The tagline is an integral part of a bank’s brand identity: it cuts to the core of what the bank aspires to represent for its clients. Banks will typically create a new tagline following a large merger, as an integral element of a major brand overhaul, as part of a new advertising campaign, or even in response to a crisis event.
In creating a new tagline, banks should consider a number of key factors. An effective tagline:
- Is short and easy to understand
- Is consistent with other bank brand elements
- Reflects the bank’s overall positioning and value proposition
- Provides themes for advertising and marketing campaigns
With these factors in mind, the following are some themes used by leading U.S. banks in developing their taglines:
In recent years, banks have been primarily focused on cost cutting. However, as the U.S. economic recovery continues to gain momentum, banks are identifying opportunities for revenue growth. As banks look to capture this, they will obviously be looking at the size and composition of their marketing budgets.
EMI’s analysis of the latest FDIC data for 20 leading retail banks found little evidence that banks are growing their marketing budgets. In fact, marketing spending for these banks over the first 9 months of 2014 was 2% lower than the same period in 2013. As seen in figure 1, 10 of the 20 banks reported growth in their marketing budgets, led by PNC and Capital One.
These 20 banks invested an average of 1.5% of their net revenues in marketing during the first 9 months of 2014. Although this marketing-to-revenue ratio rose 2 bps y/y, it is well below the 2% average that existed prior to the financial crisis. For banks looking to grow revenues, they will need to return marketing-to-revenue back to this 2% level.
Figure 2 shows that 14 of the 20 banks have marketing-to-revenue ratios of between 1% and 2%. For Chase, Bank of America and Capital One, the ratios are for their retail bank charters; marketing-to-revenue ratios for these banks’ credit card charters are much higher (as seen in figure 3).
Of course, banks looking to increase their marketing investment in order to grow revenues also need to ensure that these marketing budgets are effectively deployed, in order to optimize marketing ROI. The following are some considerations for banks as they prepare marketing budgets for 2015:
- Consumer perceptions of banks have changed. In the aftermath of the financial crisis, banks suffered reputational damage as they were seen as key contributors to the crisis. In recent years, banks have worked hard to change their business models in order to focus on their core competencies (and this has been recently seen in improved customer satisfaction ratings). Marketing will play a key role in communicating banks’ key positioning as trusted providers of financial services and support.
- Consumer banking behavior has changed. Consumer adoption of self-service-channels (online, mobile, ATM) has now attained critical mass and these channels account for a majority of everyday banking transactions. These channels create significant advertising and cross-selling opportunities (and challenges) for banks.
- Bank branches have untapped marketing potential. As everyday bank transactions move to self-service channels, banks are cutting branch numbers and reinventing various aspects of the branch (size, layout, staffing, integration with other channels). Banks should also consider the fact that the branch is the key physical expression of the bank brand, and should allocate a portion of their marketing budgets to capturing branches’ marketing potential.
- Bank need to embrace non-traditional marketing channels. Younger demographic segments (such as millennials) have very different media consumption patterns than their older peers, with significantly higher usage of online/mobile and social media. However, banks’ innate conservatism has resulted in their failure to fully embrace new embrace new media. Banks need to both significantly increase their investment in non-traditional marketing channels, but also find innovative ways to convey their core messages to a new audience.
The FDIC recently published detailed bank data as of end-4Q13. This data revealed that U.S. banks are continuing to grow their commercial and industrial (C&I) loan portfolios, although the y/y growth rate has been steadily declining, from a high of 16% in 2Q12 to 7% in 4Q13. C&I loan portfolios declined significantly following the financial crisis, reaching a low of $1.2 trillion in 2Q10. Since then, C&I loan portfolios have grown 38%, and have driven overall U.S. loan growth. The recent deceleration in the C&I loan growth rate had reduced the gap between C&I loan growth and overall net loan growth, from a high of 12.3 percentage points in 2Q12 to 3.7 percentage points in 4Q13.
Within C&I loan portfolios, overall growth has been driven by individual loans valued at more than $1 million. Mirroring overall C&I loan portfolios trends, y/y growth for >$1MM loans peaked at 21% in 2Q12, and has been declining since then. Meanwhile, small business loan portfolios (C&I loans with initial values of <$1 million) only started to report y/y growth at the end of 2012. This growth rate reached 3% in 2Q13, but has slowed since, to 1.4% at the end of 2013. This slow recovery in small business lending has been due to both tight bank underwriting (which is only now beginning to ease), as well as low demand for small business loans due to uncertainty regarding the prospects for economic recovery. Interestingly, within this C&I loan <$1MM segment, strongest growth is being seen in the <$100K loan segment, which includes small business credit card loans. This <$100K portfolio rose 4.2% y/y in 4Q13, up from 2.9% in 3Q13.
Strongest growth in C&I loans between end-2012 and end-2013 was reported by mid-sized banks with $1-$10BN in assets. The largest banks (>$100BN in assets) had trailed the industry average, as banks like JPMorgan Chase and Wells Fargo reported anemic loan growth. C&I loan portfolios for small community banks (<$100MM in assets) were unchanged y/y, as they struggle to compete with the broad commercial product range and cutting-edge online and mobile tools on offer from the larger banks.
Given the slowdown in the growth of C&I loan portfolios, how can individual banks continue to build their commercial loan portfolios?
Target specific geographic markets or vertical industry segments, where the bank already has—or can quickly create—dedicated capabilities
Re-commit to the small business segment
Develop initiatives to increase commercial loan utilization rates (which continue to trail historic averages for many banks)
Identify and dedicate resources to capture growth in other loan categories, which have been ignored in recent years