Category Archives: Marketing

Market Research Pitfalls, Part 1: The Art of Asking Questions

In working with clients, we often encounter marketing organizations that have been snakebitten by ineffectual research to the point that they no longer see the value in conducting it at all. Why is it so hard to produce valuable research?

One reason is that many don’t understand that the most natural and effective starting point for research is with a strategic problem. They think of research as a box to check rather than as a tool that can help them optimize their performance. Or, they think of research only as a tool for certain situations—focus groups for brand work, surveys for customer satisfaction measurement etc.

To be sure, there is an art to identifying and articulating strategic problems in a way that enable research support. It is the step that lies between identifying an issue—a product or sales region not making their numbers, a marketing program not generating the projected number of leads—and a proposed solution where this art can most effectively be practiced. In reality, however, most organizations simply want to make changes and move on. They don’t bother to ask the questions which are critical to producing effective, strategically vital research. The answers to questions like the following, delivered through well-designed research, play a central role in strategic and tactical decision-making:

  • Do customers in the underperforming sales region have different attitudes than those in other regions?
  • Did customers not know about the new product or were they simply not interested?
  • Are prospects responding more strongly to competitors’ lead generation efforts and if so, why?

Conducting research is not a panacea—it won’t give you all the answers and it’s not worth the investment in all situations—but it can and should help more than it does. Organizations just need to stop and ask the right questions.

The Retirement Income Conundrum

A day doesn’t seem to pass without a new, alarming headline about retirement in America.  I was reminded of this today when our head of research sent me this link about the decline in the “Retirement Optimism” index (perhaps an oxymoron these days)  https://www.wellsfargo.com/press/2011/20110602_Retirement.  And consistent with other research, retirees maintain a consistently higher level of optimism than non-retirees.

Despite this morose pre-retiree outlook about retirement, the study reports that about 3 in 4 have no formal plan for retirement.  Why are households unable to address such an important personal challenge and prepare for the days of retirement?  Well, there are many reasons for this, including:

1) The definition of retirement.  What’s retirement?  Has the norm ever been 15-20 years of golf, world travel, and endless vacations on a private yacht in the Aegean?  Maybe “retirement” is a more transitional period of life, when earned income declines, new expenses emerge (e.g. health), and guaranteed sources of income from accumulated financial assets are required to match consumption  liabilities.  So maybe “planning for retirement” is not exactly the caracature we all imagine.

2) Savings.  As we near completion of the transition from a defined benefit to a defined contribution work place, have households accepted responsibility for postponing consumption and saving for a time when they’ll need new sources of income?  This will require a cultural change in how households budget.

3) Investing.  How many consumers know how to build a retirement portfolio?  How many understand the benefits of an annuity and how to select the most appropriate product?  How many understand how to use capital market products to create a stream of guaranteed income?  The accumulation model alone based on risk and return just doesn’t solve the retirement problem yet the airwaves are filled with messaging that encourages this.

4) Advice.  Despite the dramatic increase in advisor clients requiring retirement income portfolios, there is still no acknowledged consensus on the best approach.  Moreover, compensation models based on AUM often conflict with what’s best for the client.  Systematic Withdrawal Plans, Annuities, Time Segmented Allocation Models, laddering with strips….or plain old risk and return…where’s the consensus and why isn’t there one?

5) Insurance.  To some degree, most consumers need income “insurance” in retirement.  Typically, insurance products are sold, not purchased.  Given this paradigm, the financial advisor is key – he/she needs to recommend the right product for the right purpose.    This brings us back to the point 4 – advice.  The financial intermediary is going to be key in helping households efficiently use their savings to create income for retirement.  Manufacturers of retirement income products are going have to educate financial advisors on the benefits of their product from an outcome point of view and when the advisor should incorporate them into their client portfolios and financial plans.

Leading U.S. financial institutions grow marketing spend in 1Q11

Financial institutions (FIs) reported continued strong growth in advertising/marketing spending in their quarterly financials.  The 10 leading financial institutions in the chart below spent a combined $3.0 billion on marketing in the first quarter of 2011, a growth rate of 19% over the first quarter of 2010 (and this comes on top of a 18% increase between 1Q09 and 1Q10).  8 of these FIs reported double-digit growth rates in 1Q11, with particularly strong growth rates for Discover (+60%), Capital One (+53%) and Citi (+31%).

 

For most FIs, this increased marketing has not yet translated into significant revenue growth.  In the coming quarters, they will be expecting to leverage some of the beneficial impacts of their investment (such as growth in checking accounts, as well as improved customer retention and satisfaction) into increased revenue as economic recovery continues.

One FI that can show the bottom-line impact of its marketing investment is American Express.  Following the financial crisis, Amex shifted its marketing focus to drive increases in card spending, which has resulted in strong growth in recent quarters.  In the most recent quarter, its U.S. Card unit reported an increase in card spending of 15%, which translated into a 9% rise in noninterest revenue.