Marketing Suggestions for Banks Looking to (re)Engage with Small Businesses

October 6, 2016

According to the FDIC, small business lending rose 5.3% between end-2Q15 and end-2Q16. Since falling to a post-Financial Crisis low of $279 billion in the third quarter of 2012, small business loans have risen 18%—to $328 billion—at the end of June 2016.

In the light of this steady loan growth, many banks are refocusing attention on the small business market. But how can banks—many of which virtually abandoned the small business credit market following the 2008 Financial Crisis—rebuild awareness, trust and engagement with small business owners? The following are five marketing approaches for banks to consider in (re)building their small business banking franchise:

Develop a small business brand. In recent years, several leading banks generated significant small business awareness by developing a dedicated small business brand. For some, these brands cover the bank’s entire small business operations. Capital One created the Spark Business brand for its small business solutions, and has launched a number of Spark-branded products and services, the most recent of which is the Spark 401(k) service. Another option is to develop a branded small business portal, and extend that branding into the bank’s small business social media presence. Wells Fargo created the Wells Fargo Works for Small Business portal, and applied this brand to social media platforms, including a dedicated blog and @WellsFargo Works Twitter handle.
Target small business segments. Banks’ commercial banking units tend to target firms based on size and industry sector, as these are seen to have distinct financial needs. In targeting small businesses, banks are better served by focusing on small business life stages, or by targeting underserved segments, such as women-owned businesses. KeyBank has established Key4Women, a nationwide community of women in business.
Create content of interest to small businesses. Banks can build trust and engagement with small businesses by developing and distributing information, news, and advice relevant to small business owners. This content should be focused on addressing common business challenges, and should ideally be brief and easy to scan (to reflect today’s content consumption patterns). Two recent good examples of small business-focused content are five tips from First Republic on how to run a better business, and tips from Capital One on buying or leasing office space. And banks should explore a range of content types, such as case studies, articles and blog posts, webinars, videos and succinct reports/white papers.
Raise awareness through small business surveys. Many leading banks are conducting small business surveys, which aim to both raise awareness and promote their understanding of small business concerns and needs. Many of these surveys are carried out on a quarterly or annual basis, and feature recurring metrics (e.g., Wells Fargo/Gallup Small Business Index and Capital One’s Small Business Confidence Score). Banks also seek to tackle other small business-related topics either in these recurring surveys or in standalone surveys (examples of the latter include TD Bank’s Small Business EMV Survey and Bank of America’s Women Business Owners Spotlight).
Develop a local presence. There are a number of ways for banks to establish a local presence:
1. Partner with key influencers (such as chambers of commerce)
2. Market branch presence. Small businesses tend to have heavier branch usage than consumers, and banks can leverage this branch affinity by promoting small business solutions (including technology tools) in branches, deploying branch-based small business specialists, and hosting small business events.
3. Promote small business-focused community groups or programs. In August 2016, Webster Bank announced a partnership with the University of Connecticut and Connecticut Innovations to establish a $1.5 million UConn Innovation Fund for new business startups.

Before developing and implementing these small business initiatives, banks should conduct research to understand how and how well they are perceived by small business owners, and to identify deficiencies in their product and service capabilities relative to competitors. Banks should also gain insights from key internal stakeholders to assess its ability to address these issues using existing resources. These analyses support investment decision making, and inform small business banking program development and implementation.

C&I Loan Growth is Slowing; How Can Banks Maintain Momentum?

September 1, 2016

The FDIC’s Quarterly Banking Profile reported this week that commercial and industrial (C&I) loans rose 7% between 2Q15 and 2Q16. This represents a decline from growth rates in 2Q15 (+8%) and 2Q14 (+9%).

With this decline in commercial loan growth, how can individual banks develop structures and strategies to continue to drive growth in this key area? The following are some key considerations:

Identify and communicate key differentiators. Banks should gain insights from internal (salespeople, product staff, key executives) and external (current clients, suppliers, other partners) on what the bank’s key strengths and limitations are in serving commercial clients. Banks should combine this research with in-depth competitive analysis to identify key differentiators. These key differentiators then need to be consistently communicated across all communications channels.
Identify and leverage opportunities in vertical industry sectors.
- Size and profile the opportunity: identify industry clusters within the bank’s footprint and/or sectors that have strong growth potential and that have traditionally been underserved by other banks. These sectors should be profiled to identify the key business and financial challenges of companies in this sector.
- Develop and implement a plan to target this sector, which may include establishing a dedicated industry group (First Tennessee Bank recently created a dedicated music industry group in Nashville), and engaging with this sector (e.g., by creating industry-specific content and collateral, as well as participating in, sponsoring and even hosting industry events).
Develop thought leadership infrastructure and assets. Banks can develop a competitive advantage by creating compelling content in a mix of formats (reports, newsletters, infographics, blog posts, videos, surveys) and presenting this content in a consistent and visually-appealing format (e.g., using bullet points for quick scanning, images, callouts). Many leading banks have now created branded portals that provide content, tools and advice.
Leverage captive channels and use non-traditional channels for communicating to prospects. Traditional B2B marketing channels are under pressure, as business readership of trade publications is falling and direct mail response rates continue to decline. Banks need to invest in a broader mix of marketing media, including online, email, social media and events. Banks also have significant opportunities to leverage their existing service (and sales) channels, including branch, call center, online, mobile and social media.
Develop a commercial banking presence in non-traditional markets. Unlike retail banking, banks have more scope to develop their commercial banking operations outside their traditional footprint by opening beachhead offices in markets that have growth potential (overall or for specific industries) and where the bank feels it can compete effectively with incumbents.
—BMO Harris recently opened a commercial banking office in Dallas
—Wells Fargo opened a commercial banking office in Portland, Maine.

Although C&I loan growth has slowed, banks remain committed to continuing to grow their commercial loan portfolios. Banks that can clearly articulate and deliver their value proposition (and competitive differentiation) to their commercial clients and prospects will have increased their chances of success in this dynamic environment.

Banks Grew Marketing Budgets and Marketing Ratios Modestly in 2014

February 26, 2015

EMI analysis of recently-published FDIC data on 2014 marketing spending for 17 leading banks found that banks are beginning to grow their marketing budgets in order to drive revenue growth in a growing economy. The scale of the increase was relatively modest, a trend that we expect to continue in 2015, as banks look to marry their desire for revenue generation with a continued need to exercise a tight rein on costs.

Specific findings from our analysis:

Total marketing spending for these 17 banks rose 4% between 2013 and 2014. 10 of the 17 banks increased their marketing budgets, 6 cut their budgets, while SunTrust’s marketing expenditure was unchanged.
Net revenues for the 17 banks fell 2%; as a result, their marketing-to-revenue ratios rose by 16 basis points to 2.84%.
Chase had by far the largest marketing budget at nearly $2.8 billion, up 2% from 2013. Four other leading banks (American Express, Citigroup, Capital One and Bank of America) had marketing budgets of more than $1 billion.
Of the 10 banks that grew their marketing budgets in 2014, 5 also showed increased revenues. The 4 banks with the lowest marketing-to-revenue ratios reported revenue declines between 2013 and 2014.
The variation in marketing-to-revenue ratios among these banks is huge. American Express and Discover are primarily credit card issuers and lack branch networks; they tend to have marketing-to-revenue ratios of 8-10%, in line with fast-moving consumer goods (FMCG) companies. National bank marketing ratios tend to be around 3%, while regional bank ratios are generally between 1% and 2%.
Even within these bank categories, there are significant variations. Capital One is a regional bank with a very significant credit card portfolio, so its marketing-to-revenue ratio (6.1%) falls between a monoline and a regional bank. Wells Fargo trailed its national bank peers in marketing spend. Although it grew its 2014 marketing budget by 8% to $613 million, its marketing-to-revenue ratio remains below 1%.