Tag Archives: advertising

7 Small Business Marketing Tips for Banks

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.

Leading U.S. Banks Report Modest Increase in Marketing Budgets in 2017

Marketing spend by the top 40 banks reached nearly $14 billion in 2017, up 1.8% on average from the previous year–and once again, 5 banks spent over a billion dollars on marketing. EMI analysis of bank spending reveals:

  • 30 of the 40 largest banks grew marketing spend in 2017, with 17 reporting double-digit growth.
  • As in past years, banks with national credit card franchises lead all others, in both absolute terms and in their marketing intensity (marketing spend relative to revenues). In 2017, spending among these card leaders declined, as focus shifted from acquisition to portfolio marketing.
  • Two banks notable for substantial 2017 marketing increases are Goldman Sachs Bank focused on promotion of its online lending platform, Marcus by Goldman Sachs, and U.S. Bank capitalizing on brand-building around the Super Bowl, held last week at the Minneapolis stadium bearing the bank’s name.

EMI annual analysis of Federal Financial Institutions Examinations Council (FFIEC) call report data for 40 leading U.S. banks distills both absolute spending and marketing intensity ratios, as measured by spend percentage of net revenues (net interest income plus noninterest income).  Results are reported below.

Advertising and Marketing Spending Highlights

19 banks/bank charters had advertising and marketing budgets of more than $100 million.  5 had billion-dollar-plus budgets (JPMorgan Chase, American Express, Capital One, Citigroup and Bank of America).

Of the 17 banks reporting double-digit growth, the two with the largest absolute increases in their marketing budgets were:

  • U.S. Bank: +$107 million, with a focus on growing national profile behind the increased marketing spend, including heavy branding around the Super Bowl, which was held last Sunday at the U.S. Bank Stadium in Minneapolis.
  • Goldman Sachs Bank: +$80 million, driven by an advertising campaign to promote Marcus by Goldman Sachs, its online personal lending platform.
  • First Republic was also notable for its 46% increase–a strategy that seems to have paid off with 18%+ revenue growth reported by the San Francisco-based bank in 2017.

Other banks boosted marketing spend to support new campaigns in 2017.

  • Fifth Third (+10% to $115 million) launched a campaign in May 2017 that played on its “5/3” name, promoting “Banking that’s a Fifth Third Better”
  • BB&T (+10% to $89 million) introduced a new brand campaign and tagline (“All we see is you”) in September 2017.
  • SunTrust (+38% to $220 million) rolled out its ‘Confidence Starts Here’ ad campaign in March 2017, building on its onUp movement focused on building financial well-being.

Marketing spend declines were led by:

  • Capital One: decline of $139 million, with a strong drop in spending in its card unit partially offset by a $23 million rise in its retail banking unit.
  • American Express: down $111 million, although this follows a ramp up of marketing and promotion spending in recent years.  American Express is also increasing its focus on targeting existing clients, which typically involves lower marketing spend.

Marketing Intensity Highlights

Even though 30 banks increased their marketing budgets in 2017, only 14 increased their bank marketing ratios, meaning that growth in marketing spend did not match the rise in net revenues.  Banks with the strongest growth in their marketing ratios were Goldman Sachs Bank (+183 basis points), SunTrust (+61 bps) and U.S. Bank (+44 bps).

Most retail banks have marketing ratios of 1-3%. Those with the highest marketing ratios include Santander Bank (4.1%, due to continued growth in the bank’s U.S. marketing budgets in recent years) and BMO Harris (3.4%, following a 17% rise in marketing spend in 2017).  4 banks have marketing ratios of less than 1%.  Most notable in this category is Wells Fargo, which has traditionally–and infamously–focused on sales and required much lower advertising budgets than its peers.  Wells Fargo did launch a new integrated marketing campaign in April 2017, which it reported was focused on “rebuilding trust.”  This contributed to a 4% rise in its advertising and marketing budget in 2017, but its spend levels remain well below comparably-sized banks.

We expect that banks will maintain or even increase their marketing budgets in 2018 to build brand awareness and affinity, as well as to promote new products and services–in particular those focused on digital transformation.  However, many banks remain focused on improving efficiency ratios, and marketing budgets are often on the firing line when banks look cut costs.  However these cuts–when executed without a careful strategy for maximize marketing ROI–often sacrifice market share gain and longer-term growth.

Banks ramp up advertising and marketing spend in 2016

According to EMI Strategic Marketing’s analysis of data from the Federal Financial Institutions Examination Council (FFIEC), U.S. banks spent $17.1 billion on advertising and marketing in 2016.  This expenditure represented 2.4% of bank revenues. Five banks (JPMorgan Chase, American Express, Citigroup, Capital One and Bank of America) each spent more than $1 billion, and together accounted for more than half of the industry’s total expenditure. The following chart looks at 2016 marketing-to-revenue ratios for 20 leading U.S. banks (note that for JPMorgan Chase and Capital One, marketing spend data is provided for both their retail bank charters and card-issuing units).

bank_marketing_spend_2016

Most banks grew their marketing spending in 2016, as they looked to drive revenue growth in an improving economy.  10 banks reported double-digit percentage rises in their advertising and marketing budgets.  In some cases (e.g., KeyBank and Huntington), the strong increases were in part the result of significant bank acquisitions.

13 banks grew their marketing-to-revenue ratios in 2016.

  • Half of the banks in the chart (mostly branch-based banks) have marketing-to-revenue ratios of between 1.5% and 3%.
  • Several banks have been ramping up their marketing spend in recent years.  Between 2014 and 2016, Santander Bank’s spend nearly doubled between 2014 and 2016, and its 2016 marketing-to-revenue ratio of 4.0% was the highest among branch-based banks.
  • At the other end of the scale, both Wells Fargo and BB&T have ratios consistently below 1%.

Credit card-focused banks/bank charters have the highest marketing-to-revenue ratios.

  • Chase Bank USA (JPMorgan Chase’s card-issuing bank) had a ratio of almost 20% in 2016.  The sharp rise in the ratio from 2014 and 2015 was due to both a 6% rise in advertising and marketing spend (to support the launches of Freedom Unlimited and Sapphire Reserve), as well as a sharp decline in noninterest income.
  • American Express increased in its advertising and marketing spend by 15% in 2016, and its ratio rose to nearly 12%.

As banks look to scale back their branch networks both to save costs and adapt to changing bank channel usage (in particular for everyday banking transactions), they are also cognizant of the potential loss of the branch’s role as a branding beacon in local markets.  Therefore, it’s likely that a portion of the cost savings from branch network reductions will be diverted to advertising and marketing budgets.  As a result, we may expect banks’ marketing-to-revenue ratios to gradually increase in the coming years.