Finalizing Your 2018 Marketing Budget

By Chris Nichols

In 2017, bank marketing expenditures were up. According to financial reports and FDIC data, banks spent an average of 3.5% of total expenditures on marketing and advertising on a year-to-date basis. That is about 6% of total revenues—and up about 0.05% of total expenditures.

For 2018, most banks plan on increasing marketing expenditures by approximately 4% to equate to about 3.6% of total expenditures. In this article, we look at the difference between the average bank and a top performing bank when it comes to marketing expenditures. And we look for how top marketing professionals spend their money.

The marketing/performance correlation.

How much a bank spends on marketing correlates positively with its performance. Going back to our data, if you compare the average bank with a top performing bank—one that returns more than 15% on equity—you see that the top performing bank spends about four times more on marketing. Interestingly, as the economy improves, this ratio has decreased. Four years ago, the difference in marketing expenditure between a top performing bank and the average bank was four and a half times and had gone down each year as the economy has improved.

The takeaway here is that marketing matters, and it matters more in tough times.

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Where to spend your money.

In order to look at more detail about where banks might spend their budget, we pull the data from a recent Gartner marketing spending survey. No surprise, we find that staffing expense composes the largest category of marketing spend, followed by advertising placement and services such as graphic design, website management, and keyword maintenance. One surprising item is that “martech” or marketing technology is taking a larger and larger share over the last several years and now composes approximately 22% of the average company’s budget.

For banks, a “martech stack” usually comprises:

  • A customer relationship management system
  • A video platform
  • A social media management platform
  • Creative tools
  • A search engine optimization application
  • Some website tools
  • Google Analytics

More advanced banks leverage an email automation platform, an ad remarketing application, a loyalty application, location review management software, and other analytical packages.

For 2018, 38% of marketers say they will increase their martech spend, while 8% say they will decrease spending. The rest say spending on martech will be the same as 2017.

Getting more granular.

Getting more detailed, it is comforting to know that most marketers spend more on customer retention and expansion of share of wallet than new customer acquisition. Broken down by these two endeavors, firms report that on average:

  • 63% of the marketing budget is focused on current customers
  • 37% of the budget is targeted at obtaining new customers

No surprise that digital spending is up this year—and two-thirds of marketers expect to increase spending in this category in 2018. No surprise either that most of this increase comes at the reduction of traditional advertising to include print, radio, and TV. A full 63% of marketers will further decrease or hold flat their spend for offline advertising next year.

Other areas of selected-for-increase spending include social media marketing (64% predict an increase for next year), website (61%), and mobile (59%).

Spending on content, customer data, content creation, events, and partnership are expected to hold steady next year compared to 2017.

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Putting this into action.

The above data can help bank marketers get more accurate in their planning. Next year, look for more banks to follow their top performing brethren and spend more on marketing. The rise of marketing technology and digital advertising has made it easier than ever for bankers to chart their customer’s journey and better understand the return on investment.

This has far-reaching consequences, as 2018 will likely mark the year that boards and senior bank managers recognize the important role that bank marketers play in sales, customer engagement and the customer experience. Smart banks will recognize what top performing banks already know—bank marketers must have a seat at the strategic planning table and must play a role in designing the bank’s ten-year strategic plan.

Chris Nichols is a contributing editor to ABA Bank Marketing.com. Located in San Francisco, he is the chief strategy officer of CenterState Bank, which has its headquarters in Winter Haven, FL.

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