EMI’s annual analysis of marketing expenditure for 25 leading U.S. banks reveals that they grew marketing spending by 7% in 2019 to $15.4 billion. This rate was down from the 13% growth between 2017 and 2018.
The banks’ marketing ratio (defined as advertising and marketing spend as a percentage of net revenue) has risen steadily in recent years, growing 18 basis points (bps) to 2.92% in 2018, and by an additional 21 bps to 3.13% in 2019.
The chart below summarizes marketing ratios, marketing budgets and y/y change in marketing spending for these 25 banks.
The following are some additional takeaways from our bank marketing spend analysis:
16 of the 25 banks increased their marketing spending in 2019, with 5 increasing their budgets by more than 10%.
6 banks invested more than $1 billion in advertising and marketing. Wells Fargo joined this group for the first time in 2019, with marketing spending rising by 26%, driven in large part by the launch of the ‘This is Wells Fargo’ integrated marketing campaign in January 2019 . It has invested strongly in advertising in recent years as it seeks to rebuild its reputation following the fallout from fake account and mortgage mishandling scandals.
11 banks increased their marketing ratios in 2019, with 6 of these growing the ratios by more than 10 basis points. The largest rise was reported by Bank of America, whose 15% increase in its marketing spend led to a 38 bps rise in its marketing ratio (to 2.3%).
Banks that do not have branch networks and have national credit card franchises (American Express and Discover) had the highest marketing ratios. Capital One’s credit card bank charter – Capital One Bank (USA), National Association – had a marketing ratio of 10.3% in 2019, while its retail banking charter – Capital One, National Association – had a ratio (3.2%) more in line with peer regional banks.
It is almost impossible to project bank marketing spending for 2020, given the impact of the coronavirus pandemic on the U.S. economy in general, and the banking sector in particular. In the short term, marketing budgets will trend downwards as bank revenues are impacted by decreased economic activity. However, unlike the 2018-09 Financial Crisis, the country’s fundamentals were strong heading into this disruption, which increases optimism that the economy can recover quickly once the pandemic abates. This may lead to a robust bank marketing spending in the second half of 2020. What is more clear is banks will continue to shift their marketing budgets from traditional media (e.g., TV and print) to digital and other nontraditional media.
The tagline is an integral part of a bank’s brand identity: it cuts to the core of what the bank aspires to represent for its clients. Banks will typically create a new tagline following a large merger, as an integral element of a major brand overhaul, as part of a new advertising campaign, or even in response to a crisis event.
In creating a new tagline, banks should consider a number of key factors. An effective tagline:
Is short and easy to understand
Is consistent with other bank brand elements
Reflects the bank’s overall positioning and value proposition
Provides themes for advertising and marketing campaigns
With these factors in mind, the following are some themes used by leading U.S. banks in developing their taglines:
In recent years, banks have been primarily focused on cost cutting. However, as the U.S. economic recovery continues to gain momentum, banks are identifying opportunities for revenue growth. As banks look to capture this, they will obviously be looking at the size and composition of their marketing budgets.
EMI’s analysis of the latest FDIC data for 20 leading retail banks found little evidence that banks are growing their marketing budgets. In fact, marketing spending for these banks over the first 9 months of 2014 was 2% lower than the same period in 2013. As seen in figure 1, 10 of the 20 banks reported growth in their marketing budgets, led by PNC and Capital One.
These 20 banks invested an average of 1.5% of their net revenues in marketing during the first 9 months of 2014. Although this marketing-to-revenue ratio rose 2 bps y/y, it is well below the 2% average that existed prior to the financial crisis. For banks looking to grow revenues, they will need to return marketing-to-revenue back to this 2% level.
Figure 2 shows that 14 of the 20 banks have marketing-to-revenue ratios of between 1% and 2%. For Chase, Bank of America and Capital One, the ratios are for their retail bank charters; marketing-to-revenue ratios for these banks’ credit card charters are much higher (as seen in figure 3).
Of course, banks looking to increase their marketing investment in order to grow revenues also need to ensure that these marketing budgets are effectively deployed, in order to optimize marketing ROI. The following are some considerations for banks as they prepare marketing budgets for 2015:
Consumer perceptions of banks have changed. In the aftermath of the financial crisis, banks suffered reputational damage as they were seen as key contributors to the crisis. In recent years, banks have worked hard to change their business models in order to focus on their core competencies (and this has been recently seen in improved customer satisfaction ratings). Marketing will play a key role in communicating banks’ key positioning as trusted providers of financial services and support.
Consumer banking behavior has changed. Consumer adoption of self-service-channels (online, mobile, ATM) has now attained critical mass and these channels account for a majority of everyday banking transactions. These channels create significant advertising and cross-selling opportunities (and challenges) for banks.
Bank branches have untapped marketing potential. As everyday bank transactions move to self-service channels, banks are cutting branch numbers and reinventing various aspects of the branch (size, layout, staffing, integration with other channels). Banks should also consider the fact that the branch is the key physical expression of the bank brand, and should allocate a portion of their marketing budgets to capturing branches’ marketing potential.
Bank need to embrace non-traditional marketing channels. Younger demographic segments (such as millennials) have very different media consumption patterns than their older peers, with significantly higher usage of online/mobile and social media. However, banks’ innate conservatism has resulted in their failure to fully embrace new embrace new media. Banks need to both significantly increase their investment in non-traditional marketing channels, but also find innovative ways to convey their core messages to a new audience.