Tag Archives: bank

Financial Services Marketing Symposium 2011: Marketing Critical to Driving Adoption of Mobile Technology

Mobile banking was a hot topic at last month’s Financial Services Marketing Symposium. Apps and mobile-friendly online banking sites are proliferating at a rapid rate, and Frank Aloi of ath Power Consulting revealed some research that shows why: mobile banking users are very active, and with the low cost of mobile banking transactions, they are also more profitable than other customers.

What’s more, John Auger of Citizens Financial Group showed that for his organization, the average mobile customer is not only more active in mobile banking, but in all channels:

To capture the opportunity in the mobile space, banks can’t rely on product development alone – a robust communications strategy is a must for successful adoption.  Although the benefits of new technology may seem obvious to those who develop the innovations, consumers need to be shown exactly why new technology is significantly better than the banking and payments solutions they already have, according to conference speakers from Citibank and RBS Citizens.

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.

Leading U.S. financial institutions grow marketing spend in 1Q11

Financial institutions (FIs) reported continued strong growth in advertising/marketing spending in their quarterly financials.  The 10 leading financial institutions in the chart below spent a combined $3.0 billion on marketing in the first quarter of 2011, a growth rate of 19% over the first quarter of 2010 (and this comes on top of a 18% increase between 1Q09 and 1Q10).  8 of these FIs reported double-digit growth rates in 1Q11, with particularly strong growth rates for Discover (+60%), Capital One (+53%) and Citi (+31%).

 

For most FIs, this increased marketing has not yet translated into significant revenue growth.  In the coming quarters, they will be expecting to leverage some of the beneficial impacts of their investment (such as growth in checking accounts, as well as improved customer retention and satisfaction) into increased revenue as economic recovery continues.

One FI that can show the bottom-line impact of its marketing investment is American Express.  Following the financial crisis, Amex shifted its marketing focus to drive increases in card spending, which has resulted in strong growth in recent quarters.  In the most recent quarter, its U.S. Card unit reported an increase in card spending of 15%, which translated into a 9% rise in noninterest revenue.