According to EMI Strategic Marketing’s analysis of data from the Federal Financial Institutions Examination Council (FFIEC), U.S. banks spent $17.1 billion on advertising and marketing in 2016. This expenditure represented 2.4% of bank revenues. Five banks (JPMorgan Chase, American Express, Citigroup, Capital One and Bank of America) each spent more than $1 billion, and together accounted for more than half of the industry’s total expenditure. The following chart looks at 2016 marketing-to-revenue ratios for 20 leading U.S. banks (note that for JPMorgan Chase and Capital One, marketing spend data is provided for both their retail bank charters and card-issuing units).
Most banks grew their marketing spending in 2016, as they looked to drive revenue growth in an improving economy. 10 banks reported double-digit percentage rises in their advertising and marketing budgets. In some cases (e.g., KeyBank and Huntington), the strong increases were in part the result of significant bank acquisitions.
13 banks grew their marketing-to-revenue ratios in 2016.
Half of the banks in the chart (mostly branch-based banks) have marketing-to-revenue ratios of between 1.5% and 3%.
Several banks have been ramping up their marketing spend in recent years. Between 2014 and 2016, Santander Bank’s spend nearly doubled between 2014 and 2016, and its 2016 marketing-to-revenue ratio of 4.0% was the highest among branch-based banks.
At the other end of the scale, both Wells Fargo and BB&T have ratios consistently below 1%.
Credit card-focused banks/bank charters have the highest marketing-to-revenue ratios.
Chase Bank USA (JPMorgan Chase’s card-issuing bank) had a ratio of almost 20% in 2016. The sharp rise in the ratio from 2014 and 2015 was due to both a 6% rise in advertising and marketing spend (to support the launches of Freedom Unlimited and Sapphire Reserve), as well as a sharp decline in noninterest income.
American Express increased in its advertising and marketing spend by 15% in 2016, and its ratio rose to nearly 12%.
As banks look to scale back their branch networks both to save costs and adapt to changing bank channel usage (in particular for everyday banking transactions), they are also cognizant of the potential loss of the branch’s role as a branding beacon in local markets. Therefore, it’s likely that a portion of the cost savings from branch network reductions will be diverted to advertising and marketing budgets. As a result, we may expect banks’ marketing-to-revenue ratios to gradually increase in the coming years.
Banks and other financial providers have recently increased their focus on developing financial education programs, driven by a number of factors:
Numerous studies have highlighted deficiencies in financial literacy among U.S. consumers. FINRA Foundation’s National Financial Capability Study found that only 37% of people were considered to have high financial literacy in 2015, down from 42% in 2009 and 39% in 2012. Studies also show that consumer exposure to and engagement with financial education programs leads to smarter financial decision making. Therefore, the onus is on a range of entities (government, educational institutions, nonprofit organizations, industry associations, and of course financial firms) to develop programs to improve financial literacy.
Many financial firms are looking to (re)position themselves as trusted providers of not just products and services, but also of information and advice that can help people better manage their finances. To that end, financial education programs can act as a means to help banks cement relationships with their clients.
The following are some key considerations for financial firms in establishing a new financial education program—or in enhancing an existing one:
Conduct research to gain insights into consumers’ financial literacy levels, attitudes to financial services, preferred channels for consuming financial information, and favored sources of financial information and advice.
Conduct financial education surveys. Surveys are an effective way to raise consumer awareness and interest, highlight commitment to raising financial literacy, and gain insights that inform financial education program development and execution. U.S. Bank recently published two financial education surveys: the Parent Financial Education Survey (July 2016, focused on the parents of college students aged 18-14) and the Student and Personal Financial Survey (September 2016). Last month, Bank of America published the Bank of America/USA Today Better Money Habits report, which was versioned for 7 of its markets.
Ensure that financial education content reflects the different ways that consumers process information. Keep content short, with easy-to-follow tips and soundbytes. Incorporate images, infographics or video to enhance its visual appeal.
Distribute content through a range of channels. These channels can include online portals (as described above), events, in-person and online courses, and social media platforms. (PNC announced in August that it would be using Pinterest to promote its financial and early childhood education initiative.) In addition, a number of banks (e.g., First Tennessee, First National Bank and SunTrust) have partnered with Operation Hope to open HOPE Inside offices in its branches. SunTrust recently announced an ambitious plan to expand the Operation HOPE Inside program from 7 branches today to 200 by 2020. The number of individuals receiving financial counseling through these offices is expected to rise from 6,000 to 150,000.
Partner with schools and nonprofit organizations that promote financial literacy in communities. This partnership can take the form of joint programs, funding or employee volunteer hours. Fifth Third recently introduced an initiative to deliver its Empower U financial literacy course through 60 local nonprofit organizations throughout its footprint. And Allianz Life recently awarded $275,000 in financial literacy grants to 14 nonprofit organizations in the Twin Cities.
Well-constructed, well-delivered financial education programs improve financial literacy. This in turn leads to smarter financial decision making, benefitting both consumers and their financial providers.
In a recent EMI blog post, we discussed ways that banks could re-engage with the small business market. One of these ways was to develop content of interest to small businesses. The development and distribution of targeted content can enable banks to re-establish credibility, act as a proof point of banks’ commitment to small businesses, and reposition banks as a key source of advice for small business owners.
The following are six tips for developing a content program aimed at small businesses:
Conduct due diligence. Survey small businesses and company stakeholders to develop insights into what content topics small business owners are interested in, how they consume content, and how they perceive banks as content providers. In addition, banks should study competitors’ content development to identify best practices as well as approaches to avoid. And banks should also assess content topics and styles deployed by dedicated business media, such as Inc. and Entrepreneur.
Develop a content portal. Large banks—such as Bank of America (Small Business Community), Capital One (Spark Business IQ), JPMorgan Chase (Chase for Business Resource Center), U.S. Bank (Connect), and Wells Fargo (Wells Fargo Works for Small Business)—have all developed small business portals. These portals publish a regular stream of small business-related content, which aim to drive small business awareness, interest and engagement. Establishing content templates and guidelines—covering content length, styles, colors, fonts, logo treatment, images and graphics, and approval processes—facilitate timely content development and publication.
Focus on topics of interest to small businesses. Content developed for small business owners tends to be focused on key business life stages (e.g., starting a business, growing, selling), and related business challenges and financial needs. Such content positions the bank as a trusted advisor for small businesses at different stages of evolution, and can act as a catalyst for small business engagement.
Utilize a range of content types. Banks have a range of different content types at their disposal, each of which offers specific advantages in terms of developing and presenting content. These include articles and blog posts, case studies and success stories, podcasts and webcasts, videos and infographics. Wells Fargo has a dedicated “Wells Fargo Stories” section on its website, which include thumbnail summaries, which link to additional detail, including video. Content should be presented in easy-to-consume formats for small business owners who are bombarded with information on a daily basis.
Promote content across multiple channels. Banks should aim to present this content across a number of channels, including social media (in particular LinkedIn and Twitter), the company website, small business media, and small business-oriented events. In addition, this content should be adapted for use by the bank’s small business bankers in branches or on the road. Some banks that maintain small business content and advice portals extend this branding into social media. A standout example here is the @WellsFargoWorks Twitter handle, which mirrors the bank’s Wells Fargo Works for Small Business portal.
Carry out small business surveys. Many of the large banks now conduct and publish regular (annual, quarterly or even monthly) surveys that track business sentiment and key challenges. These surveys help demonstrate the banks’ commitment to the small business market. And findings from the surveys provide fodder for content development that can be used across a range of channels. Many of these have been in place for more than a decade (PNC has published a semi-annual PNC Economic Outlook since 2003), and some include a metric that is tracked over time (e.g., the Bank of the West Small Business Growth Index). A number of banks create market-specific versions of these surveys (U.S. Bank publishes versions of its annual small business survey for 11 markets in its footprint), which help raise the bank’s profile in these markets. Banks have also conducted one-off surveys of current hot topics (e.g., the TD Bank EMV Survey in November 2015) or focused on targeted segments (the August 2016 Bank of America Women Business Owner Survey).
Developing relevant and engaging content across multiple media enable banks to position themselves as aware of small business ambitions and needs, and committed to partnering with small business owners to develop pathways to business success.