The role of marketing in customer acquisition is becoming increasingly important as banks navigate rising rates, competition from fintechs and the digital migration. While these efforts have grown significantly over the past couple of years, banks can do more to propel their marketing efforts by using analytics and technology to optimize their position in the industry.
The national banks have led the way on using marketing as an acquisition tool, pumping enormous amounts of money and time into strategies that are paying off.
And other banks are noticing. “Scale in regard to marketing is a whopping big deal,” said Kelly King, CEO of BB&T at a recent conference, according to the American Banker. “I give them credit — the largest banks are putting billions and billions very effectively into marketing, and it is swaying opinion, and it is swaying decisions, swaying behavior.”
But only a few banks can afford to drive such massive marketing investments, leaving regional banks to achieve differentiation and customer growth in other ways, including improved technology and more targeted marketing capabilities and strategies.
STRATEGIES TO REACH MARTECH MATURITY
New analysis from Novantas reinforces the national banks’ focus on marketing. (See Figure 1). Since 2015, the impact of the branch on new-to-bank checking customer acquisition declined by roughly 10%, while marketing’s impact in the same category increased by about the same amount. This transition implies that the customer-acquisition strategies of the future should focus on an active pursuit of the customer rather than just waiting for the customer to approach the bank. A key way to achieve that is through marketing.
Bank marketers today, however, are at different maturity points, with not all positioned to win the marketing battle. There are a few banks on the upper-end of what Novantas calls the “MarTech maturity framework.” In this phase banks use tools such as on-us and off-us data, person-based targeting and LTV optimization. But most banks are on the lower end, with fragmented data, ad hoc campaigns and siloed MarTech platforms. These banks have a massive opportunity to improve data management, analytical processes and campaign optimization to ultimately use marketing as a lever to drive bank differentiation.
MARKETING TOOLS THAT CAN SET A BANK APART
One increasingly popular and effective way for banks to differentiate themselves is through “custom audience” creation. These programs, created through CRM data or third-party data, allow banks to specifically target the customers who are most likely to engage with the bank. As a result, campaigns become more efficient. Banks can also continually create and refresh audiences, as well as optimize the tactics for targeting.
By Christopher Franzi | Manager, New York | email@example.com
Data collected by Acquisition IQ show that banks are per- forming quite well in their “home” markets. In the best-per- forming markets, retention rates for new-to-bank checking customers who have been at the bank for 12 months reach as high as 75% and as low as 50%.
With such variable performance, the overarching impli- cation is that many banks have an opportunity to improve onboarding capabilities. Even a retention gain of 1% could translate into an additional 10,000 to 20,000 retained cus- tomers over five years; raising that retention by 5% could mean the retention of more than 100,000 customers.
As rates rise, banks are skewing their marketing dollars toward non-DDA deposit products. Rate-based deposit spending as a percentage of total consumer deposit spend
increased to roughly 15% in 2017 from approximately 10% in 2016.
As a result, banks should consider marketing spend relative to pricing in the coming year. That means thinking about whether the bank should lead with a higher rate offer and less marketing or a lower rate offer and more marketing.
Banks also shifted 10% of their brand and consumer checking budgets toward digital between 2016 and 2017 to meet consumers’ evolving preferences, bringing the digital chunk to 25-40% of that budget. Those numbers are only expected to rise in 2019.
As banks think about 2019 optimization and then on to 2020 planning, Acquisition IQ insights reveal that the top priority for many banks will be getting marketing data and marketing technology to help them gain insight.
A second way to drive differentiation is through market-level spend strategies that take into account the market’s dynamics. Banks can allocate spending relative to the physical presence and potential for growth in the market, such as moving toward upper-or-lower-funnel spend based on branch share. This can increase the probability of efficiency returns in the market.
POOR DATA MANAGEMENT STYMIES INSIGHTS AND PLANNING
Novantas recently launched a spend and performance benchmarking initiative to better understand the state of marketing spend. Results from Acquisition IQ show that marketing capabilities and marketing performance widely vary.
The most agile banks can pull from a data cube to export by channel, month, product and designated market area (DMA) in an instant. More commonly, banks have the data split across multiple workbooks and rely on unreliable “institutional knowledge” to fill in the gaps. The lack of data makes the marketing-planning process precarious for these banks, inhibiting their ability to assess year-over-year performance and make future investment decisions.
Traditional marketplace solutions that measure competitors’ marketing spend can further complicate the picture. Such solutions provide only a certain level of confidence, with some sources miscalculating mass media spending by as much as 50% and digital spending by as much as 80%. Banks can also have difficulty in drawing industry insights about the efficiency of marketing spend when they only have access to their own data.
Regardless of a bank’s level of sophistication, the increasing importance of marketing as a lever for driving customer acquisition is real and only likely to grow in significance. If it isn’t an option to compete with massive scale, banks must pursue unique marketing strategies at the local and channel level in order to compete.
Manager, New York
Director, New York