Category Archives: Marketing

Banks Cut Marketing Spending in Absence of Revenue Growth

EMI analyzed bank marketing data of 25 leading U.S. banks and found a 4% y/y decline in marketing expenditure for the first nine months of 2013.  During this period, marketing spending accounted for 2.6% of net revenues.

Our analysis finds that marketing expenditure levels and changes vary significantly by bank type .

  • Monolines: These banks are characterized as having a strong dependence on their credit card operations.  The three banks in this segment—American Express, Discover Financial and Capital One—allocated 7.8% of their revenues to marketing in the first 9 months of 2013.  Capital One’s spend levels are relatively lower, as it has transitioned over the past decade to be more like a full-service bank, with a network of 900+ branches.  The ‘monoline’ segment is also bucking the overall trend, with a 4% y/y rise in marketing spend.

  • National banks: These megabanks invest about 2% of revenues in marketing to promote their brands, support their extensive physical and virtual channels, and advertise their wide array of financial products and services.  As these banks (which include JPMorgan Chase, Wells Fargo, Citigroup and Bank of America) are under pressure to maintain profitability in a low/no growth environment, they reduced marketing spend 8% y/y.  Wells Fargo stands out, insofar as its marketing spend as a percentage of revenues is much lower than its peers, as it has traditionally focused its revenue-generating activities on its branch network.  However, Wells Fargo was the only one of these four national banks to report y/y marketing growth for the first three quarters of 2013.

  • Regional banks: The 18 regional banks analyzed by EMI allocated 1.6% of their revenues to marketing over the first 9 months of 2013.  Under pressure to cut costs and maintain profitability in the absence of revenue growth, these regional banks cut marketing budgets by 13%, led by large regionals like KeyBank (-31%) and SunTrust (-29%).

The extent to which banks ramp their marketing spend will be based on whether they see significant revenue growth opportunities, which in turn is dependent on economic growth.  And there are some positive signs in this regard, with the OECD projecting that U.S. GDP growth will rise from 1.7% in 2013 to 2.9% in 2014 and 3.4% in 2015.

LIMRA Marketing & Research Conference Wrap-Up

EMI recently attended the LIMRA Marketing & Research Conference at Disney World. Our take-away from the conference: No business today can achieve sustainable growth and gain market share without being customer-centric. Easy to say, but less easy to implement.

As an exhibitor, we had dozens of conversations on companies reassessing and refining their client-centered strategies. The challenge of operating with a consumer marketing lens, versus the traditional product-centric lens, which so many companies have done, was well expressed in a recent McKinsey report* on U.S. retirement readiness:

[Providers] “have a unique, largely untapped opportunity…But to capture it, firms must stop driving product innovation based on actuarial models and instead lead with a strong consumer marketing lens…financial institutions must take a much stronger consumer view as they create new product prototypes.”

These challenges relate to how companies engage with their channel partners to enable customer-centric throughput. For example, one mutual fund leader at the Conference addressed investment language and how “financial security” resonates far more than “financial freedom.” An insurance leader explained the need to help agents establish an online social presence and keep diverse customers engaged through social media.

The LIMRA event helped us to crystalize several fundamental questions:

  • “Am I using customer-centricity to achieve competitive advantage with my channels and end-customers?”
  • “Is my organization unified in this approach, even if product, sales and research are in silos?”
  • “Am I extending my consumer-centric expertise and assets (e.g., research, collateral to advisor and agent channels) that arms advisors and agents with educational and motivational client tools?”
  • “Am I adapting core messaging to engage different generations, particularly as they age and their needs evolve, across relevant traditional and digital communications?”
  • “Am I preparing for what my distribution channels will need in the next two years based on what my research, marketing analysis and industry trends are reporting now?”

These questions speak to the need for strategies and tactics to help financial service institutions to grow share with their captive and third party distribution channels. EMI examined many of these questions at our recent webinar Four Strategies to Win the Hearts and Minds of Your Advisor Channel – and Grow Share which shows you the need for customer-centric throughput and the importance of building better advisor relationships that can be adapted to sales channels and ultimately end customers. This is a topical concern of research and marketing experts at investment and insurance firms alike as we clearly recognized at the LIMRA event.

 

* McKinsey & Company, “Why Are We Not There Yet? An Update on U.S. Retirement Readiness,” May 2013.

Financial Literacy: Nicety or Necessity for Retail Banks?

In honor of Financial Literacy month (that’s April in case you’ve forgotten to note it on your calendar), we’re featuring 6 banks who have led in developing financial education resources…in very different ways:

  1. Regions Bank sponsored Financial Fitness Fridays in January 2013, with live seminars at their branch locations. Their My GreenGuide online learning portal is one of the best—engaging visuals, accessible advice and a good array of life stage-based calculators for everything from retirement to managing hardships. Engagement translates to differentiation.
  2. Wells Fargo, in their usual “do it well or not at all” style, supports
    Hands On Banking, both broad and deep in the segments served and formats offered.  From teens to entrepreneurs, teachers to the workplace, this program covers the ground–and delivered financial smarts to nearly 154,000 US consumers in 2012 alone
  3. Capital One has assembled a virtual smorgasbord of learning tools, best practices, programs, seminars, games and partnerships serving just about any segment you can name—from kids to retirees, college students to newlyweds, teachers to small business owners. Buried in the maze of options they offer are some gems—including teachable moments for teens, an easy lease-vs-buy calculator for businesses and tips on preventing ID theft. But you’d have to have spare time and determination to mine the full value out of the literacy labyrinth.
  4. Literacy’s gone mobile at Fifth Third—and this has nothing to do with a smartphone. The Financial Empowerment Mobiles are 40-foot city buses tricked out as financial learning centers, and activated with locally staffed flash mobs and other PR-worthy activities. Less intriguing, but high-impact are 53’s age-based programs from the 5th grade focused Young Bankers Club to sponsorship of ABA’s Teach Children to Save and Dave Ramsey’s Foundations in Personal Finance high school curriculum. High community value matches well to this bank’s regional and local go-to-market strategy.
  5. A 2011 survey found that 89% of US parents think they are important in teaching children about basic money management, but less than 4 in 10 actually do it. BMO Harris is out to close the gap with its engaging and comprehensive Helpful Steps for Parents. Activity books for kids, age-based practical advice, blogs and videos targeting common teachable moments make this one of the best kid-centered efforts out there. The Zone offers activities, games and learning in kid-friendly form—and does well until it misses with the teen audience.
  6. PNC leverages their $350mm commitment to Grow Up Great, their multi-year, comprehensive initiative focused on helping kids under 5 prepare for success in school, made even better through partnership with Sesame Workshop. The program’s financial education reach includes distribution of more than a million multimedia kits, teacher training, parent guides, PNC staff volunteers and grants for local efforts across PNC’s footprint. Like PNC’s hypercool Virtual Wallet targeting the millenials, the S is for Savings product is the market leader—a $25 minimum balance is packaged with a kid-friendly interactive demo, tips and the online equivalent of a piggy bank. And these are only part of PNC’s broad-based financial education curricula.  Like most PNC efforts, their literacy approach is systematic, segmented and substantial.

Financial education offerings are as varied as their sponsors. And their value is clearly broader than ticking a box on a regulatory checklist. Financial literacy done right builds engagement and loyalty.  What’s more, smarter consumers are better customers.