When important measurements are in place, marketers can take rightful credit for all they have produced, speak the language of bank executives and demonstrate financial value.
by Ally AkinsBudgeting and measurement of marketing activities took a front seat as to what bank marketers are focused on in the most recent survey of ABA member’s bank marketing professionals. The survey covered staffing, budgeting, and marketing’s focus for upcoming quarters and was fielded in July 2023.
What should your marketing budget be?
Given the current economic environment, bank marketing budgets are under pressure. Increasingly, especially with technological advances, marketers are being asked to deliver more for less. As we’ve covered in previous survey articles, marketing’s role also continues to expand, overseeing areas of the bank not previously considered marketing (data and analytics, customer experience, product management, digital channels, etc.).
Faced with a challenging economic environment, marketing budgets are unlikely to expand much going into 2024, and marketers will be asked to justify any changes or additions to their budget. Some marketers may even be asked to justify a budget that is the same level or less than last year, as management looks for cost savings and efficiencies.
Typically, the size of a bank’s marketing budget correlates with the total assets of the bank – equal to roughly 0.06 percent of the bank’s total assets on average. Marketing expense typically equates to between 2-4 percent of total non-interest expense. These figures have stayed consistent over the last few years. Below is the average marketing budget of respondents in each of the asset tiers captured in the July survey.
As more pressure is put on all bank leadership to drive revenue and performance, it makes sense that survey respondents reported that business lines are now giving direct input to marketing expenses. 46 percent of marketers responded that business lines had direct input into where their budgets went.
While the input can be helpful in terms of where marketing’s focus and resources should be spent to support the overall strategy of the organization, it also means that marketers have less control over where their budgets go.
Justifying a budget increase and proving marketing’s value
One way to take back some of the control over your marketing budget is to measure and calculate the impact that marketing can and will have on each initiative.
To justify an increased (or in some cases, similar) budget for next year, marketers will need to be able to prove and calculate the value of initiatives and programs that they are being asked to execute, including the directives from the business lines.
Here are keys to do this throughout the development of a program:
- Before a program even hits the market, marketing and the business lines should set strategically aligned goals for the program (number of new customers, number of accounts, cost of deposits, etc.). These goals should be used to calculate the appropriately sized marketing budget and a goal for overall return on marketing spend.
- While a program is running, marketing should be tracking the results of the program weekly.
If not more frequently, to ensure that conversions are taking place and monitoring performance for potential optimizations.
- At a natural mid-point of the campaign, initial calculations on cost per new client, results against our goals, and return on investments should be done and shared with all members of the teams.
- Once a campaign is complete, the return on marketing investment should be shared with all members of the teams, and a thorough post-campaign assessment should be conducted measuring overall results, learnings for future programs and any immediate next steps regarding the campaign’s performance.
One of the key measures of a program’s success (and one metric your CEO and CFO care about) is the return on marketing investment. If you do nothing else, calculating the ROI of your programs can allow you to quickly provide context and justification for the programs you are proposing for next year.
There are a couple of important components of this calculation that will need to be worked on with other members of the bank’s leadership team:
Value of a new customer: Work with your bank’s finance and product teams to understand how they calculate new customer or product profitability. Determine an appropriate value for a new customer to use to calculate your return.
Marketing budget: The goal number of new customers times the acceptable CAC provides useful input for the marketing budget of the campaign.
While working with other bank teams (finance, digital, retail, etc.) to calculate the value of new customers to the bank can be time-consuming, it allows you to more confidently estimate budgeting needs and project results for the business lines. This process helps to reposition Marketing from an expense to an investment that can be optimized over time in the eyes of bank leaders.
While the rigor and discipline of this reporting can take a lot of up-front time and resources to get off the ground, CPG has seen that once banks can get through the process the first time, it becomes a lot easier and feels more natural with more and more campaigns developed and tracked.
Putting these measurements in place allows marketers to take rightful credit for all they haveproduced, and justify budget expansion and control moving forward. It also allows bank marketers to speak the language of bank executives and demonstrate the financial value of their marketing initiatives.