Budgeting and Bank Advertising for 2018

Bank Advertising Budget

As September rolls around, it is time to start updating next year’s strategic and tactical plans plus put a preliminary budget together. For us, marketing in 2018 looks a lot like 2017 with some notable changes. Like this year, next year will continue the trend of more digital advertisement. This means more social media spend, more mobile allocation and more video production. Email and content will remain front and center, and we will be expanding our search term and search engine optimization. While we will talk more about specifics in the future, today’s article covers our starting point of what we are thinking about for a budget and the process that we go through.


Working With a Budget


For us, budgets and plans go hand and hand in an iterative process. While some banks start with a budget and then back into a marketing plan given that budget, the better way to do it is to start with a set of objectives, come up with the plan and then allocate a budget. That said, a more practical way, at least for us, is to develop both simultaneously. Our opinion is based on the fact that resources are not infinite and while it would be nice to set the budget to objectives, the reality is that advertising dollars need to compete with other marketing efforts as well as other operational efforts. The operational, regulatory and other risks are such that there are natural (and political) constraints on growth. As such, the sky is not the limit and developing both a reasonable marketing and operational plan in lockstep has proven to be most efficient.


Start with a Base


At this stage in the year, we are still unclear on where our optimal growth path is for next year. For the sake of planning, we start the process by asking – if we had to produce a similar level of growth as this year, what would we have to spend.


Given that it is likely to be a record year for bank and corporate profits, we will assume that advertising dollars from our competitors increase slightly. Thus, all else being equal, we feel that advertising sensitivities are such that we will have to spend more to achieve the same level of growth as there will be more “noise” that we will have to cut through.   


As a first cut, a 2018 base advertising budget, looks something like below. The data below is from Standard Media Index (SMI) which tracks the spend of banks and major US corporations through their agencies. While the data is from 2017, our budget projections look very similar for 2018  in terms of overall base growth of 4% and the reapportionment away from print, magazines/newsletters, radio and outdoor and to more digital. 


2018 Bank Advertising Budget

As we work through this analysis, we conduct a review of each tactic and the results and figure out if we should be increasing our advertising allocation to that sub-channel in order to increase our return on investment (ROI) or can we improve our ROE by decreasing our spend. Of course, it is never that simple, so there is a fair amount of subjectivity, but the trick is for bankers to be objective as possible to determine what is working and what is not. We obviously want to do more of what is working and less of what is not.


Operational Goals


After getting in the right ballpark with a baseline advertising budget, we do the same for marketing and then sales. The next move is to figure out what changes need to be made in both our strategic and tactical plan for next year so we can work that into our budget. This is where our Bank Strategy Cube Framework comes into play which we already covered in depth (HERE). Using the Cube format, we can then aggregate a budget both by function (i.e., advertising) and then by each department. This permits an easy, yet integrated, rollup into a master budget.


After updating our strategic and tactical plan in the next sixty days, we will then update our marketing plan (an explanation of our marketing plan can be found HERE) and fine tune our budget across both functional and departmental lines.  


Putting This Into Action


We take budgeting very seriously. We believe that proper budgeting helps hone objectives and resource allocation. In the process, it makes everyone cognizant of what inputs are required for certain outputs and the converse. By starting early, it allows us enough time to ask the difficult questions and pull in the required data so we can make the best decisions given our resources.  Our takeaway today is that using the example of advertising, it helps to develop both a budget and an update to the strategic plan in an iterative process to improve both.