This much is certain: financial marketers now know more about consumers than at any other time in history. Financial institutions today regularly apply insights gleaned from a combination of transactional- and interactional behaviors. They factor consumers’ needs and preferences — both those that have been expressly stated and those that are implied. And big data promises to uncover an even deeper layer of insights. Thanks to the burgeoning mounting of information and the growing array of analytical solutions available today, banks and credit unions can create consumer profiles that were simply unimaginable just a few years ago.
Welcome to the Digital Age. Financial marketers finally have ready access to the metrics and intel they’ve so sorely needed. It is against this backdrop of data analytics that Cognizant outlines four key forces reshaping marketing priorities and budgets in the banking industry.
In their report, “Digital Marketing in Banking: Evolution and Revolution,” Cognizant says the confluence of these four forces — fueled by new digital technologies and models — is rapidly transforming marketing into an unquestionable revenue center. In the report, Cognizant looks at everything from the customer experience and holistic customer journey mapping, to digital channel optimization and programmatic advertising. What forces are impacting brand loyalty, and their relationship to maintaining and growing mind and wallet share?
1. Socioeconomics and Shifting Demographics Matter More Than Ever
Consumers around the world expect banking brands to be more meaningful and useful to them. According to the “Brand Meaningfulness Index” study from Havas Media, the majority of people worldwide say it would not matter to them if 73% of all brands disappeared. That figure jumps to 90% in the U.S.
Reality Check: People — and the world they live in — are changing rapidly. Financial marketers must scramble to keep up, because there’s little margin for error.
Cognizant points to the emergence of alternative banking providers and new technologies such as peer-to-peer lending, mobile wallets and blockchain as evidence that the market has changed significantly. Consumers are increasingly relying on secondary and non-traditional providers for financial services like loans, credit cards and investments. How could these outsiders and challenger brands find any traction without a massive shift in consumer attitudes and preferences?
Most Millennials are on the cusp of many of life’s major milestones, but they are hobbled by school loans. This has forced many to stay at home longer, defer marriage and put off other big decisions like starting a family, buying a home or getting a new car. They are driven by a distrust of financial institutions, and most Millennials are not particularly savvy about banking products. Unfortunately, Millennials don’t have the same purchasing power or retirement savings as other generations do, which reduces their profit potential for banking providers. Nevertheless, Millennials are raising the digital bar in banking — a fact that traditional institutions simply cannot afford to ignore.
But Millennials aren’t the only demographic segment of importance. The report cautions financial marketers that they should not overlook Seniors (those born before 1946) and Baby Boomers (those born between 1946 and 1964). Cognizant says these are two of the most critical segments to financial marketers, specifically because of their exceptional purchasing power. Boomers outspend other generations by a staggering $400 billion per year on consumer goods and services, are digitally-savvy, and are increasingly spending more time online — especially on social media — and less time watching TV. Boomers actively borrow and spend money and invest their wealth. All these changes are having a radical impact on how financial marketers build their strategic plans and allocate their budges.
To succeed in the Digital Era, Cognizant says it is critical for banks and credit unions to understand the relationship each demographic segment has with digital channels. Cognizant urges CMOs to reshape their digital marketing strategies in ways that acknowledge these demographic shifts — both among older, more profitable and brand-conscious consumers and younger, socially-aware, digitally-savvy consumers.
2. New Digital Capabilities Redefining the ROI of Marketing
Nearly every banking provider today understands that digital is the future, but they just aren’t sure how to get there… and what it might look like when they’ve finally arrived. With the proliferation of both new channels and new competitors, banks and credit unions are struggling to find ways to build brand awareness, market their products effectively and raise engagement rates in ways that clearly link back to their institution’s financial performance.
Quantifying marketing’s contribution to the bottom line has always posed challenges for financial institutions, as Cognizant points out. The ability to measure the value generated at each customer touchpoint across the entire marketing funnel has been every CMO’s dream. But in the Digital Age, it’s not just possible… it’s a reality. Financial marketers can determine the effectiveness of their online strategies, and identify and optimize investments in profitable channels, and do so nearly in real-time. According to Cognizant, all it takes is the right mix of metrics and a strong data-driven attribution model to make sense of it all.
With cross-channel and multi-device ad platforms that assign a single unique ID to each consumer, marketers can develop their own proprietary fractional attribution models. The challenge going forward, Cognizant says, will be to take action on these models and reallocate marketing spend. What is the right combination of media outlets, devices and marketing messages? This can be a daunting task, Cognizant warns.
Unfortunately, as Cognizant notes, most financial marketers are still stuck trying to wrap their head around what it even means to “be” digital.
3. Disruption and Consumerization of Banking Services
Traditional financial institutions are under increasing pressure from new competitors — fintech players, peer-to-peer lenders, new types of digital payment methods and even crypto currencies — startups born in all-digital environment and unburdened by legacy delivery models. Cognizant says financial institutions have taken a conservative and predictable approach in their defense against customer attrition: they’ve banked on inertia and the relative difficulty of switching providers… just as they’ve always done.
Waking up to the threat from outsiders that are disrupting the industry, Cognizant says financial institutions are finally starting to fight back with digital, mobile and other tech-centric strategies. Banking providers are starting to accept that their brands actually can be displaced by more innovative, nimble and quick competitors, so they are employing strategies that look and feel a lot more like those used in other industries (e.g., retailing).
Cognizant has defined four states representing how traditional institutions are responding to the digital banking mandate (note: these states are not necessarily independent, nor are they sequential).
- Basic Core Infrastructure. The simple implementation of an effective digital interface between legacy systems and digital consumers.
- True Digital Backbone. Implementing a natively-digital platform that integrates all touchpoints — from the front to the back office, across all channels.
- Digital Partnerships. Digital partners are established under the bank’s brand to provide digital services that might otherwise disintermediate the organization.
- Open Architecture. In this state, is not necessary, at least from the onset of a initial relationship, for a consumer to acknowledge the institution from which the services are being provided. Consumers choose not only the access method but the entire approach to their interaction.
Where is all this disruption headed? Cognizant says organizations of all stripes, sizes and flavors will be battling for consumers — not just traditional institutions competing among themselves, but also with fintechs and non-bank players such as Google and Amazon. As a result, banking websites could soon include as many (or more) non-banking services as banking ones — a mashup intended to leverage an entire ecosystem of intermediary customer services. The intent? Keep people transacting and interacting on their websites and in their digital channels.
4. Digital Banking Becomes a Multi-Level Marketing Opportunity
Cognizant says an entirely new class of customer is emerging, where fintechs and other disruptors serve as intermediaries, and these new consumers will be addressed primarily through digital channels. Cognizant says you should think of this as something akin to “multilevel marketing.”
In the Digital Era, banking providers are increasingly becoming marketplaces, and each prospective financial product/service/need is becoming its own marketplace opportunity. Cognizant says this raises an important question: Is there an issue with the cohesion of financial brands in this new digital world, in which more and more services are becoming disintermediated? For the end consumer, perhaps. But as Cognizant points out, that suggests financial institutions should consider marketing their abilities to provide services to the intermediaries instead of the end consumer. In other words, if the intermediary is- or can be a bank’s customer, then shouldn’t banks market to them accordingly, regardless of who they are?
The case Cognizant lays out for this unusual “multilevel marketing” model is compelling. After all, traditional institutions have made significant investments that can be leveraged — it’s the infrastructure/backbone such intermediaries need. The fear of brand erosion should be shelved, Cognizant argues, and energy should be redirected into new business models that profitably embrace the sea of changes sweeping across the industry.
Doing so will require large volumes of customer data and the underlying analytics to micro-segment appropriately — the trifecta of marketing segmentation + personalization + automation. A “segment of one” has been a popular notion for years, but the requisite capabilities have not existed until now to make it a practical reality. Today, an incredible amount of customer insight can be sourced and maintained from both inside and outside the institution. By building rich customer personas, Cognizant says banks and credit unions can achieve mind-boggling levels of personalization, leading to more tailored product offers, higher product acceptance, lower attrition, greater customer acquisition and much-improved customer satisfaction.
According to Cognizant, it is critical for financial institutions to look at the customer experience in a holistic sense across the entire relationship. In other words, the “customer experience” includes every touchpoint and interaction, not just those more traditionally associated with marketing and sales. Ease of use ranks as an important benchmark, as customer perception of effort is the primary determinant for loyalty. If that means turning the conventional banking model upside down, Cognizant says “so be it.”
CMOs Take Center Stage in Digital Transformation
The Digital Age is rapidly redefining the role of the CMO. All this emphasis on customer engagement has left the modern CMO managing responsibilities that were previously owned by other divisions (e.g., Sales). Marketing is expected to find synergy with — or even take on — emerging roles, such as Chief Experience Officer and Chief Digital Officer. In fact, roughly three out of every four CMOs expect to own (or at least play a major role in managing) end-to-end customer engagement for their organization in the next three to five years.
The new digital landscape has not only empowered today’s consumer to be in control of the buying process, but it has also dramatically increased the number of ways a brand can “touch” the customer during and after the buying journey. With a plethora of channels and touchpoints that connect consumers with financial institutions, the need for an integrated, holistic approach to managing the customer lifecycle is critical.
Cognizant believes the individual responsible for bringing all this into a cohesive engagement/marketing strategy is the CMO. CMOs must focus on the entire customer journey and seek ways to tangibly impact customer experience and decision-making at multiple points during that journey, thereby creating opportunities to generate direct revenue outcomes. Cognizant says a key challenge in this process will be to convince C-level stakeholders to support the significant acceleration of innovative marketing strategies that drive new business and revenue opportunities.
Download the Complete Report
You can download the entire 16-page PDF report, “Digital Marketing in Banking: Evolution and Revolution,” from Cognizant’s website by clicking here (instant download, no registration required).