Trends in U.S. Bank 3Q11 Marketing Spend

A scan of U.S. banks’ financial reports for 3Q11 shows that many of the leading banks reported strong year-on-year increases in their marketing spend. Banks reporting double-digit growth rates include:

  • Chase: increase of 42%, to $926 million
  • Citi: up 39%, to $635 million, driven by new consumer marketing campaigns, and sponsorships
  • Capital One: rise of 25% to $312 million
  • Bank of America: growth of 12% to $556 million

However, the rise in marketing spending is not universal, and a number of other leading financial institutions have cut expenditure levels year-over-year. Most notable is American Express, whose marketing and promotion spending fell 14% y/y to $757 million (of course, this follows a significant ramp-up in marketing spending throughout 2010).

In general, banks must balance external and internal forces to determine the appropriate levels of marketing investment:

  • External: banks are looking at capture their share of business in certain segments (e.g., affluents) and/or product categories (e.g., auto lending, credit card, commercial loans).  And this need to invest in growth areas is particular strong at present, given banks’ struggle to generate meaningful revenue growth.  However, if there are strong indicators of deteriorating economic conditions, banks may want to scale back on their marketing spend.
  • Internal: banks must also recognize their own circumstances and challenges and how this impacts on marketing spend.  For example, many banks now have programs in place to reduce expenses (see our recent blog on brand cost containment programs). And marketing is frequently one of the first casualties of a bank-wide crackdown on costs. However, there are also internal forces that may lead to significant increases in marketing spend; for example, a bank may have just completed a significant merger, and will need to invest in marketing to support the overall integration effort.

Capital One launches a new small business credit card suite

Capital One recently launched Spark Business, a suite of six small business credit cards.  This represents a radical overhaul of the Capital One small business credit card portfolio, with the six new Spark Business cards replacing the existing five cards.

In launching Spark Business, Capital One is following the lead of Chase, which in 2009 replaced its small business card product range with the Ink portfolio. Like Chase, the launch of Spark Business enables Capital One to concentrate its marketing on one brand.

Other interesting aspects of the Spark Business launch:

  • One of the cards–Spark Miles–is a small business version of its well-known Venture Rewards card, featuring two miles per dollar on all spending with no limits, and an annual fee of $59.  There is also a cash back version of this card, called Spark Cash
  • In an earlier blog, we highlighted the fact that many small business card issuers are offering large bonuses to drive small business credit card spending.  Capital One is no exception to this, with Spark Miles offering a bonus of up to 15,000 miles, and Spark Cash promoting up to $150 cash back
  • All of the Spark products have no foreign transaction fees. This is a standout feature, as most other issuers only eliminate foreign transaction fees on their high-end cards
  • All of the Spark Business products offers card personalization options and free employee cards