Tis’ the season to make predictions and identify trends for the coming year (or trendictions if you’re so inclined). I’m a lousy prognosticator, so it wasn’t much of a decision, on my part, to not join in the party.
Hopefully, you’ll agree with Constellation Group analyst Neil Raden — as I do — who tweeted the following:
“A post mortem of the year past is 1000 times more useful than a prediction of the year to come. Sadly, the ratio of ink is reversed.”
So here’s my post mortem for bank marketing for 2011:
1. The Shroud of Durbin. Like an old, smelly, rotting, disgusting tarp (pun intended), the Durbin amendment covered the financial services industry in 2011, blocking any rays of light that might have brightened up the industry as the economy continued to flounder under this total failure of a president.
Although the proposal to drastically cut the debit card interchange fee that large banks receive was poorly conceived from the start, banks’ reactions to the amendment weren’t very rational, let alone effective.
You would think that most banks would have an economist on staff — that is, someone who understands the concept of price elasticity. As the cost of something declines, the demand for it typically rises. The extent to which demand rises determines how elastic that demand is.
As the “cost” of debit card interchange declined (by force), it’s conceivable that merchants and retailers desire to accept the card — especially in lieu of cash and checks — would increase. While an increase in the use of debit cards in this scenario might not have made up for the total fees lost to the price change, this would have been a more palatable scenario to what did happen.
By attempting to recoup potential lost interchange revenue with account fees, banks pointed their loaded guns at their feet — and shot away.
What the Shroud of Durbin leads me to believe is that bank marketers are not masters of their domain. I don’t think a lot of the marketing people I talk to had any trouble foreseeing the potential issues here. But they’re not in charge of pricing. I think it was the CFO organizations who pushed for, and drove these fee increases. And then the banks suffered, and the fingers were pointed at marketing.
To a large extent, the remaining top stories of bank marketing for 2011 all stem from the Shroud of Durbin.
2. The Return of The Credi(t). In Return of the Jedi, Luke Skywalker tried to bring his father back to the Light Side of the Force. In 2011, banks tried to bring credit cards back from the Dark Side of the Financial Services industry.
The trough of the economy created a perfect (negative) storm for credit card issuers. As the economy worsened, many peoples’ credit scores declined making them less-than-creditworthy customers and leading issuers to cut credit limits, discontinue the card, and limit their prepaid offers. On top of this is the fact that the best candidates for new credit cards — Gen Yers — had developed a distaste for credit cards through the generally improved (but still far-from-perfect) financial education efforts that hammered into them how bad it is to run credit card balances.
So credit card growth declined, as issuers fought over relatively-affluent rewards card holders.
After 2-3 years of slow growth, by 2001, issuers had had enough, and were determined to loosen the purse strings on credit. With the looming cut in the debit interchange rate, issuers saw credit card use as an answer to declining debit card revenue, and ramped up their credit card marketing efforts.
Never mind, of course, that a good debit customer doesn’t necessarily make a good credit customer. We’ll have to wait and see how this plays out.
3. BTD. Bank Transfer Day will (or should) go down in history as the greatest marketing failure on the part of banks. AND CREDIT UNIONS. Nothing — and I mean NOTHING — demonstrates a lack of marketing competency on the part of both banks and credit unions than BTD.
For the banks’ part, that some woman who knows so little about the financial services industry (have you heard her speak? I have. Not impressed. AT ALL), could cause such a stir has got to make bank CEOs wondering if their marketing departments were asleep at the wheel).
While it’s still not very clear how much business actually walked away from the large banks, I don’t think the failure is measured in lost accounts. The failure is measured in lost brand “equity” (yes, I hate that term, but I have to use it here for lack of a better alternative).
For how long now have we seen advertising from large banks telling us how good they are at this or that, or how they lend to the community, or how they help make our financial dreams come true?
Answer: For way too long.
What BTD should have shown banks was that those branding approaches were useless. I know at least one person who might argue with me on this, but to me, having a strong brand means being able to weather some negative storms. Whatever “brand equity” the large banks thought they had built up was shown to be nothing but a house of cards in 2011.
On the other hand, credit unions would be wise to stop slapping themselves on their back for their perceived “job well done.” As I wrote about it in a previous blog post, what credit unions couldn’t do for themselves in 100 years of existence was done for them with the creation of a Facebook page — which wasn’t even designed to create awareness of credit unions.
And now, with the Mea Cuna Culpa that’s been issued, it’s not clear how successful BTD was from a credit union perspective. I hope credit unions aren’t banking (pun intended) on seeing many gains from Balance Transfer Day.
4. Tied to the Bitching Post. When you’re done reading, you should really go read (or re-read) The Financial Brand’s article Reality Check 2.0: Social Media Myths & Facts. If, after reading that, you really believe that social media has had any meaningful impact on bank marketing practices, then let me know and I’ll give you the number for the Kool-Aid Overdose Hotline.
For how long have we been hearing how social media was going to transform the way banks and credit union market, and how it will be used to engage customers and members and deepen relationships, and yada yada yada?
Answer: For way too long.
What 2011 proved is that while social media might be able to produce those benefits, they haven’t yet, and certainly didn’t in 2011.
In fact, what social media did evolve to in 2011 — devolve might be a better word — is the Bitching Post. The place where people come to bitch about their little problem in the hope that they will embarrass their financial institution into responding. Sadly, the tactic often works.
Is this to say that some organizations didn’t effectively use social media tools and techniques to acquire customers/members or engage their existing ones? No, of course not. But, in looking back at 2011, these examples are exceptions, not the rule, and reinforce the fact that 2011 was not the year that financial institutions became “social businesses.”
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That’s my year 2011 post mortem. What did I miss?
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Blog post post mortem: Update Dec 23
I know I shouldn’t do this, but after giving more thought to this post, I decided to add this new section:
In a tweet trying to call attention to this blog post, I wrote “Overall, I don’t think 2011 was a good year for bank (or credit union) marketers.”
Thinking back to what I actually published here, that connection might not be obvious. Here’s why 2011 wasn’t a good year for bank and credit union marketers:
Their attention and focus was diverted from improving their core marketing capabilities and from developing new ones.
The online channel has become an important — if not the most important (for right now) — channel for marketing to, and engaging customers and prospects. But what I’ve found in analyzing the interactive marketing maturity of banks and credit unions, is that demand generation and demand conversion capabilities are seriously lacking. Interactive marketing functions like CRM, email marketing, and measurement need improvement. Site design, SEO, and online advertising fare better, but still have plenty of room for improvement.
Furthermore, mobile marketing capabilities have yet to be developed. And while many bank and credit union marketers know that tablets will be an increasingly important device, few really understand the role the device will play in the customer experience puzzle.
What happened in 2011, thanks to the Shroud of Durbin, BTD, and Social Media Madness, is that many bank and credit union marketers didn’t focus on improving their core marketing capabilities.
One of the biggest issues that marketers face — and that few realize, if you ask me — is that: 1) New marketing channels and new marketing techniques don’t replace existing channels — they augment them, and 2) The marketing skills needed to effectively use new marketing channels and techniques come from the skills marketers developed in using the old marketing channels and techniques (i.e. CRM, measurement, site design, etc.).
The financial services events of 2011 distracted the industry’s marketers from improving their marketing ability. Let’s see what 2012 brings.