If you boil the financial services business down into the core “revenue” businesses, the big categories are:
- Retail Banking
- Credit Card
- Mortgage
- Small Business
- Wealth Management
- Mid-Market, Corporate & Institutional
Where doest thou marketing spend lie? Where doest thou earnings coming from? Doest thou seest a problem?
In financial services the tail kinda wags the dog. The more consumer focused enterprises get overwhelming amounts of the money. And to a degree, that makes sense. The “experts” will tell you because of the B2C nature of it branding work (TV, Advertising and the like) are essential to capture the awareness and consideration mindsets of the audience. OK, we stipulate. But to what degree?
Over the last 6 years in the top 25 financial institutions the Mid-Market, Corporate and Institutional groups (heretofore referred to as C&I) have made 58% of all earnings. Retail, Credit Card, Mortgage, Small Business and even the higher brow wealth managers only made about 40% of all the earnings–COMBINED. Chew on that a minute. Over the same time period C&I groups received a paltry 17 cents for every marketing dollar the company spent. Ok finance geeks let’s do some basic math:
58% of my earnings get 17% of my marketing spend, while 40% of my earnings get more than 80% of my marketing spend.
And you guys are OK with that?
“Wait, you’re not factoring in that interest rates are terribly low and you cannot make money in retail driven solutions until rates rise.” Again, we stipulate. But to what degree? The revenue mix for financial institutions has changed forever folks. If you think grandma’s deposits are going to be the primary earnings driver for the company when rates rise…it’s just not going to happen. Branches are dying or at least dying in their present form, online providers are kicking your butt or at least elbowing in on your fiefdom for services like cards and mortgages. The world has changed and as you play catchup with your expensive Vegas-like “branch transformation strategies” the earnings workhorse for your company is having trouble spelling marketing.
We are not advocating the abandonment of retail strategies or solutions and the high dollar marketing required to fuel it, but we are advocating taking a look at your investment mix. We understand retail-like things will always carry the heaviest marketing purse, but if C&I is carrying you with 17% of the marketing spend, what could they do with 25%? That notional amount could pay for something as simple as demand generation…as an example:
- Completely pay for a demand generation platform (Eloqua, Marketo, Hubspot, etc)
- Completely pay for a content creation engine to fuel it
- Completely pay for a consultant to implement it all
- Within a year you are driving hundreds more leads and appointments to businesses within C&I that are producing huge first revenue per deal.
- It would be completely measurable and easier to track ROI
One of our clients did just that. They cancelled a $300,000 marketing effort around a failed deposit advertising effort and reinvested it in the demand generation approach above. The result: verifiable first year revenue attributable to the program of $9,875,000 in 2014. In 2015, they are at $8,620,000 year to date. Think anybody is concerned about their $300,000 annual investment? Nope. Think anyone misses the deposit advertising effort? Heck to the nope.
If you ever wanna chat about the budget mix in your diversified financial institution, give us a holler.