Banks’ Top Marketing Challenges

 Ron Shevlin, analyst with Aite Group, a research and advisory firm serving the financial services industry, and author of Snarketing 2.0, offered some observations about  Marketing’s (Only) Three Challenges on The Financial Brand.
He cites a financial marketing agency’s survey of 120 CEOs from small banks (asset size ranging from $45m to $3.5b, with median size of $500m). in which they asked about their biggest marketing challenges. Here are the results:

What Is Your Biggest Marketing and Branding Challenge?

  1. 60.3%: Difficulty measuring/proving results/ROI
  2. 36.4%: Figuring out Social Media
  3. 30.6%: Insufficient Budget/Manpower
  4. 25.6%: Ill-defined undifferentiated brand
  5. 24.8%: Regulation and compliance issues
  6. 23.1%: Inadequate MCIF/CRM database
  7. 22.3%: Too many initiatives
  8. 19.0%: Employee support for marketing, branding, sales
  9. 15.7%:  Silos in the organization
  10. 12.4%:  Inflexible and limiting IT
  11. 11.6%:  Senior Management
  12. 09.9%: Takes too long to make internal decisions
  13. 09.9%: Risk averse/slow to adopt new ideas
  14. 07.4%: Lack of consumer trust in financial industry
  15. 05.0%: Inferior products or pricing

Source: Survey of 120 bank CEOs, Q2 2012

Shevlin’s Take: Marketers Must Refocus

Shevlin has an interesting take on these findings. He believes that they are category errors that come from just asking the wrong questions.

“Difficulty measuring marketing ROI” is a red herring. If your organization’s rate of new customer acquisition, improvement in customer retention, and growth in existing customer relationship was double what it was last year, and double the rates of your competitors, I’ll bet you $100 that your CEO doesn’t think the firm has a problem “measuring marketing ROI.

Second, if a bank isn’t putting up strong new customer acquisition and existing customer growth numbers on the board, and its CEO thinks that “figuring out social media” is going to solve the firm’s marketing problems, then s/he should be fired.

And if marketing has an “insufficient” budget, then increase the budget! You’re the CEO! You can do that, you know.

Why ROI Doesn’t Matter

ROI, he points out, is a tactical — not strategic — measure. It tells you how successful your investments were, but doesn’t tell you if those investments were the right investments to make, or if you invested enough:

It’s possible to generate an average of 250% ROI on annual marketing campaigns and still fall short of overall marketing success if the investments were too small to generate significant growth in customers or profits…I’ll take a 25% ROI on a $10m investment over a 50% ROI on a $100k investment any day.

Shevlin says that before worrying about the ROI of the marketing investments, CEOs should be primarily concerned about the quantity and allocation of those investments. His research of community banks and credit unions suggests that

  •  Financial Institutions are under-investing in marketing.
  • They are not optimizing the allocation of what they do invest.
Financial Institution (FI)
% who referred FI
% who grew the relationship
Performance Referral Score
Large bank

32%

11.9%

381

Credit union

47%

7.5%

353

Community bank

34%

7.9%

269

Total

36%

9.8%

353

Source: Aite Group

According to the research, 0nly 34% of community bank consumers and 32% of large bank consumers who consider a community bank their primary Financial Institution  referred their community bank to friends/family.  Since referrals are believed to be an important driver of new business, this is a warning sign for banks.

However, both community banks and credit unions had a lower percentage of customers who expanded their relationships than large bank customers in 2011. This suggests that community banks and CUs are less effective at marketing to existing customers.

According to Shevlin, improving the measurement of marketing ROI, and “figuring out social media”  isn’t going to fix these fundamental challenges for community banks and credit unions.

When you consider that the percentage of consumers who follow their financial institution on Twitter is in the single digits and barely in double digits for Facebook, throwing more money at marketing won’t help if that money isn’t put to productive use.

Bottom Line: Bank marketers need to begin marketing-related discussions with the senior management team focusing on three challenges:

  1. Acquiring the right customers.
  2. Retaining the right customers.
  3. Growing the relationship with the right customers.

Shevlin emphasizes that everything else is related to one of these challenges, and so, any discussion of tactics and strategies should be put in the context of how potential investments and initiatives address these challenges. Peter Drucker’s described  a business’s mission as:  to create and keep a customer, and this is a message that is too often hidden in detail that diverts attention and focus from the hard metrics of acquisition, retention and engagement.

Snap! principle of core financial marketing metrics:

Focus on acquisition, retention and engagement.

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