Many banks talk about delivering a targeted local approach, but end up spending their marketing budget to garner a mass appeal. Nine times out of ten, this is a mistake and by utilizing a different approach, banks can be more efficient in their marketing dollars. As usual, solving this marketing problem is a function of asking the right questions. The question is not “How does the bank acquire more customers,” but “How does the bank acquire the right customers.” This means that first you have to understand who the right customer is.
While we have written about how banks can develop customer personas (HERE), the exercise is to figure out which type of customer you need to target to deliver the most profit. Further, you need to understand not only the demographics of the customer but the psycho-demographics – what the customer thinks, understands, behaves, loves and fears. To make this easy, a good starting place is to go to the existing profitable customers that you want more of. By analyzing their backgrounds, interviewing them and recording survey answers, banks will be well on their way to developing a target customer persona.
Next, in a similar exercise, banks should look at the top 3 zip codes around each branch and identify customers that have contributed the highest lifetime profit. The findings will confirm or help a bank identify what their most profitable customers look like and where they live. Then, by looking at “look alike” zip codes in surrounding areas of the branches, banks can find high concentrations of households or businesses that best resemble the target customer profiles.
The goal next is to tailor the marketing plan to match the target customers. Running a marketing channel optimization model can help banks focus more on customers that matter. Usually banks spend too much on mass media such as general paper publications, wide community sponsorships, radio and outdoor advertising. Things like billboards are great for branding and name recognition, but do you care about building a brand with customers that aren’t likely to do business with you?
The more efficient route is to spend money for lead generation, business event sponsorships for particular industries and specific digital advertising with local business journals. Once a marketing plan is developed, testing ads with simultaneous action-oriented placement becomes important. Sometimes advertising in the sports section of the local paper is more effective than advertising in the business section. This wouldn’t be readily apparent until you test an offer or promotion. In similar fashion, partnering with Young President Organization-type of entities or venture capital clubs works well for many banks. To underscore the point, it is not because your target customers are at these organizations, but because these organizations have individuals that fit your target customer profile. While that Young President may not be your customer, he or she likely knows 10+ others that are your customer.
The dimension of time is also important when deciding when to spend marketing dollars. As our research uncovered for marketing for checking accounts there are better times than others. The first part of January is always excellent for marketing almost any bank product. March is the next optimal time coming up this calendar year. Also a consideration is planning marketing at times when staff can best take advantage of it. One bank launched a big campaign only to realize that it was a time when every employee had to do multiple 360 degree reviews for performance evaluation. The result was delayed times in following up with profitable prospects.
The above framework utilizing data analysis and marketing models is standard fare for retailers, hotels and other industries, but community banks are just now taking to some of these methodologies. Banks that utilize these ideas will find that not only will their marketing become more effective, but retention will increase and satisfaction may go up as well.
Submitted by Chris Nichols on January 13, 2015