This Month in Retail Banking
In today’s digital-first world, seeding awareness and consideration is increasingly the purview of marketing rather than the physical networks. Not surprisingly, Curinos’ decade-long longitudinal Shopper Study has empirically revealed the steady rise of marketing’s impact in driving new-to-bank acquisitions. Unfortunately for marketers, the cost per acquisition has nearly doubled over the past two years, far outpacing the inflation rate for media baked into most budgets. At the same time, the loss of fee revenue, the fierce battle for deposits and the volatile macroeconomic environment are shrinking margins.
The result? Marketers are under pressure like never before to both drive franchise growth and cut costs. In this context, those who can adopt the mindset of a portfolio fund manager – considering the marginal impact of each dollar in their investment pool and optimizing allocations at a market, product and channel level – will outperform those who stick to business as usual.
Just as fund managers allocate capital across investment opportunities, bank marketers need to allocate their budgets optimally across geographies, products and channels.
One significant area of opportunity lies in calibrating spend allocations by market type. Too many bank marketers pursue the same strategies across all markets in their footprint when, in fact, significant network-density and competitive differences can have an impact on efficiency. Because in its benchmark Curinos tends to see very different cost per acquisition (CPA) profiles by market type, if marketers are not adjusting overall investment and channel allocations accordingly, their efficiency is likely to be suboptimal. The handful of marketers who’ve been able to maintain a consistent level of efficiency across high-, medium- and low-branch density markets are making these market-level plans part of their strategic agenda.
Another important dimension for optimization is allocating marketing dollars by product. A bank’s portfolio of products is generally broad enough to respond to the variety of needs that the typical consumer has. In developing bottoms-up marketing plans, thinking through the role each product can play in driving franchise growth is an important part of the budgeting equation. Optimal approaches to budget allocation considers differences in churn rates; must-win segments and the awareness levels of each; the length of the consideration and buying cycle; and, to chart a path toward optimal efficiency, potential paths to primacy post acquisition.
The final area of opportunity lies in better balancing upper- and lower-funnel allocations and holding to those balances consistently. Too often we see banks investing the lion’s share of their budgets in lower-funnel channels and sporadic investments in the upper funnel. Consistent brand and upper-funnel spending is the one thing that the most efficient bank marketers have in common. That investment drives both consideration and purchase, resulting in higher efficiency curves and lower CPAs.
Just as fund managers carefully allocate capital across various investment opportunities, bank marketers need to allocate their budgets optimally across geographies, products and channels. By strategically assessing the potential returns and risks associated with different marketing initiatives, they can allocate their resources to areas that are likely to have the highest impact and deliver the desired results.
