Top marketing executives struggle with many issues in a tough economic environment, including differentiating their institutions and brands from competitors.
By KENNETH CLINE
What’s on the minds of top bank marketing executives these days?
Get ready for a long list, according to Nick Papachristou, executive vice president and director of corporate marketing for Green Bay, Wisc.-based Associated Banc-Corp and Eric Steinhouse, executive vice president and marketing director for Commerce Bancshares Inc. in St. Louis, Missouri. Long gone are the days when launching campaigns to attract new customers or sell products was the main focus for these executives; nowadays, they struggle to differentiate their institutions from competitors; restore fee income lost in recent regulatory changes; master the difficult art of multi-channel marketing, customer analytics and customer segmentation; improve the customer experience; shepherd the transition from free to fee checking; and – there's no escaping it – figure out how to utilize social media.
Papachristou and Steinhouse are members of the BAI Bank Executive Marketing Exchange (BEME), which BAI created earlier this year as a forum for top marketing executives to exchange ideas and learn from other experts in their field. To assess the current state of bank marketing, BAI Banking Strategies recently interviewed Papachristou and Steinhouse about the top challenges they face in their day-to-day work lives.
Q: What’s the major task for bank marketers in 2011? Are you still working to restore customer trust in banks or have you returned to the traditional job of highlighting products/services? Is the financial crisis finally in the rear-view mirror?
Papachristou: First and foremost, the primary imperative for marketers should be the development and optimization of their brand. Given the intensity of competition, as the result of the current economic environment and low customer demand, answering the question, “why us?” has to be the top priority.
However, in order to deliver against any brand promise in a tangible and direct fashion – again, given the continuing economic instability and consequent low demand – an inseparable and related challenge is to find financially sound means for generating organic growth. This can best be accomplished through strategies targeting both existing and prospective customers and through a multi-channel, fully integrated (sales and marketing) approach.
Although the erosion of confidence has lessened post-financial crisis, there remains an enormous skepticism across all lines of business that has to be addressed in all areas of practice. I would say that “objects in the mirror are closer than they appear.” By that I mean that although there is a lessening of the issues, many of the dynamics in terms of consumer confidence, regulatory impacts, demand erosion, etc. are still significant factors that affect marketing practices across the board.
Steinhouse: Given significant hits to the retail business, the major task for bank marketers will be to help restore growth and overcome lost revenue in this “new normal.” Marketers will also need to help our sales forces adapt to the demise of free checking, while communicating the value of the financial solutions we’re offering customers.
While the U.S. financial crisis centered around the banking industry is effectively over, economic uncertainty continues. Given Commerce Bank’s long history of positive financial performance, conservatism, high capital and low loan losses, we avoided loss of trust from our customers. However, we recognize that consumer trust of the banking industry still needs significant work. Going forward, our industry needs to learn from recent events by providing more compelling evidence of the value of the services we offer our customers.
Q: Banks this year are facing increasing budgetary and cost-cutting pressures. How can marketers respond to these pressures to make their own operations more cost-efficient? Where can you cut costs in a typical marketing unit without impairing performance?
Steinhouse: Marketers should take the time to question the status quo, looking closely at how resources (i.e., money and time) are used, and identifying the relative return on those resource allocations. We have been tightening marketing budgets over the past few years in four fundamental ways: 1) aligning our marketing activities with revenue production, customer experience or the monitoring of our business; 2) designing annual plans/budgets at reduced levels (but as part of an organization-level effort, not just marketing); 3) seeking leaner approaches from our vendors; and 4) accomplishing the most important tasks when we have turnover on our teams. The overall result has been a more intense focus on critical activities, while we have been able to maintain a high level of employee engagement.
There are numerous opportunity areas for productivity gains, including eliminating duplicated efforts and unnecessary exception-management, improved targeting, bundling print jobs, increased use of more cost-effective marketing channels, and perhaps most importantly – measurement and refinement of marketing campaigns.
Papachristou: There are a few key considerations in ensuring financial efficiency and optimizing investment. The first is to ensure a robust method of prioritization that is derived from integration with line-of-business leadership and financial analysis. On a more practical level, utilization of digital, social and new media, along with a strong regionalized approach, help ensure that investments deliver maximum “bang for the buck.”
Under the assumption that the starting point for any organization is strong efficiency, it’s very difficult to reduce costs without a material loss of benefit. The key, as I indicated, is to develop an integrated, real-time prioritization process that ensures that investments are synchronized with organizational and business unit priorities and that any reductions are consensual and affect those initiatives that are agreed to be lowest priority. Marketing can’t manage these dynamics in a vacuum. Strong partnerships within the organization are critical for success.
Q: The role of customer analytics and segmentation has become increasingly important in bank marketing (as in product development). What new capabilities has this brought to the marketing profession? How can banks best use these tools to get the right message to the right customer segment?
Papachristou: Customer analytics is, among other things, an important tool for ensuring efficiency of investment. Meaningful targeting, creation of an “audience-of-one” approach and ensuring that marketing initiatives are germane, are mechanisms that will ensure the credibility of marketing spend and maximum return on investment (ROI) performance. What is critical today is to utilize database capabilities within the framework of online, digital, social and new media. These disciplines enhance the ability to economically deliver the right message to the right audience at the right time with maximum impact (cost/return).
Steinhouse: We are very active in customer analytics at Commerce Bank. We regularly create predictive consumer models to identify what may be of most interest to our customers. We use the models in our test-and-learn marketing campaigns, measuring lift-versus-control groups, or comparing groups that have been exposed to marketing outreach (lift) versus those that have not (control). Not surprisingly, by targeting the right customer at the right time with the right offer, our results have shown that predictive modeling can make a difference. We perform additional analyses on customers who respond to our marketing campaigns, using those insights to further refine our predictive models.
Segmentation can be used to identify and prioritize which segments of the customer base are generating attractive current or future potential revenue. Our marketing team then works to identify the marketing mix that will be most effective in building relationships with the desired segments. As we move out of the free-checking era, we are leveraging that knowledge to develop new product, service, and delivery/channel options for key segments.
Q: Banks have been experimenting with various tactics to improve the customer experience (particularly in the branches). How can marketing help in that effort? How should marketing work with the business lines to create a lasting boost in customer satisfaction?
Papachristou: Customer experience management (CEM) is fundamentally a marketing activity. Although delivered through the frontline, the strategies and tactics need to be integrated with all “other” marketing activities and correlated with the organizational brand. Customer experience is one aspect of the brand promise and should be inseparable from the other aspects of the brand strategy and execution. As in all areas of marketing performance, it is critical that business line and marketing actions are synchronized and fully integrated. A strong partnership with the line is a critical success factor for marketing, regardless of the area of focus, but particularly in CEM.
Steinhouse: At Commerce Bank, customer satisfaction is one of our four key results at the corporate level. Our retail Customer Experience (CE) initiative was conceived, defined and developed from the customer’s perspective. Marketing has been instrumental in identifying, defining, and measuring our customers’ experiences. Our CE model is based on the customers’ “life cycle” with the bank.
Comprehensive marketing research was conducted with customers and focused on individual aspects of the CE model. Based on the research results, marketing defines the desired experience(s) for each module, which are then presented to our frontline. Every module includes behavioral guidelines, training, huddles, scripts, and role plays. To ensure that we have business line buy-in, we formed a Customer Experience Advisory team that includes the business line head, sales management, product management and market/frontline representation. This team reviews all plans/materials prior to implementation.
Finally, we follow up with measurement versus the desired experience via both mystery shopping (i.e., are they doing what we want) and customer surveys (i.e., what do customers think about the experience we are providing). Results are provided at the corporate and local level, with comparisons across time and against established benchmarks.
Q: Social media remains a controversial topic in bank marketing. How can banks utilize social media effectively in their marketing efforts without alienating customers? And how do you actually measure ROI when using social media? Is there actually an ROI for social media?
Steinhouse: While we do not currently use social media for marketing purposes, we have a cross-functional team exploring opportunity areas. Our Human Resources area has used LinkedIn successfully for recruiting and hiring, and we recently rolled out a social media policy to all employees.
As a bank that actively seeks feedback regarding our customers’ daily experiences with Commerce Bank, we would like to utilize social media to hear from our customers. But social media is qualitative in nature, making it hard to project ROI based simply on the qualitative feedback. While ROI appears to be a challenge to measure, social media has great potential to capture the voice of the customer and should be considered as a pilot towards that end. Identifying service gaps that lead to customer irritations, as well as hearing what we are doing well would certainly be beneficial to us.
Papachristou: The monetization of social media is still “under construction” within the banking space. However, social media is a key resource in managing customer experience, understanding customer trends and managing public perception. Although it remains a secondary solution for product promotion, its emergence as a primary channel is inevitable. Measuring social media ROI is similar to measuring the impact of pure brand investments, i.e., through increases in awareness, favorability and perception of the bank’s brand. These hard metrics can then be correlated to production dynamics using a lift-over-control methodology.
Yes, there is an ROI for every investment made. However, with social media, the critical element is ensuring that there is organizational agreement and understanding of the “assumptions” that are developed in the measurement methodology.
Mr. Cline is managing editor of BAI Banking Strategies. He can be reached at email@example.com.