Furthermore, the need to optimize marketing spend will be critical in coming months as historically low interest rates intensify cost pressures. A vibrant and enhanced marketing mix model will help banks target the most valuable customers.
Novantas recently sat down with Vijay to talk about the role of marketing mix models in banking today.
What is the biggest value that marketing mix models can provide to companies today?
Marketing mix models have been around for more than three decades and have extensively been used by retailers and consumer-goods companies. While huge strides have been made in developing more sophisticated approaches and methodologies along with greater computing power and data availability, marketing mix modeling hasn’t changed much over time from a conceptual point of view. At the core, these models help managers decide where to allocate their marketing resources to achieve their business goals.
Which industries are the most sophisticated in using marketing mix models for valuable insight?
The Amazons of the world are perhaps the most sophisticated. Companies that have a strong engineering and/or computer-science base understand the power of data and technology. It is a part of their culture, whereas for most other companies, it has been difficult to appreciate the importance of data and the capabilities needed to make use of that data. When you don’t have sufficient expertise in-house to take the results from the analysis and translate them into action, then data is of little use.
Where do banks rank?
Banks have a great advantage over traditional consumer goods companies in that they already have their customer, or first party, data. On the other hand, if I buy a soda from a convenience store, it is difficult for the soda company to know that I am their customer.
Banks haven’t done a good job leveraging the power of their data.
Are banks using this data to their advantage?
The issue has been banks haven’t done a good job leveraging the power of their data. They tend to rely on marketing mix models that use highly-aggregated data rather than understanding the underlying motivations and preferences of individual customers. They then use these aggregated models to figure out the return on investment and how to allocate resources. But when you sum everything across segments and markets, you suffer from aggregation bias. These aggregated models also do not help you respond to changing consumer behaviors, especially when the marketplace is subject to significant external shocks, like a pandemic.
What are the implications of that?
Look at what happened in retail, even before COVID-19. Many retail giants closed shop because they failed to leverage the power of data to respond to their customers’ changing needs and relevant factors that influenced their purchase decisions and behaviors.
How does the transition to digital banking impact marketing mix models?
Well, digitization has now enabled many banks to deploy an omnichannel marketing strategy. Marketing mix models can provide managers a good idea of which channels effectively drive individual consumer behaviors and, subsequently, different marketplace outcomes, such as sales, profitability, new customer acquisition and customer retention across time and space. While marketing mix models can include digital marketing efforts, they can also include a whole range of customer characteristics, such as demographic or psychographic variables, the firm’s marketing efforts in offline channels and, importantly, measures of brand equity.
What are some of the new types of marketing capabilities that are valuable to banks?
We have now transitioned from digital marketing to dynamic marketing. Here, you should have the capability to assimilate continuous feedback from the market so that you can finetune and optimize your marketing operations in almost real-time. You have to be so much more agile and responsive. It’s not enough to have a website with a ton of information or spend loads of money on paid media. You need to appear in front of the consumer like a magic genie with your best content and service when the customer actually needs you. While digital marketing was about moving from share-of-voice to share-of-attention, dynamic marketing is about moving from share-of-attention to share-of-influence.
How does the domination of mobile devices change marketing strategies?
Mobile is the dominant platform for people to access and share information. You have to understand the context behind a human-mobile interaction first so that you can push out the right content. Compare it with stores and their shelves a decade ago. If you didn’t have a product on the shelf, you lost customers. In today’s world, if you’re not in front of the customers with the right content when they are looking for a product or service on their phone, you have lost them.
If you’re not in front of the customers with the right content when they are looking for a product or service on their phone, you have lost them.
Let’s talk about your personal banking habits. When is the last time you went to a branch and what was it for?
I went to a drive-through ATM recently, but that’s really rare. It’s been many months since I walked into a branch. The last time I went to get a physical bank branch was to get a banker’s check. Today, I use my bank app for just about everything: depositing checks, transferring money, making investments and contacting customer service.