By Mark Gibson
Most bank marketers have their budgets approved for 2020. Now the question is how much of that budget to allocate to digital versus traditional marketing techniques. This article looks at how much banks are spending on digital media, how they are aligning that spend with corporate objectives and how they are optimizing their spend.Thanks to the exponential growth of digital marketing choices, setting a marketing budget has become more complicated in recent years. Advances in data analytics and marketing automation tools have added yet another layer of complexity. During favorable economic times, this development has not posed a real problem for most institutions. They’ve been able to increase their marketing budgets to afford these new investments without eliminating the traditional media, events and sponsorship activities. However, with loan growth slowing and interest spreads tightening, many institutions are faced with flat or even reduced marketing budgets, requiring a more thoughtful allocation of scarce resources.
Where is the money going?
The amount banks spend on marketing has not changed significantly over the years—as a general rule of thumb, it hovers just below 0.1 percent of assets. But the share of digital spend is dramatically shifting. According to Cornerstone’s Performance Report for Banks, the percent of spend allocated to “online channels” increased 71 percent from 2015 to 2017, from seven percent to 12 percent of total marketing spend. (“Total marketing spend” includes such items as sponsorships, corporate donations and corporate communications). However, the 12 percent of spend accounted for by digital is dwarfed by the 45 percent allocated to “offline and direct mail channels.” (“Offline” is assumed to mean traditional media such as TV, radio and print.)
Another recent survey, by WebStrategies, corroborated these findings, indicating that the vast majority of community banks spend less than 20 percent of their marketing budget on digital marketing.
So, even with this rapid growth in digital investment, the banking industry still lags behind other industries’ use of digital marketing. According to eMarketer, companies across all industries spent more in digital advertising than in traditional advertising in 2019.
The picture in marketing automation use is strikingly similar. While many banks have either not yet invested in marketing automation, or have yet to fully implement it, 48 percent of CMOs across all industries report they are using marketing automation to personalize customer experiences.
Just as important, marketing automation and other technologies are receiving a larger piece of the marketing budget each year. According to Gartner’s most recent CMO Spend Survey, which covers all industries, martech accounted for 29 percent of marketing expenses in 2018.
How much should you allocate to digital marketing?
What’s clear is that advertisers are increasingly meeting their customers on digital channels—and in terms of its investment in digital marketing, banking lags way behind other industries. So for most banks, a digital marketing allocation in the 12 percent range is likely not enough. How much, then, is appropriate?
There are three primary considerations that drive a bank’s allocation of marketing dollars across traditional and digital techniques. The first relates to your organization’s strategic objectives; the second is informed by the audience you are trying to reach; and the third is driven by the results you’re able to achieve.
- Align with corporate objectives.
A key lesson we hear perennially from industry players is that your marketing plan and tactics should be developed to support your bank’s strategic plan. However, this is not always common practice. Chris Nichols, chief strategy officer at Center State Bank, recently highlighted a Forbesinsights study that demonstrated a disconnect between bank marketers and their management counterparts. According to Nichols, the biggest discrepancy was management’s desire for top-line revenue growth. The other major gap was marketers’ prioritization of product and brand awareness. Some of this could be attributed to the need for marketing to educate bank management on how awareness helps drive demand. But the study made clear that many banks don’t have alignment between business and marketing objectives.
How should banks turn this situation around and make sure their marketing is aligned with corporate objectives? According to David Kreiman, EVP and director of marketing at Glenview State Bank, “It ideally should start with annual planning.” If you can identify the top priorities of your lines of business, he says—and translate those into marketing initiatives—you will have much greater insight into what your budgeting needs will be. “This is true whether the focus is on customer acquisition or an increased penetration of specific products into your existing customer base.”
Michelle Allen-Cassel, SVP and marketing director at Origin Bank, adds, “We work with our management team to break down a big goal—like ‘grow deposits by $350 million’—and carve out how much of that is desired from each product type. Then we develop collaborative marketing programs to assist our teams in reaching those growth objectives.” She explains that this approach helps align marketing resources with bank objectives so that the mix of digital and traditional media can be determined strategically, based on the targeted audience. “Our process allows for alignment of goals between management, marketing and our bankers, which we monitor throughout the year and with each campaign or program.”
- Match your digital mix to customer preference.
Your mix of digital and traditional media should always start with an understanding of how your target audience learns about and buys your product. This of course requires you to be clear about who you are trying to attract. The better you define this target customer, the easier you will find it to determine the specific media they use. And spoiler alert: Most consumers and business owners of all ages use a mix of digital and traditional media. Don’t let the hype fool you—even Gens Y and Z are influenced by some traditional media like billboards and bus wraps. And many grandparents are on their computers and mobile phones for hours on end.
- Let business results be your guide.
The final driver of how much you should spend on digital media seems obvious—spend the right amount to obtain the business results you are striving to achieve. However, like many things that sound simple, this is harder than it seems. The WebStrategies survey found that a majority of community bank marketers were unable to measure whether they see a positive return on their marketing spend.
It doesn’t have to be this way. CenterState’s Nichols explains: “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.” Nichols is right—digital media and direct mail are very measurable. You know who you targeted with your message and whether they responded or not. However, even results from traditional media can be measured. You can establish a baseline of sales before and after the ads run and measure the lift caused by the campaign.
By testing various mixtures of traditional and digital media, you will eventually be able to tell which combination is driving the best results, and what it costs to attract a customer or sell an additional product. Balancing that with what a customer or product is worth to the organization helps inform how much you should be spending in both digital and traditional marketing. If this sounds like a foreign language—and even if it doesn’t—be sure to work with your finance team to get this part right.
What type of digital marketing should you be pursuing?
The Gartner CMO Spend Survey quantifies that 25 percent of all marketing investments are placed in a combination of paid search, organic search (SEO), website and email. Focusing specifically on financial services, eMarketer agrees that search is critical for certain products like credit cards and consumer loans. However, eMarketer finds that financial services firms spend slightly more on display advertising than they do on search.
What if you have limited budget, or you’re just getting started with your digital efforts? A good rule of thumb is that you want to focus on search first, so people can easily find you or your products if they are searching for them. Paid search (with Google or Bing) is the fastest way to get started, but at some point, you probably also want to work with an SEO expert to help you appear in organic searches as well. This will likely involve creating some content that helps you appear on searches for key words you determine are important.
The next place to focus on is targeted display ads. You can either do this directly with a company like Facebook or LinkedIn, or you can work with an agency that has resources to place advertising on a wide variety of websites. Finally, you should consider advertising and direct marketing partners that can help you target the specific prospects you want as customers, using their I.P. addresses.
What about marketing automation?
As we’ve seen, banks are behind most other industries in their uptake of marketing technology. What to do? The short answer is: don’t panic, but do something! But be warned—the worst thing you can do is sign a contract and start spending money with a vendor before you know what you want to accomplish. You need to define business requirements right up front.
As a first step, consider investing in data analytics and campaign management. Be aware, though, you can’t automate what you aren’t already doing manually. Until you have a robust new customer acquisition program, onboarding and cross-sell process integrated with your sales teams, you’re not ready for automation. Get the essentials right, work with an outside partner for analytics and basic automation if necessary, then begin to lay the ROI groundwork with your management team for the necessary investment in marketing and sales automation.
Pulling it all together
Digital media and marketing are here to stay. They work, they are measurable and they can be cost-effective revenue generators when deployed in the right combination with traditional marketing. The plethora of media choices, vendors and marketing technologies can be overwhelming. That’s why it is so critical to take a step back and start with the fundamentals. What business objective are you trying to achieve? Who are you trying to reach and how do they learn about and buy financial services? How much is a new customer or product worth to your organization? And what combination of digital and traditional techniques delivers the best cost per acquisition for you? By following this approach, you might even find that finance wants you to spend more budget than you asked for so you can grow even faster.
Mark Gibson is senior consultant at Capital Performance Group, a strategic consulting firm that provides advisory, planning, analytic and project management services to the financial services industry. Email: firstname.lastname@example.org. LinkedIn.