The Case for Data-Centric Marketing

By Tony Rizzo

Banks of all sizes can gain a critical advantage from the ability to gather financial data. Data can provide a firm with behavioral insight leading to improved service, enhanced products, and real-time analytics for marketing execution. But for many small to mid-sized banks—especially those without large analytical staffs—the implications (both in time and dollars) can be daunting. First, you must identify who are your most profitable, engaged, and valuable customers that best support this process. After that, you must identify those customers who could be more profitable and engaged by adding one additional product or service to the household.

If you think that data-driven marketing is a just a trend that you can afford to ignore—or if you think that it’s wrong for your institution—consider the larger picture.

In the United States, there are few industries as cluttered as the financial services sector. This competitiveness comes from many sources including physical branches, Internet-based financial firms, nontraditional new entrants into the market, and massive spending and innovation from the world’s top financial brands.

The Competition, by the Numbers         

Clearly, this is an industry in which no bankable U.S. consumer wakes up and wonders where he or she will be transacting their financial business that day. Since 2000 the number of FDIC-insured commercial bank branches increased by 27.79% to 82,156 locations, according to the statistics portal Statista. Additionally, as of year-end 2012, the number of physical locations for United States-based credit unions totals approximately 20,000 branches. From a customer service distribution network standpoint, this translates to one branch every 2/10 of a mile. According to a 2014 McKinzey report, 75% of U.S. households have a choice of six or more banks within 10 minutes of their residence. In terms of physical outlets, the consumer clearly has plenty of options and does not have to wander far to seek financial alternatives.

Options on the Internet are staggering. A Google search of the term “mortgage loan” yields 205 million results, and a Google search of the term “checking account” yields 67 million results. This channel is at the mercy of those institutions that can pay abundantly for general keyword terms pushed to the top of every search, where the cost per click (in the United States) for the search term “mortgage loan” costs $24.88 and “checking account” totals $35.54 per click.

Adding to this competitive soup are global retailers seeking to enter the financial services market. Broadly stated, these non-bank entities are free from obsolete legacy systems and capital-intensive single product distribution networks, plus they have well-established global brands and millions (if not billions) of existing customers. For example, Alibaba became China’s largest seller of money market accounts in just seven years. With the introduction of Google maps, Google eliminated 85% of top GPS companies’ market capitalization. PayPal is considered a number one payment option in some countries. T-Mobile (via a services called Mobile Money) now offers a prepaid Visa card and an electronic checking account, allowing customers to direct deposit their paychecks, access ATMs, and use debit cards. Billed as an alternative to banking, American Express and Walmart have partnered to produce the Bluebird account. This virtually fee-free account effectively turns the 11,488 retail locations (under the banners of Walmart U.S., Sam’s Club, and Walmart International) into bank branches by offering customers a convenient means to manage money not only where the customer shops, but wherever the customer is via his or her mobile device.

The Deep-Pocket Response

In addition to nontraditional global entries into the financial services market, small to midsize financial institutions face increasing pressure from their much larger counterparts in terms of their comparatively small marketing budgets.

During 2013, Bank of America spent $1.58 billion and JP Morgan Chase spent $1.88 billion on advertising in the United States. This type of massive spending has allowed these corporate marketing departments to produce innovative and disruptive marketing campaigns and technologies.

For example, in November 2014, Norwegian bank DNB purchased every commercial break for a 24-hour period on TV channel TV2 (the largest channel in Norway). This effort claims to have increased the awareness of the bank over 70% just overnight.

Recognizing 74% of shoppers in the United Kingdom rated waiting in line as their number one Christmas pet peeve, Barclaycard designed a wearable payment item called the “contactless payment glove.” This “tap to pay” wearable item eliminated the need for customers to reach into their wallets to make a payment.

And at the Other End of the Spectrum

Compare those spending levels and capital-intensive executions to the 6,300 credit unions across the United States. According to Peer to Peer analysis, their combined 2014 marketing spend for the entire industry was $206 million. This means that Bank of America spends approximately $180,000 and JP Morgan Chase spends $214,000 per hour versus the combined credit union industry amount at $24,000 per hour. What’s even more startling is the average credit union spends $3.73 per hour, whereas the two largest United States banks spend 53,000 times that amount hourly.

What This Means for You

Regardless of an institution’s size or marketing budget, traditional regional institutions have a competitive advantage that can be found in a single word: data. The amount of financial and nonfinancial data collected by banks provides a wealth of knowledge into consumers’ buying habits and preferences. A bank’s data supports the ability to finance, make payment systems, and give customers a secure haven from which to conduct their financial lives. The process of turning data into actionable communication is what will set any financial institution’s brand apart from both its immediate and impending competitors.

Tony Rizzo is General Manager of Creative Services at Marquis, a Plano, Tex. data analytics company specializing in the financial services industry. A 26-year veteran of financial marketing, Tony has been published in every major financial industry publication as well as the Wall Street Journal and USA Today, and is a frequent national speaker on leveraging data to increase retention and profitability from a marketing perspective. Email: [email protected].


Hear more from Tony when he presents at the ABA Bank Marketing Conference, September 25-27, 2016.  We look forward to seeing you in Nashville!