Using Market Analytics to Make Smarter Decisions

By Emma Metzler

“Spend wisely!” is a saying that most of us have heard since we were old enough to know the value of a dollar. The same adage likely runs through every bank marketing executive’s head prior to making any decision regarding allocation of marketing dollars.

While maximizing the return on investment from marketing programs has always been important, it has become even more so given the revenue challenges that banks are facing and the challenges that have intensified in recent months, such as staying abreast of ever-changing marketing techniques and new channel tactics.

To help focus spending efforts, marketing executives should ask the following questions:

  • Where are the opportunities for growth in our markets?
  • How do we maximize customer growth through digital channels?
  • How can we strategically approach our most important investment priorities?

Market analytics can be a useful tool and provide insights in answering each of these questions. Let’s discuss these considerations in more detail, and how market analytics can be applied to inform better decision making:

1. Identifying opportunities for in-market growth

In a time when growth is especially challenging, marketers have a secret weapon. Using simple but powerful market analytics, a shrewd marketer can identify the specific customer segments where the bank is performing well and making profit and more importantly how many prospect households in those segments exist in the bank’s footprint. In other words, market analytics can guide the institution to where it should focus in order to grow most profitably.

For example, in 2021 Rhode Island-based BankNewport conducted this type of market analysis to obtain a clear picture of what its market penetration was for business segments, consumer segments as well as product usage. Using these market penetration insights, Wendy Kagan, BankNewport’s EVP and chief engagement officer, was able to hone in on where to focus the bank’s next investment and assess untapped market potential.

“Once we had the market data, we were able to confirm and support a lot of our assumptions,” Kagan explained. Her team ultimately presented its findings to the executive team and the board, where they tied the market penetration analysis back to a number of strategic considerations:

  • From a customer segmentation standpoint, they could see where there were pockets of market opportunity.
  • From a distribution perspective, they could see where they might want to open a branch based on where the greatest opportunity existed.
  • From a marketing standpoint, they could see the opportunity by zip codes and direct their digital marketing to those locations. This is crucial in an age where geotargeting has become so prevalent.

“Coupling all of this data with internal data, such as our brand awareness study and market survey, we could really begin to tell a greater story,” Kagan affirmed.

2. Maximizing digital channel growth

Consumers and business owners were already gravitating toward digital channels before the pandemic. But that shift then just accelerated. As a result, branches are generating fewer new relationships and marketing is being asked to fill the void. What to do?

While large banks cite that more than 20-30 percent of their new relationships are coming from digital channels, community banks often find their share is below 10 percent. Assuming that an institution has a competitive on-line application, market analytics can help inform digital targeting efforts. For example, analytics can help marketers identify where consumers who are likely to open an account digitally reside. In many cases, it is possible to obtain their name, address and IP address! This information can be used to improve the rate of digital account openings, and thereby enable marketers to fill the void caused by reduced branch footprint.

3. Strategically approaching our most important investment opportunities

Most bank marketers currently have three priorities: growing loans, acquiring new households and increasing brand awareness. Market analytics enable bank marketers to approach each priority more strategically:

Growing loans. Loan growth will continue to be a major challenge and marketers have a key role to play. Market analytics and third-party data from sources such as Acxiom or Claritas can help bank marketers refine their targeting and source more qualified loan opportunities to the consumer and business sales teams. For instance, using Claritas’s P$YCLE Premier Segment definitions—which assign consumer households to a specific life stage group based on their age range and income-producing assets, among other things—a community financial institution with just under $1.0 billion in total assets was able to pinpoint the loan products that its target customers were most likely to use.

They can now use this information to locate those customers using geographic intelligence tools, and then market the appropriate loan products in that area—within regulatory standards—to drive better loan growth.

Expanding new relationships. New-household growth is a priority for most institutions. Market analytics can help to locate pockets of consumers or businesses that are similar to the bank’s existing customer base, or resemble the kind of customer the business lines target. For example, a community bank with $4.5 billion in total assets employed third party-data to identify all the households in its footprint that had more than $1.0 million in investable assets, and then targeted them with a very attractive deposit offer. The campaign generated 6 times the results of the previous campaign which utilized less effective targeting.

Increasing brand awareness. It’s important for marketers to know if they could (or should) be spending more marketing dollars in the bank’s current footprint versus high-opportunity expansion geographies (and if so, where, to whom and through what channel?). Is the bank’s total marketing spend adequate to maintain brand awareness and market engagement, given the opportunity? Does it make sense to reallocate some marketing dollars from lower opportunity markets to areas that would respond more actively? Markets with high growth or retention potential need to be evaluated for proper marketing investment in order to best support strategic initiatives.

Often, institutions measure this growth potential via some form of a market opportunity analysis, whose metrics typically fall under categories such as consumer attractiveness, business attractiveness and competitiveness. Once high opportunity markets are identified, brand spend should then be estimated to achieve awareness goals.

Today, bank marketers everywhere are wrestling with these three considerations in some way shape or form. Market analytics, when intelligently applied, can not only help to answer them, but also help marketers confidently make smarter investment decisions. After all, a recommendation backed by numbers and data is difficult to argue with.

Emma Metzler is senior business analyst at Capital Performance Group, a strategic consulting firm that provides marketing performance and strategic planning services to the financial services industry. She may be reached via email at [email protected] and at LinkedIn.