With the rise of non-bank competitors, a sluggish economy, burdensome regulations, a low interest rate environment, and continuing advances in technology, CMOs are increasingly being tasked with finding new and innovative ways to drive growth and profitability. Some CEOs are setting aggressive growth goals for their boards and shareholders, even if they aren’t sure what the source of this growth will be.
Reflecting this trend, many CMOs have seen their titles morph — Chief Growth Officer, Chief Experience Officer or perhaps Chief Information Officer. But regardless of the title, the reality is that growth in banking has almost always been achieved through stealing market share. It’s simple: in a mature sector like banking, “organic growth” will only come from the handful of new households that are entering the market, so you need to go toe to toe with the competition and steal their customers.
Competing on price is an easy, short-term solution. Sure, it brings in customers, but it has never been a sustainable — nor very profitable — long-term strategy. As soon as the attractive “introductory pricing” disappears, so do those new customers.
But, as many bank marketers can testify, getting consumers to move their primary banking relationship isn’t easy. With all the automated tentacles that are tied into a modern checking account (direct deposit, automatic bill payments, e-statements), many consumers fear that switching banking providers would be like taking on a second full-time job.
Bottom line? You have to get better at stealing market share. Period.
This is driving many financial marketers to marketing analytics, so they can more readily identify those retail consumers who are most predisposed to move their account(s). Instead of the shotgun approach where the audience is “everyone age 18 to 65 with a wallet and a pulse,” marketers can refine their strategy and target specific segments — e.g., focusing on more profitable households first. Marketers can also know which competitors they are likely to be up against for these segments, and thus be able to pivot their offers and messaging accordingly.
This is one of the primary reasons that marketing departments have been expanding their budgets to include expenses related to data analytics and digital marketing initiatives. They are loading their toolbox with everything from data management and marketing automation platforms and to analytical systems that crunch volumes of big data from digital and social channels. But these ballooning budgets are also putting CMOs squarely in everyone’s sights — namely the CEO and CFO, who assume that with all the new analytic and digital marketing resources available to the CMO, it should now possible to identify unique new business opportunities that will “transform the business”… and deliver that growth that the board and shareholders were promised.
You could call this thinking “disruptive innovation” — creating growth by making fundamental changes in your business paradigm. In essence, you’re trying to disrupt yourself with big internal changes, where the objective is to find new markets, new customers and new value propositions… before someone else does it to you first.
Remember: this is all about stealing market share; that’s where the bulk of growth in banking comes from. So the point of “disruptive innovation” is to get consumers to see you in new ways — to see you differently than your competitors and all the other traditional providers — so they will be more willing to abandon the “old way” of banking in favor of your new vision, your new platform, your new model. This is why banks and credit unions need to wake up and take the Data Revolution seriously.
Unfortunately, a study published by Accenture in 2016 found that only 33% of CMOs are taking the initiative to lead with growth initiatives that involve this flavor of data-driven “disruptive innovation”. The majority of CMOs still tend to focus on old school growth strategies that worked back in the Industrial Age, but don’t cut it in the Digital Age. Thankfully, this perception is beginning to change. In a 2009 Accenture study, 62% of CMOs said technology and data analytics would significantly change the role of marketing; by 2016, this number had jumped to 91%.
But is it too late? Many smaller banks and credit unions are faced with a do-or-die scenario, and the responsibility for growth is falling in the laps of their CMOs. Is this fair? You could argue that this is the price CMOs should have to pay for all the new toys they’ve been given. But fair or not, most CEOs don’t have an infinite supply of patience. They’ve read all the articles and seen all the studies extolling the virtues of data analytics and “disruptive innovation” and many are wondering why their CMO hasn’t already completely transformed their paradigm?
The reason only a third of CMOs are finding traction with disruptive innovation is that they have to live in the reality of their situation. These new tools have placed the CMO in many new and relatively unfamiliar roles, compounded by the fact that many times these new technical functions also report to various other senior managers throughout the bank. This lack of consolidated management and absence of a cohesive vision for these new functions creates a patchwork of strategies and tactics.
Reinventing your entire organization and the way it does business is going to take more than a new marketing strategy. This level of change requires a wholesale change in your perspective — the fundamental tenets that underpin your business model. These days, banking is no longer about “superior service” or “the people that make the difference” or the “great financial products” you offer (if it ever was). Your most precious raw material — the lifeblood that should be powering everything in your organization — is now data. This is your most valuable asset. This is where your new value proposition — and the growth that comes along with it — will come from.
To achieve optimal results, it takes hard work and a clear understanding of how all these new marketing analytics tools work together. It also requires recalibrating the growth expectations placed on CMOs, who (in many cases) have been set up to take the fall if their CEO and board don’t see the numbers they expect.
However, long-term growth and profitability driven by customer-centric digital marketing tools based on a solid analytical foundation is possible, and can provide nice fat bonuses for those CMOs who can deliver.
Frank Koechlein is the Managing Director at Velocity Marketing Analytics and coauthor of the marketing resource book, “The New Marketing Analytics.” Frank has 40 years of marketing experience in the financial services industry. He has held several senior marketing positions including SVP, Marketing with the Dreyfus Corp and Director of Marketing with Prudential Direct, Prudential’s in-house, direct response agency, as well as, community bank and credit union marketing positions. If you’d like to contact Frank, you can send him an email.