their day-to-day activities.
5. Net Promoter Score (NPS)
What it is: NPS is a cross-industry metric that measures customer satisfaction. It relies on the answer to a single question: How likely is a customer or member willing to recommend your institution to a friend or colleague?
How it’s measured: Customers or members are asked to answer the question on a scale of 1–10. Depending on their answers, respondents are grouped into three segments: Promoters (9–10), Passives (7–8), and Detractors (0–6). Brands then take the percentage of promoters and subtract the percentage of detractors, giving them an NPS value between -100 and 100.
Why it’s important: An NPS is ultimately tied to the reputation of your brand. It’s important to understand whether your new and existing customers are happy with your services, as it can prompt you to either keep doing what you’re doing, or change things up. Conducting periodic assessments of this score can help you understand how your brand is trending at each stage of the customer journey, and track it back to specific activities that might be supporting that trend.
How to improve it: Focus on the customer journey. At what point might people be experiencing friction? Does the NPS for new customers trend better than that for long-time customers or vice versa? Where can your brand do more to engage with the customer in the right way? What campaigns are falling flat as you try to bring leads through the marketing funnel? This information — gathered through your available data and anecdotal inputs — can help you transform problem areas in the journey.
Making the Most of Data
Financial institutions run on numbers. For every decision that’s made, every product or service that’s launched, every transaction that happens, consistent measurement is key to help drive effective decision-making. Marketers often face challenges with demonstrating value and bottom-line impact to the leadership at their bank or credit union.
As they navigate the many changes in the sector and embrace the need to create campaigns equal part personalized and cost-efficient, the above metrics can help to provide effective direction, especially when measured and monitored consistently.
Setting performance metrics, using the results to make key decisions, and revisiting these metrics as needed in response to customer trends is a surefire way to make your marketing team more effective.
For more information on marketing data and metrics, visit Fintel Connect.