What to Cut, What to Keep as Bank Marketing Budgets Get Squeezed

Bank and credit union marketers are facing pressure to cut back on marketing spend as the economy moves into a difficult period thanks to COVID. Now is the time to look at what's expendable, and where you should hold the line or even increase spend given declines in traditional marketing approaches.

By now, most financial institution marketers have thrown their 2020 plans out the window. The challenge is what to do in 2021. Chief Marketing Officers are deciding what expenses to cut, but at the same time, they realize that the growth generated by traditional client acquisition and relationship-building methods — especially from branch walk-ins and banker prospecting — have declined.

Marketing has a larger role than ever to play in helping institutions manage customer relationships and create new ones, but circumstances facing CMOs and marketing directors as they plan for the year ahead are complex and unique, to say the least.

Capital Performance Group spoke with numerous bank and credit union marketers who have pivoted their plans and budgets to the new reality. This article provides insight into what is working, what CMOs are eliminating, and what they are investing in for growth, looking toward the year ahead.

Take the Time to Evaluate Your Plan with a Fresh Eye

Most marketers know that much of what their team is asked to do fails to translate directly to the bottom line. The pandemic has given CMOs the impetus to take a fresh look at all marketing activities and share their perspectives on what generates results for line-of-business executives.

It takes considerable time and effort, however, to dig into how these activities and expenses help move an institution’s strategic initiatives, business goals, brand and revenue forward. Prudent executives, however, believe it’s worthwhile. Ubaldo Plentywounds, First Vice President and Marketing Manager of California Bank & Trust conducted a week-long team pause on day-to-day work to focus on obtaining a fresh perspective on 2021 plans. Essentially, if a marketing activity made or is making an impact, it stayed on the to-do list; if it hasn’t or isn’t, it went in the “reconsider” bucket.

For example, while most charitable giving has remained steady or even increased, financial institutions have understandably ramped down spending on face-to-face events since the outbreak of the pandemic. The tough question for 2021 is: When will loosening of social distancing policies permit physical gatherings, and will they remain a key source of client engagement and prospecting? Because of all the uncertainty, several institutions we have spoken with are reallocating at least a portion of these event dollars to fund investments in digital lead generation and marketing automation, as discussed further on.

Ramp Up the Important Things

What existing programs have been successful at achieving growth or other corporate objectives? Can your direct mail or digital campaigns that attract new customers or deepen relationships be expanded or pivoted in 2021 to be even more successful? Start by reallocating your budget dollars and staff time to answer these questions. Here are several specific approaches bank and credit union marketers have told us about.

Refocus on direct mail. What we are seeing most often in this category is reallocating dollars or even increasing dollars to support programs that have a proven track record of growing customers or selling products. A West Coast institution used a mortgage direct mail program to attract new households, for example. Given the interest rate environment, the CMO made the decision to expand this program to take advantage of what may be a short-term growth opportunity. A bank in the Northeast did the same, even reassigning retail branch staff to support expanded mortgage application volumes.

Targeted business lead-gen. Commercial and business bankers realize their old approach to sales involving networking and face-to-face meetings has been up-ended. In many cases, Marketing is being called on to assist with content marketing and lead generation. One CMO performed some “quick and dirty” market research on four business verticals and found that one industry had a particularly bad PPP experience. Half the decision makers in that group said they would switch institutions. As a result, the bank is ramping up a marketing campaign and calling program targeting that vertical.

Opportunistic buying. In some cases, increased marketing spend is strategically important. An institution in the Mid-Atlantic region, for instance, recently moved into a new city by acquiring a bank, and has low brand awareness there. The CMO took advantage of the fact that most banks pulled their advertising, and ramped up his spend to stand out and cost effectively build brand in a quiet media environment.

Key Question: What Are We Missing?

Answering the “What is missing?” question is a harder exercise to conduct but might be even more important. What we see institutions doing most often here is ramping up tests using digital marketing. They’re striving to find out what proven tools they have not been using that their peers — or even companies in other industries — are using with success.

This doesn’t have to be a big-budget exercise. Start with small dollars, and do these three things:

1. Collaborate with your lines of business to identify consumer and business groups that they believe are in the market for a new bank, given their financial situation and recent experience with their bank or credit union.

2. Work with your media partner to determine how to efficiently reach these groups, and what a relevant message might be. Important here is to realize that the pandemic and recession have changed peoples’ perceptions, needs and behaviors. If you are not on top of this, it might pay to do some quick research so your value proposition and message are spot on. Either talk to people in the target demographic yourself, or hire a research firm to do some one-to-one interviews.

3. Develop multiple sets of creative per channel and test the reach, shares and engagement you receive with your target and test audiences. Did you see positive sentiment in the comments? How did this impact the cost and efficiency of your campaign and was there an impact to the bottom line? Don’t forget to leverage video whenever possible and set a clear A-B test with a hypothesis to get started.

Read More: How to Turn Your Financial Institution’s Website Into a Lead-Gen Engine

Important Investments to Consider for the Year Ahead

Many financial institutions have realized that given the current environment, nothing they do will make their 2020 financials look attractive. This provides them with a unique opportunity to make strategic investments. Investment in marketing and sales technologies to improve efficiency and effectiveness is one of most critical areas on which to focus, and CMOs should be sure it is not overlooked.

COVID-19 created a virtual standstill in the retail brick-and-mortar distribution of banking services. As a result, building direct relationships with consumers and business prospects became much harder. This situation makes the adoption of a CRM platform and other marketing automation essential, in order to execute personalized messages.

Whether it is to welcome new PPP clients to your institution or remind existing customers of the various ways you can fulfill their needs, ensuring engaging and timely messages that are relevant to your changing audience is a must in 2021 and beyond.

And remember, there are bite-sized ways to get started. The CMO of a $1 billion financial institution in New England decided to pilot a powerful marketing automation platform specifically to launch a consumer checking campaign for six months. The pilot has clear and actionable KPI’s and will serve as a building block for future digital campaigns. Importantly, the marketing automation is being “rented” by the month at an affordable price. This is just one example of building a digital roadmap on a budget.

Figuring Out Your New Budget

Importantly, should you be asking for less money or more? We have heard from most CMOs that they pushed ‘pause’ on expenses for at least 60 days. Additionally, a Gartner survey of CMOs found that 44% are facing moderate mid-year budget cuts. As a result, overall spend in 2020 will end up being abnormally low.

Given thinning margins and bloated loan loss reserves, however, it will be a challenge for Marketers to ask for even 2019 levels of spend. The reality for most financial institutions is that they still need to bring in new customers, loans and deposits to make up for those who leave. As a result, the stronger your case that your marketing efforts will fill that revenue pipeline, the better your chances of preserving or even increasing your budget.

If considering whether to reduce your budget, remember that marketing dollars work harder during recessions. As a Harvard Business Review article states, “Companies tend to cut marketing in a recession. But firms that maintain their marketing spend while reallocating it to suit the context — be it in product developing, advertising and communication, or pricing — typically fare better than firms that cut their marketing investment.”

The planning tasks outlined in this article directly translate into your revised budget. Ideally, you have been able to leverage experience with previous campaigns to size what your spend should be and how many new customers or product sales you will generate. Direct marketing and digital media agencies can also help in this regard.

Of course, you won’t have precise numbers and ROI for every program, but don’t let that stop you. Developing logical and realistic assumptions with your Finance colleagues will allow you to estimate an ROI on your total marketing expenditure and increase the chances that your CFO or CEO will approve your new budget.

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