Leading U.S. Banks Report Modest Increase in Marketing Budgets in 2017

Marketing spend by the top 40 banks reached nearly $14 billion in 2017, up 1.8% on average from the previous year–and once again, 5 banks spent over a billion dollars on marketing. EMI analysis of bank spending reveals:

  • 30 of the 40 largest banks grew marketing spend in 2017, with 17 reporting double-digit growth.
  • As in past years, banks with national credit card franchises lead all others, in both absolute terms and in their marketing intensity (marketing spend relative to revenues). In 2017, spending among these card leaders declined, as focus shifted from acquisition to portfolio marketing.
  • Two banks notable for substantial 2017 marketing increases are Goldman Sachs Bank focused on promotion of its online lending platform, Marcus by Goldman Sachs, and U.S. Bank capitalizing on brand-building around the Super Bowl, held last week at the Minneapolis stadium bearing the bank’s name.

EMI annual analysis of Federal Financial Institutions Examinations Council (FFIEC) call report data for 40 leading U.S. banks distills both absolute spending and marketing intensity ratios, as measured by spend percentage of net revenues (net interest income plus noninterest income).  Results are reported below.

Advertising and Marketing Spending Highlights

19 banks/bank charters had advertising and marketing budgets of more than $100 million.  5 had billion-dollar-plus budgets (JPMorgan Chase, American Express, Capital One, Citigroup and Bank of America).

Of the 17 banks reporting double-digit growth, the two with the largest absolute increases in their marketing budgets were:

  • U.S. Bank: +$107 million, with a focus on growing national profile behind the increased marketing spend, including heavy branding around the Super Bowl, which was held last Sunday at the U.S. Bank Stadium in Minneapolis.
  • Goldman Sachs Bank: +$80 million, driven by an advertising campaign to promote Marcus by Goldman Sachs, its online personal lending platform.
  • First Republic was also notable for its 46% increase–a strategy that seems to have paid off with 18%+ revenue growth reported by the San Francisco-based bank in 2017.

Other banks boosted marketing spend to support new campaigns in 2017.

  • Fifth Third (+10% to $115 million) launched a campaign in May 2017 that played on its “5/3” name, promoting “Banking that’s a Fifth Third Better”
  • BB&T (+10% to $89 million) introduced a new brand campaign and tagline (“All we see is you”) in September 2017.
  • SunTrust (+38% to $220 million) rolled out its ‘Confidence Starts Here’ ad campaign in March 2017, building on its onUp movement focused on building financial well-being.

Marketing spend declines were led by:

  • Capital One: decline of $139 million, with a strong drop in spending in its card unit partially offset by a $23 million rise in its retail banking unit.
  • American Express: down $111 million, although this follows a ramp up of marketing and promotion spending in recent years.  American Express is also increasing its focus on targeting existing clients, which typically involves lower marketing spend.

Marketing Intensity Highlights

Even though 30 banks increased their marketing budgets in 2017, only 14 increased their bank marketing ratios, meaning that growth in marketing spend did not match the rise in net revenues.  Banks with the strongest growth in their marketing ratios were Goldman Sachs Bank (+183 basis points), SunTrust (+61 bps) and U.S. Bank (+44 bps).

Most retail banks have marketing ratios of 1-3%. Those with the highest marketing ratios include Santander Bank (4.1%, due to continued growth in the bank’s U.S. marketing budgets in recent years) and BMO Harris (3.4%, following a 17% rise in marketing spend in 2017).  4 banks have marketing ratios of less than 1%.  Most notable in this category is Wells Fargo, which has traditionally–and infamously–focused on sales and required much lower advertising budgets than its peers.  Wells Fargo did launch a new integrated marketing campaign in April 2017, which it reported was focused on “rebuilding trust.”  This contributed to a 4% rise in its advertising and marketing budget in 2017, but its spend levels remain well below comparably-sized banks.

We expect that banks will maintain or even increase their marketing budgets in 2018 to build brand awareness and affinity, as well as to promote new products and services–in particular those focused on digital transformation.  However, many banks remain focused on improving efficiency ratios, and marketing budgets are often on the firing line when banks look cut costs.  However these cuts–when executed without a careful strategy for maximize marketing ROI–often sacrifice market share gain and longer-term growth.

Banks Are Reducing Branch Networks…But Remain Committed to Human Channels

In reporting their quarterly and annual financials, leading U.S. banks reported continued declines in their branch networks.

These declines are driven by banks’ need to cut costs, as well as reflecting the significant shift to digital channels by consumers and businesses for their everyday banking needs.  However, There is plenty of evidence that banks remain fully committed to their human channels, especially the branch channel.

  • JPMorgan Chase announced last week that it plans to open up to 400 branches in the next five years in new markets.
  • At its 2017 Investor Day, Citigroup discussed its retail banking campaign in Manhattan, which featured three new Citigold Centers as well as the addition of 70+ relationship managers and financial advisors.  This campaign led to a 16% rise in checking deposits, 18% growth in assets under management, and 35% increase in personal and home equity loans.
  • Wells Fargo has a branch presence in more than 460 markets, which it considers to be a competitive advantage over national banking competitors such as Chase and Bank of America, both of whom are in less than 250 markets.  Wells Fargo also highlights that it is in the 15 fastest-growing U.S. markets.
  • Fifth Third presented its “bricks and clicks” approach at its Investor Day, which articulated the roles of both digital and branch channels as well as the importance of integrating these channels.

Why do banks remain committed to human channels?

  • While digital channels are effective for day-to-day banking needs, bank clients tend to prefer human channels for their more personal and complex banking needs.
  • With the switch to digital channels for everyday banking, banks no longer need highly-dense networks in order to establish or maintain a physical presence in new markets.
  • Reflecting their changing role, branches are increasingly staffed with specialists (e.g., mortgage bankers, small business bankers, investment bankers) who increase branch effectiveness as a sales channel.
  • Maintaining a branch presence in a market is key to raising and maintaining brand awareness and affinity.

Banks need to invest in both human and digital channels, in order to reflect customer needs, preferences and behaviors.  A truly integrated channel strategy and structure, which is built around the customer journey, and which reflects the unique attributes of both human and digital channels, is vital for banks to optimize returns on their channel investment.

Banks Use Surveys to Cover Small Business Topics of Interest

In May 2017, EMI published a blog that discusses how banks use surveys to build small business engagement.  In that blog we reported that many leading banks publish recurring surveys that track general business optimism as well as key challenges and opportunities.  In addition, banks also carry surveys that cover specific topics on a one-off basis.  The following table looks at the topics covered over the past six months:

The banks cover these topics of interest to achieve a number of objectives, including:

  • Raising general awareness of the bank and affinity among small businesses
  • Positioning the bank as a small business banking thought leader
  • Communicating their understanding of the changing issues impacting small businesses
  • Highlighting their areas of strength
  • Differentiating the bank from its competitors

In fact, the desire for differentiation is leading banks to conduct surveys on specific small business sub-segments or on specific product areas.  Recent standalone surveys of this type include:

  • U.S. Bank surveys of Asian-American small business owners (October 2017) and Hispanic small business owners (October 2017)
  • Surveys by both Bank of America (September 2017) and American Express (November 2017) on women-owned businesses
  • Bank of America Small Business Payments Spotlight (October 2017)
  • American Express Small Business Saturday Consumer Insights Survey (November 2017)

The proliferation of small business surveys that cover specific topics of interest indicate that they are effective tools in helping banks build awareness and engagement with their small business clients and prospects.