It is easy for banks to understand the relationship between marketing and the consumer business. Afterall, marketing drives about 15-25% of retail production and its impact is considered fairly straightforward to measure.
But other lines of business typically receive far less support from marketing even though it can drive anywhere from 5-15% of new customer acquisition. As a result, opportunities are missed for both the marketer and the non-retail business — especially when it comes to deepening customer relationships.
Marketing budgets often are among the very first to get cut in tough times, so marketing executives can help to prove their worth by allocating more investment dollars to the rest of the bank and establishing metrics that measure the impact. From commercial to wealth, market planning can be a holistic exercise. (See Figure 1.)
Figure 1: Spending In Other Lobs Can Drive Efficiency In Consumer Checking
Furthermore, the evolution of digital marketing has made non-retail marketing significantly more relevant. The old-world strategy was events-based, such as sponsoring a yacht race to target wealthy customers in a specific market. Needless to say, those strategies fell by the wayside during the pandemic. While those tactics can still work as we get back to normal activities, marketers can also target that demographic digitally, with ads on boating websites or mobile apps.
Additionally, account-based marketing (ABM) can target specific messages to business customers — both existing ones and potential prospects — across channels.
RETAIL GETS ALL THE ATTENTION
One of the reasons that retail gets the bulk of marketing dollars is because there are traditional measurement standards in place that allow people to understand the general returns associated with marketing. Indeed, marketing can be a significant contributor. For example, SalesScape data show wide variability of per branch performance, with some players notching 120 new-to-bank sales per branch per year and others bringing in upwards of 300. The difference is partly reflected by marketing.
The same gap in performance exists in business banking where top performers bring in about twice as many new small business clients than do average performers. These data typically don’t reflect the impact of marketing because there is either a limited amount of marketing taking place or just a lack of measurement. Just think about how even the top performers could bring in more customers by incorporating marketing programs into their strategies.
Another factor contributing to a lack of marketing attention in non-retail lines of business is that marketing traditionally focuses on measuring new-to-bank customers. Banks typically ignore the ability of marketing to help cross-sell products, deepen relationships and retain customers. That is the case even though near-term revenue drivers tend to focus around deepening relationships with existing customers. Marketing can help achieve those goals!
The net result: data from Acquisition IQ spend and efficiency benchmarks show that banks spend an average of 20% of budgets — and even less of staff — in non-retail lines of business. That means banks are essentially throwing away marketing’s potential to contribute to the businesses that drive as much as 40-80% of profitability. (Figure 2.)
Figure 2: Since 2018, Non-Consumer And Brand Spending Has Become Increasingly Focused On Wealth Management
SEGMENTING FOR SUCCESS
Most marketers naturally use segmentation in order to build a holistic marketing strategy. This is particularly important in non-retail businesses that may be targeting only 1-5% of the population within the market. When going through a segmentation exercise, you find that the average value, the likelihood to open a new account and the resonance of a regional bank varies highly across different customer segments.
A good segmentation exercise would identify segments of customers with whom the brand and products will resonate and have an attractive mix of deposits, loans and fee income. Unfortunately, segments are often created and driven by factors that don’t include these characteristics, namely sales revenue on the business side or assets under management on the wealth side.
An examination of Business IQ data, which profile product profitability in small business and commercial operations, shows that industries with annual revenue of $5-$10 million generate significantly different mixes of deposits, fees, and loans depending on industry segment. We often see differences of 25 percentage points or more when comparing the ratio of loans to deposits between industries. The difference is even greater for the most credit-intensive segments, such as manufacturing.
This suggests that it makes sense to cherry pick the segments that would be most attractive to the bank rather than using a one-size-fits-all marketing approach. Additionally, fees generated by treasury management are often significant profit contributors to the bank, but marketing typically isn’t involved in driving the TM relationship.
MARKETING FOR COMMERCIAL
Marketing in the commercial line of business has also been an area of historical underinvestment. But there is great potential and an opportunity for early adopters of more advanced marketing concepts to create real performance differentiation. But while many of the concepts from consumer marketing are applicable, both marketers and bankers will need to adapt a bit.
As an example, marketers need to take into account much longer sales cycles in commercial, meaning that measuring success will also take longer. For example, it may take years to assess the change in business performance versus just tracking the number of account openings over weeks or months. Bankers need to develop higher degrees of trust in data and marketing analytics as they decide how to allocate their time.
Marketing can also help the bank acquire and deepen commercial primary relationships, which typically generate seven to 10 times the DDA balances of non-primary relationships and capture a significantly higher proportion of total fees. But a bank’s potential to achieve primacy varies based on a number of factors ranging from credit relationship to product capabilities. Advanced marketing analytics can pinpoint those relationships that have the highest near-term primacy potential, enabling bankers to focus their time where it is most likely to yield results.
MARKETING FOR SMALL BUSINESS
In the business banking/small business space, there is increasingly a move toward multi-channel coverage models that integrate traditional relationship managers with virtual bankers, digital, service centers and branches. With such an array of potential contact points, it is both more challenging and more rewarding to correctly track clients and position high-value conversations with appropriate experts. In establishing a robust multi-channel coverage model, it is critical that banks integrate digital marketing to accurately assess relationship potential. And a steady stream of relevant content can be a differentiator.
There’s certainly no silver bullet when it comes to marketing for non-retail businesses. It requires careful coordination with the sales force and can be a thankless job. (The general attitude is that if things are working, the sales force is doing great. But if things aren’t working, it’s marketing’s fault.)
Organizations need to understand where the opportunity is, leverage account-based marketing tactics for targeting deepening initiatives and surround the process with the right technology (potentially CRM + CDP) to ensure that the bank can scale these efforts and start seeing results.