Bank Marketing, Part II – Thoughts for CEOs

In my last posting, I talked about what Gonzo bank marketers should be doing to maximize their value to their respective institutions. It’s only fair to tell the rest of the story – what the CEO should be doing related to marketing.

Most CEOs will tell you that their marketers really don’t pay much attention to the intense business issues and challenges that jam CEO calendars. The marketers will complain that the boss doesn’t understand much about marketing and often minimizes its importance. I generally find both statements to be true. There has to be a meeting of the minds here to ensure that the bank gets a good return on its marketing investment and marketers broaden their mental scope of attention enough to see the big picture and stay fully engaged.

Many CEOs have a limited view of what marketing truly entails.

Jack Trout, author of the great little book The Power of Simplicity, said, “Marketing is far too important to delegate to middle management.” What Trout was getting at is the general notion that CEOs often see marketing as a necessary expense, not a strategic function. As long at the calendared promotions get launched, the “logo” stuff is nice, and the Web site information is up to date, everyone is happy. This limited view of marketing can be a general detriment to the organization. The evidence, you say?

• More often than not, no single senior officer has overall accountability for new product development. We tend to either suffer through a chaotic path to product improvement or just follow the lead of competitors.
• Requests for funding of customer and market research are often cut during the second-round budget inquisition.
• Requests to upgrade MCIF systems capable of pushing relevant sales messages to retail and telephone agent screens keep getting put off – “maybe next year.”
• Critical investments in online banking functionality and interactive Web tools are pushed back in favor of other priorities.
• We let marketing spend some money on “social media,” but do we have a service delivery structure that appeals in any way to the “wired’ generation? Or are we saying to them, “Come try our great branch-based delivery system?”
• We will spend $2 million for a new location with drive-up tellers but choke at spending $200,000 in upgraded online functionality – “don’t we have someone on staff that can do that stuff?”
• We make pricing decisions based on competitor actions without the benefit of accurate product or customer profitability information.

True Gonzo CEOs know marketing is a strategic function that includes understanding customer segments and their specific needs; developing products that are relative; building service processes that meet the needs of clearly defined and potentially profitable segments; anticipating the needs of future segments; finding the pricing sweet spot between customer acceptance and profitability; and intelligent branding and public communication that position the bank as smart and customer savvy. This obviously takes work, and it takes a leadership commitment to see that the job gets done right. Please accept my humble thoughts on a few key areas.

1.  New Product Development is an Essential Function
There should be a specific and documented process for new product development and a senior officer who is responsible for the ongoing process in which marketers, line managers, technology and finance people participate. Allowing line managers to develop products in their own silos often leads to conflicting incentives, slow implementation and cultural mayhem. While this process takes discipline and cooperation, it can separate the market leaders from the followers. Once we have convinced ourselves that we are in a commodity business and have no choice but to compete on service alone, product and delivery creativity goes out the window.

• Assign the chief marketing officer the task of actively coordinating the process.
• Ensure the product development process is well designed and everyone follows the same rules.
• Insist that the chief marketing officer be an active and contributing member of the bank’s ALCO process. The more he or she understands about the numbers the better job they will do.
• Remember – market research is not a luxury, it’s a necessity. Proposed product and pricing structures need to be shared with front-line tellers and platform sales people prior to launch. The best practice is to share major changes with key customer focus groups. Getting customer reactions will almost always improve the offer.
• Insist that the marketing leader develop an annual plan with a scope beyond the promotional calendar. The marketing plan should include customer acquisition and retention, product and pricing development; delivery system strategy; customer and market communication strategy and implementation plans.

2.  Delivery Strategy Must Be Aligned with Customer Needs, Products and Marketing
Developing sound delivery strategy depends on a clear understanding of customer segmentation and customer needs. We all know we have customers that prefer the branch environment. We also know they are aging and transferring wealth to their kids that will expect a robust remote banking experience. The marketing process must include consideration for multi-channel delivery based on the needs of major customer segments, especially the segments that are growing and will dominate the business model in the future.

• Branches continue to have value to aging customers that grew up within that model, but not to younger consumers. The comeback that branches are necessary to acquire customers doesn’t hold much water. The rapid growth of ING Direct and USAA is a clue.
• The idea that branches are necessary to serve business customers is also suspect. What business owner would not rather have the bank’s team come to them?
• Get used to the idea that the Internet will be the delivery channel of the future. The bank that puts off building its Web delivery infrastructure will always be a follower.
• Remote deposit capture will soon replace tellers for profitable customers. A bank can maintain branch locations to serve unprofitable customers if it wants to, but the new regulatory regime will not allow the bank to recoup its costs.
• Younger customers will demand more than an online loan application and approval – they will expect the entire end-to-end transaction to be completed within the channel they choose.
• It is imperative that the bank’s lending, retail, operations, IT and marketing leaders communicate and work together. Organizations built around silos may survive, but will not thrive in the future.

 3.  Marketing Should Play a Major Role in the Bank’s Sales Strategy
Marketing should play a major role in developing the bank’s sales strategy, including the messaging that shows up on customer-facing computer screens. A good MCIF system that analyzes customer data and develops the right messaging and newer applications that will push it to the font, either in the branch or call center, can increase cross selling from mediocre to great.

• Insist the marketing staff actively use available tools for segmentation and targeted messaging. Too many MCIF systems are sitting idle or are used for reporting.  
• Make sure that accurate transaction and cost data is built into the system. This takes cooperation from Finance, but it leads to better targeting.
• Financially support cross-functional efforts to push intelligent messaging to teller and call center agent screens.

4.   Be Careful About Making Branding Promises You Can’t Keep
Branding is misunderstood by many CEOs. Branding is the process of building a public personality for the bank that people remember and are attracted to. This “personality” is directly affected by the accumulation of all customer interactions with the bank. It is important to pay attention to the messaging that is going out there and ensure the customer experience does not contradict it.

5.  The “Power of the Internet” is Not a Cliché
Having been a chief strategy officer and planning consultant for years, I see a lot of strategic plans. In my experience, in many cases a bank’s Web site does not reflect the strategies embodied in its planning documents. While we see the Internet growing in importance as a delivery channel, we see very few smaller to mid-size institutions paying enough attention to their Web sites. This is not an area CEOs can allow to get sloppy.

• Provide the financial resources to keep the bank’s Web site engaging and interactive and its functionality up to speed with market leaders.
• Advertising forays into the land of social networking must be supported by a service infrastructure that is delivered via the Web without the requirement to “come in and see us.” They won’t.
• Provide sales staff with Internet access. If the sales staff wants to communicate with customers online and actively promotes the bank in a friendly way, they should be allowed to do it. Obviously the bank policy about external site use must be well crafted, but locking the place down because Bob was selling his kayak on Craig’s List will prove to be short sighted.
• Provide a channel for customers to post comments and concerns related to the bank’s products, pricing and service experience and get involved in the conversation. CEO bloggers know their customers better. CEOs who don’t have time to interact with customers won’t understand their behavior or needs well enough to retain them until they get profitable.

 6.  Insist on Fiscal Responsibility
Many CEOs today do not require sufficient information about the effectiveness of marketing expenditures. It is not only fair, but necessary that major marketing investments are looked at from a cost-benefit perspective. IT is expected to justify its investments, right? At the same time understand that some investments are difficult to measure – e.g., newspaper, radio, outdoor, television and corporate donations.

• Insist that media ads have mechanisms such as coupons or Web site access within the content so response can be measured as much as possible.
• See that the finance and marketing people work together to standardize cost-benefit analysis requirements for major marketing expenditures.
• Hold the marketing officer (and everyone else, for that matter) accountable for providing timely and logical responses to budget variances.
• While the marketing function may never be a profit center, it can and should be managed to contribute to the bottom line. 

The importance of communication between the bank’s CEO and its marketing staff cannot be overestimated. I know it is hard for most CEOs to find the time to do this – there’s just too much on their plates. But CEOs who do make time to talk with their marketers will always learn something. And the marketers will be more energized and productive as a result.

 

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