By Mark GibsonMost bank marketers would agree that they have never seen a year like 2020, and they are not sad to see it come to an end. However, the earthquake caused by the virus and economic ramifications will send tremors well into 2021 and beyond, and marketers need to be prepared to deal with them. In fact, 2021 promises to be a year where marketers can have an impact on their organization like never before.
Experts are predicting that low interest rates will persist next year, while the economy and unemployment will likely slowly improve until the vaccine is widely distributed.
The final wild card is the political environment and what regulatory impact that might have on our industry.
What this means for most institutions is that costs and efficiency will be a major focus. Automation, and digitization to make things faster and less expensive will rise to the top of the agenda. Another implication is that growth will be harder to find, so sales and marketing efforts will need to be smarter and more targeted to find that growth.
Based on those environmental factors, Capital Performance Group sees four important trends for bank marketers in 2021:
- Marketing as the new growth engine;
- Doubling down on brand;
- Bulletproofing your budget; and
- Fortifying for the regulators.
Let’s take a look at each of these trends and how you and your team can prepare now for their probable impact next year.
1. Marketing as the new growth engine
Growing revenue will be paramount in 2021 with thin margins and growing loan losses putting pressure on earnings. The problem is that the old way of doing it—selling face-to-face has lost its impact. COVID-19 disrupted the face-to-face prospecting model that business bankers and wealth managers rely on.
As a result, for many more organizations, marketing will need to partner with its sales teams to create new prospect leads and business opportunities. In short, marketing is becoming the new “growth engine.”
Many banks have already seen a sharp increase in digital sales since the pandemic started. Some sources indicate that online sales of consumer checking accounts have nearly doubled, but they still account for less than half of total sales. This leaves much additional room for growth.
With face-to-face selling more difficult, commercial bankers and wealth managers face an even bigger challenge to prospecting and are increasingly looking to marketing to fill the void.
Luckily, the tools already exist to provide this assistance. They have been deployed for years outside of banking, and have been trickling into bank marketing departments over the past several years. There are various names for this capability—performance marketing, growth marketing, demand generation—the list goes on. Whatever you call it, there are three basic components to building this capability:
Collaborative campaign design with the sales team. Often, marketing is on Mars, and the lines of business are on Venus. When marketing’s whole purpose is to generate qualified leads and new business for the sales team, campaigns must be designed together from day one. What is sales trying to achieve? What type of customer are they seeking? What is an acceptable cost per new customer? These and other questions need to be answered together and built into the campaign. Finally, the sales team needs to be asked: What marketing support do you need in order to be successful?”
Data-driven targeting. Growth will be difficult to come by with both consumers and businesses in 2021, as the economy sputters to life. That’s why targeting will be so critical for success. In this difficult environment, a broad approach will not generate the quality of lead or the return on investment needed to pay for the campaign. Rather, using primary and third-party data to find those “gems” (i.e., prospects with a financial need that your institution can profitably fulfill) will move from being ‘nice-to-do’ to ‘need-to-do’ in 2021.
Designing the campaign workflow to optimize results. Since success will depend equally on marketing and sales teams doing their jobs in unison, there is no room for misunderstandings or lack of transparency. As a result, successful marketers will need to clarify roles and responsibilities with their sales partners in terms of goal setting, campaign execution, lead nurturing, prospect development and the method of success tracking. In addition, available technology needs to be integrated into the workflow. Whether a CRM, marketing automation or spreadsheets, agreeing to the data that will be leveraged to track the campaign is essential. Without clear responsibilities and trackable sales, campaign success and the return on investment will be questionable, and budgets will not be forthcoming.
2. Doubling down on brand
Brand spend will be a tough sell for many bank marketers in 2021. But should it be? Let’s review a few key lessons from 2020.
Unlike during the financial crisis, the banking industry has been heralded as a leader and even a savior in many ways during the pandemic. The industry was quick to offer aid and loan forbearance to help consumers and small businesses when their incomes were decimated. Banks then took a leading role in administering the Payroll Protection Program, literally keeping millions of small businesses afloat during the spring shutdown. Finally, many institutions took a proactive stance during the political and economic unrest in 2020, committing to equality and social justice. The culmination of these actions and more has been a very favorable perception by both the public and the press this year. For those with historical perspective, this may be a generational high-water mark for the reputation of the banking industry. And 2021 may offer the biggest opportunity in our lifetimes to convert that goodwill to new customers.
Source: American Banker 2020 Bank Reputation Survey.
When you think of it from that perspective, wouldn’t a rational executive want to invest in amplifying that story and ‘laddering’ it from the industry to his or her particular institution? Marketers all understand that market share is gained by moving prospects from awareness to consideration and finally to preference and purchase. Doing that successfully is a lot easier if the prospect is already prone to like you. However, if you don’t invest in telling your story and the bank across the street does, well, we all know who recruits that prospect as a new customer.
How do you explain this seemingly logical story to your CEO and CFO so you can maintain or even grow your brand budget? With facts and data, of course. What is your brand awareness and preference today? How much will it cost to improve that? If you do that, how many new customers can you expect? And, what are those new customers worth to the organization? Those of you who can answer those questions and explain it clearly to your management team will get the funding you need to leverage your brand to grow next year.
3. Bulletproofing your budget
Decreased margins and a focus on efficiency translate into pressure on marketing and communications budgets. What it also does is force a reallocation to categories that reliably pay for themselves, either in terms of customer growth and revenue generation. Put simply, in 2021, budgets for activities and programs that are able to be measured and linked to important goals and metrics will be maintained or even increased, while funding will be reduced in other areas. Bank marketers should be proactive and get ahead of this in allocating their 2021 budgets.
So, what are bank marketers investing in for 2021?
Based on conversations with more than 20 bank marketers, here is what Capital Performance Group is seeing:
Digital lead generation. As mentioned earlier, institutions are building lead generation programs for specific products and lines of business that generate a predictable and cost-effective flow of new customers. And digital media is leading the charge not only because it’s effective but because it can be much less expensive than traditional media or mail. Where should you focus your digital lead generation efforts? Start by understanding what your organization’s and lines of business’ strategic and business objectives are. Your largest budget allocations should line up with those. For instance, if your institution is flush with deposits, focus your largest programs and budgets on loan and fee generation.
Marketing automation. While many institutions have a marketing automation platform, most don’t. This puts them at a disadvantage in terms of planning and executing programs for new digital customers, cross-selling and onboarding. If you are lucky to have MAP and a CRM, make sure they are sharing leads and results to optimize program performance. If you don’t, put it in your budget and be ready to explain to the CFO how it pays for itself.
Brand. We are seeing most institutions hold steady on brand spend. As discussed above, our industry is in a wonderful position from an overall reputation standpoint, and not investing to capitalize on that leaves money on the table. We are even seeing several institutions stepping up their brand spend if they are facing unique situations—mergers in their footprint, needing to raise awareness in a specific geography, launching a particularly attractive new product, etc.
Thought leadership and content marketing. Related to both brand building and lead generation, prospects have grown numb to advertisers talking about themselves and how great they are. We are seeing success with institutions that are actually positioning themselves as the ‘go to’ for certain financial information, providing relevant and helpful content. For instance, many small businesses are very confused about the PPP loan forgiveness process. Bank of the West has done an excellent job helping answer these questions and demystify a confusing process for both customers and prospects.
Effective thought leadership requires marketing, corporate communications and public relations to be joined at the hip, creating a strategy and content calendar together.
Data analytics and measurement. Getting the data for effective targeting as well as doing the back-end analysis after a campaign to measure how much revenue it actually produced is the Achilles’ heel of many bank marketers. For 2021, it’s no longer a ‘nice to have.’ Without good data, your programs and budget will be challenged. Now is the time to invest in internal or outside resources that can think through the data you need and where it will come from so that you can improve your campaign targeting continually, and report the new products, balances, and new customers those programs generated.
4. Fortifying for the regulators
Many regulatory observers predict that there will be increased enforcement of consumer protection laws in 2021. This will have serious consequences for bank marketers. In fact, this issue featured prominently in marketing news in 2019 and 2020, when both Facebook and Google modified their audience targeting to deal with concerns that these platforms could be used to discriminate against protected classes. Of course, bank marketers already take compliance seriously, but programs related to housing, consumer lending and employment will likely be in the spotlight. Equally important is that digital media is being used more extensively and offers its own set of risks to be managed. Let’s describe the risks, then explore what activities you and your team should brush up on to mitigate the risk.
First, let’s clarify scope of focus. For lending, the relevant statutes are: Fair Lending, Fair Housing and Equal Credit Opportunity Act, and the Community Reinvestment Act.
So, what is the element of risk? The risk is primarily targeting, which can occur in many ways, including geography, demographics, behavior, and predictive modeling. While all media—including direct mail—can create risk with regard to relevant targeting exclusions, digital media presents unique challenges. As mentioned, Google and social media platforms allow for precise targeting with some recent protections that help bank marketers. However, most other national and local internet media sites have few or no restrictions on targeting criteria.
Programmatic buying’ by definition exposes banks to many of those unregulated sites. Much of this media selection is actually made by machines rather than human operators based on where real-time responses occur. So clearly risk is created. Fortunately, there are protections a bank marketer can take to minimize these risks. They center around: marketing and compliance collaboration; risk assessment; training; vendor management; oversight; documentation; and evaluation.
- Collaboration—Marketing and compliance need to be “joined at the hip.” While these two groups have worked together forever, they need to collaborate at the conception of, approval of, and evaluation of each marketing campaign. This may include a quarterly update of what’s to come to ensure your legal and compliance partners are feeling completely informed before you press “go” on a new acquisition tactic.
- Risk Assessment—Marketing and compliance should meet at the beginning of the year to review the full year marketing plan, media plan and budget, as well as before each major campaign. At the specific campaign level, marketing and compliance should assess the risk level of a given campaign and agree at the outset on the level of documentation and monitoring that is needed as a result. For instance, a multimedia brand campaign will likely need less scrutiny than a digital media or mail-only home equity or mortgage campaign, or a consumer loan campaign using only digital programmatic media.
- Training—The marketing, sales and compliance teams should update their training to reflect these digital media targeting considerations. You may want to invite compliance to meet and educate media buying agencies/vendors on relevant regulations and compliance objectives. Share specific examples of situations to be avoided and provide detailed maps so vendors can visually see your geographic assessment area.
- Vendor management—Marketing needs to maintain strong oversight of digital media providers, approve audience targeting criteria, algorithms and models used in programmatic ad buying, and then document with the provider that no unacceptable targeting will occur.
- Oversight and documentation—Marketing should review actual targeting with the media partners during the campaign to make sure the approved targeting approach is being followed. Marketing also should document campaign adjustments or optimizations that take place during the campaign to make sure they understand who is being targeting and that biases have not crept in. Remember, it’s not just targeting criteria that need to be reviewed, but also how budget dollars shift during a campaign as well, because if dollars move from underperforming to over performing, this influences who sees the ad and the resulting penetrations.
- Campaign evaluation—Once a campaign is complete, marketing and compliance should meet to review reporting that provides a view of media used, how much was spent in each medium in each geography, what targeting criteria were used in each medium and what specific websites were included. Be warned, with programmatic buying, this last piece is often impossible to obtain.
The year 2020 was like no other, and most of us will be happy to put it behind us. However, 2021 presents its own set of unique challenges, many of them predictable. By focusing on the four trends outlined here, bank marketers should be in a much better position to survive the tremors, defend their budgets, and deliver true value both to customers and their banks in the New Year.
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. He can also be reached at [email protected] or LinkedIn.