There are more than 31 million small businesses (6.0 million employer and 25.7 million nonemployer firms) in the U.S. and the vast majority of banks provide a range of banking services to this segment. However, many banks do not have a dedicated small business marketing programs. This is in part due to the small business segment often falling between two key segments: consumer and commercial.
For banks to effectively grow their small business banking franchise, they need to identify the unique characteristics and financial needs of this segment, and then build an integrated series of marketing initiatives to drive small business awareness, interest and engagement.
The following are 7 areas where banks should focus attention in developing small business marketing initiatives:
Incorporate small business into bank advertising campaigns. It’s expensive to develop dedicated small business advertising campaigns; only small business finance specialists (such as Kabbage) or the very largest banks do so. However, banks can highlight their commitment to the small business market by featuring small business owners and services in bank-wide brand campaigns.
Build marketing initiatives and offers around National Small Business Week. National Small Business Week is organized by the U.S. Small Business Administration (SBA) and takes place each year in May. Many banks now celebrate the week with special offers, events and other initiatives targeted toward small business needs.
Participate in/host dedicated small business events. Many banks speak at, exhibit at or sponsor small business events in their footprints, which helps to position them as a provider of advice and services to small businesses, while also allowing banks to engage directly with small business owners. Banks that have invested significantly in small business events include Chase (which hosts regular Chase for Business Conferences in various cities, most recently in Pasadena and Columbus) and Wells Fargo (which participates in Small Business Expos throughout the country).
Leverage the branch network. A Mercator survey found that 79% of U.S. small businesses visit a bank or credit union branch at least once a week. Owners also want to create and maintain networks within their local markets. Banks can leverage business owner branch affinity and networking needs by hosting events in their branches. In addition, banks should deploy dedicated small business bankers in larger branches, as well as incorporate small business signage and collateral into all branches.
Carry out small business surveys. A wide range of banks now carry out regular surveys that both provide a gauge of small business health (optimism, key challenges, opportunities) and reveal small business attitudes toward hot topics (e.g., tax reform, regulations, technology usage). Banks are increasingly publishing findings in more creative formats, such as infographics. It is also worth noting that banks conduct these recurring surveys at different intervals:
Create dedicated small business portals. Most banks have built and branded online small business portals that act as a one-stop shop for small business information and advice. To encourage repeat visits to these portals, banks need to provide a range of content (articles, case studies, podcasts, webinars, videos, infographics) organized around key small business needs or life stages (e.g., starting a business, selling a business), and designed to create an excellent user experience. Prominent small business banking portals include:
Develop a dedicated small business social media presence. Banks can emphasize their commitment to the small business market, as well as promote various small business events, offers and other initiatives, by creating a dedicated small business presence on social media, particularly on Twitter. Banks with dedicated small business Twitter handles include:
Chase for Business (@ChaseforBiz, 191,851 followers)
Wells Fargo (@WellsFargoWorks, 57,715 followers)
Capital One Spark Business (@CapitalOneSpark, 42,318 followers)
With the wide range of marketing options at their disposal, it is vital that banks do not use a scattergun approach to their small business marketing initiatives. Instead, banks should look to create an integrated small business marketing plan that includes goals and objectives, reflects overall bank positioning, has consistent messaging and creative execution, and works in tandem with the bank’s small business sales and service channels.
In spite of the emergence of new electronic business-to-business payment forms, and the continued popularity of checks, U.S. small business owners continue to grow their small business credit card usage. According to The Nilson Report, U.S. Visa and MasterCard small business credit card volume rose 15% in 2017 to $223 billion. And American Express also reported that its Global Small Business Services loans rose 13% to $12.3 billion in 2018.
In order to capture their share of small business card spend, leading U.S. banks have launched a range of new small business credit cards over the past year. These credit card launches are summarized in the table at the end of this blog. The following are the key trends and features that stand out for these new cards:
There is a mix of 0% purchase-only and purchase-and-balance-transfer introductory offers, with durations of 9 or 12 months.
As demonstrated by both M&T Bank and BB&T, there tends to be a 200 basis-point gap between rewards and non-rewards business card versions.
Business credit card APRs tend to be lower than their consumer card counterparts. BB&T launched Spectrum Cash Rewards (consumer) and Spectrum Cash Rewards for Business at the same time: the business card’s lower tier was priced 300 bps less than the consumer card (and the business card’s upper tier is 100 bps less than the consumer card).
New business cards offer either a 1.5% earn rate for all purchases with no limits or a tiered earn rate.
For tiered programs, the business cards either offer higher earnings on specified spending categories (such as at restaurants and gas stations) or on the top spending categories during the month (U.S. Bank Business Leverage Visa Signature).
Issuers are now deploying different approaches to incentivize business card usage.
We continue to see acquisition-and-activation offers for reaching a spending threshold within the critical 90-day initial period. However, new American Express Amazon Business Card cardholders receive a $100 Amazon gift card on approval.
To promote relationships, some business cards now offer bonus earnings on cumulative spending over the first year. Recent examples include Discover it Business Card and U.S. Bank Business Leverage Visa Signature. Furthermore, the new U.S. Bank card also enables cardholders to earn rewards for accepting credit card payments.
Most business cards launched over the past year have no annual fee, the exceptions were BB&T’s Spectrum Travel Rewards for Business and U.S. Bank’s Business Leverage Visa Signature.
New business credit cards show significant variation in the percentage (3-5%) and minimum fees ($5-$15) for both cash advance and balance transfer fees. However, some new cards deviated from the standard approach:
The Discover it Business Card carries a 5% balance transfer fee with no minimum.
The U.S. Bank Business Leverage Visa Signature Card has a different fee for balances transferred with the card application vs. the ongoing BT fee.
Mirroring consumer cards, many new business cards now come with no foreign transaction fee. This include non-travel cards, such as the American Express Amazon Business Card and the two new M&T business credit cards.
Banks looking to build awareness and engagement with small business owners should look to leverage strengths in specific markets and develop targeted marketing campaigns and other outreach programs. The following are some of the most popular ways that banks see to engage with small businesses at the local market level.
Leverage the branch network.
Small businesses continue to be among the heaviest users of bank branches, and leading banks deploy dedicated small business bankers in branches to provide expert advice and support. This past January, as part of a broader commitment to its brand network, Chase announced plans to hire 500 small business bankers.
Banks use their branch network to bring small business campaigns to life. Last month, Santander Bank rolled out its Small Business Month campaign, which featured in-branch merchandising and in-branch events across its network of more than 600 branches.
Some banks even allocate space in their branches for small businesses to use. Citizens Bank recently created open space in its Chestnut Hill, Massachusetts, branch that small business clients can use to conduct meetings with customers and business partners.
Target campaigns at local markets.
Capital One launched its We Work as One campaign, designed to promote and empower local businesses in select markets (New York City, Chicago, San Francisco, Denver and Boston) where it operates local Capital One Cafes.
Foster small business entrepreneurship.
Some banks include small business entrepreneurship as part of their broader community outreach. For example, Santander Bank’sCultivate Small Business initiative promotes small business ownership in underserved communities in Greater Boston.
Partner with local groups that promote small businesses.
Banks look to develop partnership with a host of local organizations that represent small business interests. Prominent among these organizations are the more than 3,000 chambers of commerce located through the U.S. Many banks team up with local chambers to carry out joint initiatives, such as hosting member events and carrying out surveys. Last November, Webster Bank hosted a cybersecurity event in partnership with Greater Boston Chamber of Commerce.
Publish market-specific versions of small business surveys.
These surveys enable banks to highlight their presence in and commitment to particular markets. In addition, market-specific findings can be leveraged by small business bankers to engage with small business owners in these markets. Banks that have recently published market-specific versions of small business surveys include Bank of America, PNC and U.S. Bank.
To develop and implement an effective small business-focused local market strategy, banks need to:
Identify and profile key local markets (including the bank’s in-market presence and competitive environment, as well as the size and composition of the small business market)
Prioritize the markets for targeting
Tailor marketing programs based on goals and local market conditions
Gain input and buy-in from key local stakeholders, including branch managers and in-branch small business specialists
Track campaign performance, and distill learnings for use in other local markets and future campaigns