By Mark GibsonAs 2021 came to an anti-climactic close, and plans and budgets are submitted and approved, marketers everywhere took deep breaths before plowing into the new year. How will the COVID-19 virus and supply chain challenges continue to impact the economy and the banking industry in 2022? And what impact will economic challenges have on marketing priorities?
Capital Performance Group performed an informal survey of nearly a dozen of our strategic planning clients to gain an understanding of what the C-suite priorities are likely to be next year, and what the implications are today for bank marketers. So read on!
Marketers face four realities
As we spoke with members of bank C-suites, four themes rose to the top of the list:
Shift to growth. With margins shrinking and profits declining, many banks will be reducing marketing budgets for any activities that are not directly generating revenue growth.
Loans, loans, loans. While most institutions (and many businesses) are awash with deposits thanks to PPP and the stimulus payments, loan growth is projected to be tepid this year. All lines of business will need help generating loan demand.
Digital sales. The pandemic highlighted how vulnerable an institution can be without robust online account opening channels in place. This is not just a nice to have, it is as or even more imperative than having a convenient branch. Focusing marketing efforts on driving accounts through the digital channel will be key in 2022.
Measurement and attribution. Bank executives now expect marketers to be able to establish the linkage between your activities and the generation of business results.
Let’s take a look at each in a little more depth:
Growth as a top priority
Every bank marketing department has a ton of competing priorities—client events, sales campaigns, contributions and sponsorships, and social media posts, among others. Sometimes it’s a challenge to determine what to focus on. That is not likely to be the case next year.
It’s not ‘new news’ that margins have been declining for several years. (See chart below.) What is new is that, in addition to narrowing margins, volumes will be declining from the high tide of government stimulus loans in 2020 and 2021. This is expected to create an earnings shortfall in 2022, according to the financial projections of most of our bank clients.
Declining earnings usually means one thing for bank marketing—budgets will be under pressure. That’s why focusing on growth will likely be the top priority for bank marketers in 2022. Working with your line of business executives to understand their revenue goals, then crafting programs designed to help them reach those goals, will be the surest way to protect your budget from the chopping block.
Loans, loans, loans
Speaking about those revenue goals, it’s unlikely your executives are looking for deposits, since most institutions are swimming in excess funding. Rather, the prognosis for loan growth, especially on the business side, is very murky. This is due to a combination of factors, including the government stimulus programs, supply chain constraints impacting business sales, and the economic uncertainty that many businesses currently face. Unfortunately, one of the most attractive loan categories—commercial and industrial loans—has realized sharp declines in the rate of growth in the past year. (see chart below).
Banks need to grow loans in order to counteract shrinking margins, but many bankers expect loan demand to be uneven at in 2022. Enter marketing! How can you use data to determine which consumer or business segment is likely to borrow? What specific products will be in demand?
How can you craft a targeted campaign using third party data to find those prospects? How can you provide a flow of qualified home equity or business line of credit leads to your sales teams to supplement their calling efforts? These are important questions you will want to answer in order to deliver relevant value to your institution next year.
Deposit and loan product sales have been moving to the digital channel for years, but bankers were able to look at the (shrinking) majority of sales made through branches and convince themselves that consumers still preferred buying face-to-face. The year 2020 laid bare the fallacy of this thinking. As branches closed or limited service to appointments during the worst days of the pandemic, consumers flocked to open accounts online. Many large banks opened more deposit accounts online than in the branch. Unfortunately, many community banks and regionals discovered that their digital application user experience or marketing prowess was not up to the challenge.
“My digital account openings tripled, admittedly from a low base,” says the head of consumer banking of a $10 billion dollar institution. “But my branch sales plummeted 30 percent. The net was 1500 fewer new customers last year. That’s unsustainable.”
Sources: https://thefinancialbrand.com/123603/square-paypal-pose-grave-threat-to-community-financial-institutions/ and https://www.onespan.com/resources/cornerstone-digital-identity-verification-report
As a result, ramping up digital sales is near the top of the priority list for a large number of institutions. This doesn’t just require a fast, easy-to-use new account opening experience. There are many other pieces and parts involved in getting digital sales right, and Marketing needs to play a key role.
Let’s imagine you are helping generate loans for your business banking team. First, you need to work with them to understand exactly what kind of business they are likely to lend to. Then you can use third party data from providers like Dun and Bradstreet or ZoomInfo to identify those businesses. Next you need to develop and distribute a digital ad or content to capture their attention. And finally, once they visit your site or ask for more information, you need to nurture the lead and deliver it to your sales team, tracking whether it converts to a loan.
While other teams like the digital channel, IT, and the business line need to be involved in the process, it’s clear that marketing plays a pivotal role in bringing digital sales campaigns to life.
Measurement and attribution
There’s a good chance you’ve read up to this point and are saying to yourself, “We are doing all these things. We’ve got it covered!” That’s great news, but don’t get excited too soon. What we hear from too many C-suite executives is that their marketing team speaks a foreign language when it comes to results. While business line management is focused on growing new-to-bank households and deposit and loan balances, marketing talks about impressions, views and clicks. Not that those metrics aren’t important early indicators of business success. They are. But your internal clients generally don’t care about them. They care about moving the revenue dial.
In 2022, executives will either expect you to be able to demonstrate the linkage between your programs and business results, or they will redeploy your budget to activities that are known to drive business. That’s why it’s critical for you to build that framework and understanding with your business line clients and finance team now.
As we know, some activities like direct mail and digital media are easily measurable, while others such as traditional media or events are harder. That doesn’t mean you can’t do it, though! Remember, ‘perfect is the enemy of the good.’ In other words, just because you don’t have perfect attribution of each individual sale does not mean that you cannot take credit for it—if it’s reasonable to assume that marketing activity generated it.
Consider this example: Imagine that your bank is opening 50 checking accounts per month when no marketing is taking place. Then you launch a multi-channel campaign. Sales rise to 75 accounts per month. You can track that 5 accounts came from direct mail and 5 accounts came from digital advertising to your landing page and online application. It’s reasonable to assume that the other 15 came from marketing activity as well, because nothing else changed. Capturing that lift in graphs and charts is important to visually demonstrate the correlation between marketing activity and sales. For instance, using the chart below, South Shore Bank used a year-over-year comparison chart to demonstrate the lift associated with a successful digital marketing checking campaign conducted in 2020.
Source: Courtesy of South Shore Bank, South Weymouth, Massachusetts.
By comparison, this bank actually calculated a ‘baseline,’ when no advertising was running, then identifies the week that important marketing activities like direct mail or advertising begin, to help demonstrate the correlation between marketing activities and business results.
It’s important to gain this level of understanding with your internal clients BEFORE you run the campaign, but if you do, and you measure your results carefully, you and your bank’s management team will begin to develop a clearer picture of the business results your marketing programs are having. And that understanding will be more important than ever this year.
Thriving in adversity
This year promises to be even more challenging than the past two for the financial industry. But that creates a golden opportunity for sharp marketers. Revenue generating departments will need more help than ever to hit their business goals. Translating your programs into language they can understand, helping drive meaningful volume through your on-line applications, and handing them qualified loan opportunities will position you and your department as an essential partner in 2022 and beyond.
Mark Gibson is senior consultant at Capital Performance Group, a strategic consulting firm that provides marketing performance and strategic planning services to the financial services industry. Email: [email protected]. LinkedIn.