November 9, 2007, Lincolnshire, IL    Banks can achieve more effective marketing, with lower costs, says Robin Foote and Leo D’Acierno, managing directors of Novantas.  All it takes is a systematic approach to understand local markets.

Foote and D’Acierno offered their observations during a November 1, 2007 Webcast entitled, “Using Local Insight to Increase Marketing Effectiveness,” hosted by OnsiteConference, Inc. a privately held research marketing firm located in Tampa, Florida.

Novantas, a consulting firm counting 12 of the top 20 banks among their clients, provides revenue enhancement services to a variety of industries.

Noting financial industry trends of lower demand for retail deposits and loans, with corresponding decline in net interest income, most banks are looking to cut costs.  And marketing budgets are frequently the first to be reviewed. 

To support cost cutting efforts without losing the ability to contribute to institutional growth, marketers should begin by evaluating and prioritizing their markets, argues Foote and D’Acierno.  The final step involves better matching of media to the markets with the highest potential for growth, with on-going evaluations.  “We want to see marketing expenses move away from being a ‘cost of doing business,’ to a view of marketing as an investment,” offered Foote.

Novantas refers to their recommendations for marketers as The New Precision Model, which Foote believes will help marketers more effectively quantify the expected return from their marketing budgets.  The Novantas model involves four key processes:

1)  Scientifically score market to determine yield for spend; identify “strategic” investments

2)  Develop integrated marketing plans, campaign priorities and spending levels based on franchise strength, growth targets, market score and market prices for advertising and other vehicles

3)  Buy selected mass media; identify targeted local placement buys and other campaign and promotional activities according to strategy

4)  Treat marketing as an ‘investment;” rigorously track and measure returns; reallocate among markets in-year as warranted; surgically trim spending in markets that are not performing

Market scoring is based upon a simple concept regarding consumer preferences for choosing their bank.  According to research conducted by Novantas through BAI, customer share of wallet grows at institutions which the customer selected based upon proximity to home and work.  Customers who selected their bank because it offered many locations locally or nationally generated a shrinking share of wallet.  “This means that,” said Foote, “those markets in which you have little or no presence are very unlikely to generate any growth.”

Prioritizing among the markets served by the bank, however, moves away from the simple proximity concept towards more involved analytic techniques. “There are some new tools and techniques on the horizon that will aid this type of evaluation,” promised Foote.

The inputs needed to thoroughly conduct an evaluation include, market definitions, targeted segments, and the bank’s share of wallet, deposits, households and various product lines.  “The results are,” according to Foote, “local marketing plans with tailored customer and prospect offers based on preferences and potential and reflecting local competition.”

The process should begin by comparing the percentage of branches in a market to the deposit share that the bank holds in that market.  “If the number of your offices is relatively low, yet the deposit base is strong, then you have a market that needs less help,” commented Foote.  Product penetration and household penetration should also be elements of the analysis.  Foote added, “The cost of media could also be an element of this analysis.”

“The analysis is really a five step process,” D’Acierno continued.  First, define what you mean by opportunity for each market across your network.  Next, establish segment and product potential and priorities for each of your markets.  Third, define segments and product goals by market.  Fourth, match marketing programs with segment and product potential.  “If the bank’s local position is relatively weak, then targeted efforts rather than mass marketing better compensate for the weak position,” commented Foote.  Finally, tailor your execution strategy by each market.

The goal of this analysis would be to rank each market served by growth potential, and then cross reference the ranking against the bank’s actual or potential position in the market to create a marketing scoring grid.  Those markets with the highest potential should be allocated the larger share of available spending.  Those markets with high potential, but low bank penetration can not be relied upon to yield immediate results.  As such, spending in these markets should be considered long-term investments. 

In general, Foote and D’Acierno recommend moving away from mass media vehicles to targeted media. D’Acierno offered, “Neighborhood or demographically-focused publications can be better buys if they give you more of the priority market you want to reach.”  He added, “Reaching more people may sound like a good buy, but it’s wasted spending if they aren’t in your priority markets.”

“By gaining local market insights regarding potential growth and better matching media to reach that potential growth, marketers may see a 30% to 50% improvement in the management of your advertising spend,” observed Foote.  She further noted that redeployment from low to high ranked markets may account for up to a 15% improvement, while shifting to focused campaigns based upon market opportunity could add another 20% improvement.  By changing the media mix, another 15% improved could be possible.

D’Acierno and Foote also presented their Marketing Pyramid, which evaluated types of media spending by relative cost, effectiveness, ease of measurement, and the trend for use of the media.  “Network broadcast and mass publications use in marketing campaigns is on the decline,” observed Foote.  “The emphasis is on channels that can better target your high priority segments,” she added.  Cable spot broadcast and targeted publications tend to be more effective, according the Marketing Pyramid.  Targeted campaigns, including branch intercept technology tend to have medium to high effectiveness and are easily measured. 

According to the Noveantas Marketing Pyramid, automated marketing programs based upon event triggers, including on-boarding follow-ups and Matrix Mail cross-sell programs, not only exhibit medium to high effectiveness and are highly measurable, but their use in the industry is increasing.