Tag Archives: Bank of America

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.

Spate of small business lending commitments by banks

A meeting yesterday between Vice President Biden and 13 U.S. banks has resulted in a number of these banks announcing or reiterating small business loan commitments.  The banks include:

  • Chase: announced that it was on track to increase small business lending this year by 20% over 2010 levels, to $12 billion
  • Citi: committed to lend $24 billion to small business over the next three years ($7 billion in 2011, rising to $9 billion in 2013)
  • KeyBank: committed to lend $5 billion to small businesses over the next three years
  • M&T Bank: pledged to increase small business lending by $50 million over 2010 levels for each of the next three years

For banks, making such a commitment is important, as it acts as a rallying point around which resources can be concentrated.  Having a specific commitment also implies that the bank’s senior management has approved the objective, another key criterion for success.

However, announcing a specific lending commitment is only a first step.  For banks to achieve a small business lending objective, they need to design and implement an integrated plan that encompasses a wide range of activities, including:

  • Customer and competitive intelligence
  • Segmentation and targeting
  • Data mining
  • Product, service and offer development
  • Marketing communications
  • Merchandising
  • Sales channel optimitization (including structuring, incentives, training, and ongoing sales support)

In addition, these activities needs to be organized around customer needs and bank opportunities at various stages of the customer lifecycle:

  • Acquisition
  • Oonboarding
  • Cross-sell
  • Retention
  • Ongoing relationship development

For more insights in developing effective small business banking operations, see our white paper on The Transformation of Small Business Banking in the Thought Leadership section of the EMI Strategic marketing website.

Bank of America credit card production by channel: interesting trends

Bank of America recently published a breakdown of its credit card production by channel, in its second quarter 2011 Investor Fact Book.

Comparing the first half of 2011 with the full-year 2010, we see that eCommerce remains the most important credit card acquisition channel (at just over 28%), but its share fell almost 8 percentage points between 2010 and the first half of 2011.

Channels that have had the strongest share gain are:

  • Branch:  Bank of America was at the forefront of the push among leading bank card issuers to sell cards through their branches in the mid 2000’s, but this trend appeared to have lost traction in more recent years, as the financial crisis took hold.  However, there was a notable shift in the first half of this year, with branches accounting for 28% of credit card production, up more than 7 percentage points from 2010.
  • Direct mail: Traditionally, direct mail accounted for an overwhelming share of credit card production.  However, this share plummeted over the past decade, as response rates fell and new channels emerged with lower average acquisition costs.  However, this decline appears to have bottomed out, with bank card issuers now rolling out targeted direct mail campaigns to specific segments of interest, such as affluents.  DM accounted for 24% of card production in the first half of 2011, up 3.5 percentage points from 2010.