Tag Archives: advertising

Financial institution financials reveal differences in marketing spend intensity

A review of reported marketing/advertising expenditure by leading financial institutions revealed the following trends:

  • 2011 spend levels: Five FIs (JPMorgan Chase, American Express, Citigroup, Bank of America and Capital One) each spent more than $1 billion on marketing in 2011.
  • 2010-2011 trend: Of the 12 FIs included in the review, six increased marketing spend by double-digit percentages in 2011, led by Citigroup (+43%) and Capital One(+40%). Four FIs reduced marketing spend in 2011.
  • 2007-2011 trend: Taking a longer-term view, we see that although Citigroup and Capital One had very strong growth in 2011, spending was actually down relative to 2011, indicating that these banks’ recent strong growth is more of a return to historic norms. JPMorgan Chase, Wells Fargo and PNC all had strong growth between 2007 and 2011, but each of these FIs had made a big bank acquisition during this period.
  • Marketing as a percentage of revenues: To eliminate the effect of merger and acquisition activity, and get a gauge on marketing investment intensity, we also looked at marketing as a percentage of net revenuefor 2007 and 2011.
    • American Express has the highest level of marketing spend intensity, with its 2011 marketing expenditure representing 10% of net revenues in 2011, up 70 basis points from 2007
    • Other leading FIs for marketing investment intensity are Discover (no branch network, national credit card operation) and Capital One (regional branch network, national credit card operation)
    • Among the regional national banks, JPMorgan Chase has the highest level of marketing intensity (3.2%), ahead of Citigroup (3.0%). Chase, which has both an extensive branch network and a national credit card operation, actually increased marketing intensity by 33 bps from 2007 to 2011. Citigroup has a limited U.S. branch presence, but again has a national credit card franchise.
    • Bank of America’s market spend intensity fell from 3.5% in 2007 to 2.4% in 2011
    • Wells Fargo maintains significantly lower marketing spend levels than its national bank competitors, with a marketing spend intensity of 0.7% in 2011.  However, it was recent named as the leading U.S. bank in The Brand Finance Branding 500 rankings, indicating that topline marketing spend does not necessarily correlate to brand strength.  However, it should also be recognized that, unlike some of the other leading banks, Wells Fargo’s operations are mainly concentrated within its retail banking footprint.

 

In terms of setting optimal levels of marketing investment in 2012, financial institutions face competing forces. On the one hand, many FIs have established cost containment programs with defined targets, and this will put downward pressure on marketing spend. On the other hand, the above table shows that many FIs have reduced their marketing intensity levels in recent years. With signs of economic recovery now emerging, these FIs may need to increase their marketing investment to compete effectively in a growing market.

Trends in U.S. Bank 3Q11 Marketing Spend

A scan of U.S. banks’ financial reports for 3Q11 shows that many of the leading banks reported strong year-on-year increases in their marketing spend. Banks reporting double-digit growth rates include:

  • Chase: increase of 42%, to $926 million
  • Citi: up 39%, to $635 million, driven by new consumer marketing campaigns, and sponsorships
  • Capital One: rise of 25% to $312 million
  • Bank of America: growth of 12% to $556 million

However, the rise in marketing spending is not universal, and a number of other leading financial institutions have cut expenditure levels year-over-year. Most notable is American Express, whose marketing and promotion spending fell 14% y/y to $757 million (of course, this follows a significant ramp-up in marketing spending throughout 2010).

In general, banks must balance external and internal forces to determine the appropriate levels of marketing investment:

  • External: banks are looking at capture their share of business in certain segments (e.g., affluents) and/or product categories (e.g., auto lending, credit card, commercial loans).  And this need to invest in growth areas is particular strong at present, given banks’ struggle to generate meaningful revenue growth.  However, if there are strong indicators of deteriorating economic conditions, banks may want to scale back on their marketing spend.
  • Internal: banks must also recognize their own circumstances and challenges and how this impacts on marketing spend.  For example, many banks now have programs in place to reduce expenses (see our recent blog on brand cost containment programs). And marketing is frequently one of the first casualties of a bank-wide crackdown on costs. However, there are also internal forces that may lead to significant increases in marketing spend; for example, a bank may have just completed a significant merger, and will need to invest in marketing to support the overall integration effort.

Sun Life advertises no government bailouts

A couple of weeks ago, Sun Life announced the launch of a new advertising campaign (“Get to Know Sun Life”), designed to raise Sun Life’s brand awareness in the U.S.  (See http://www.gettoknowsunlife.com/)

sun_life_no_bailout_ad

At the same time Sun Life is also running online advertising that emphasizes the fact that it have never received a government bailout in its 144+ years of existence.   The advertising is a counter of how long Sun Life Financial has gone without bailout money.  In addition to emphasizing Sun Life’s financial strength, it also highlights its longevity.

Many banks, insurers and investment firms have highlighted the fact that they have not received government funding–or have repaid the funding–in investor and analyst presentations, but very few financial institutions have launched advertising around this topic.