Category Archives: Marketing

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.

Leading U.S. banks cut marketing spend in 1Q13

A study of the financial reports for 13 leading U.S. financial institutions reveals that 10 of these FIs reported y/y decreases in their advertising/marketing spending in the first quarter of 2013, with 7 of these banks reporting double-digit percentage decreases.

Much of this is driven by bank-wide cost-cutting initiatives, with marketing typically one of the expense line items that is most susceptible to cuts.  However, it is important not to take one quarter’s worth of data as a trend.  This is particularly true for bank marketing spending, which fell significantly following the financial crisis in 2008, but recovered somewhat from 2010. A recent EMI blog showed that 7 of 11 leading U.S. banks increased their marketing spend between 2007 and 2012. For example, PNC reported a strong decline in marketing spending between 1Q12 and 1Q13, but this followed a very strong rise in spending from 2007 to 2012.

Another way to study bank marketing spend is to look at marketing spend intensity, which we define as marketing spend as a percentage of revenues.

The chart above reveals that in terms of marketing spend intensity, there are three distinct segments:

  • Current (Discover and American Express) and former (Capital One) credit card monolines. In particular, Discover and American Express have limited banking operations, so remain quite dependent on their credit card business, which tends to have higher marketing spending than other financial services. In addition, Discover and American Express lack branch networks, so they need to have higher levels of advertising spend to maintain strong brand awareness.
  • National banks (Citibank, Chase, and Bank of America), which typically devote 2-3% of revenues on marketing. These banks tend to have higher advertising to support their brands nationwide. In addition, these banks have large credit card operations. An exception is Wells Fargo, which spends only 0.5% of revenues on marketing. Wells Fargo has a national branch presence, but has a limited credit card business (unlike the other banks, it only markets credit cards to existing bank customers).
  • Regional banks, who spend 1-2% of revenues on marketing.

Finally, it is difficult to prove a correlation between marketing spending and bank growth, as many factors influence customer acquisition and revenue growth.  It is worth noting that banks continue to struggle to generaterevenue growth (7% of the 13 banks reported revenue declines between 1Q12 and 1Q13).  However, the three banks with the highest marketing intensity (Discover, American Express and Capital One) were among the 6 banks that did generate y/y revenue growth.