SELECTING THE BEST PRODUCT OR SERVICE TO PROMOTE

Of all the decisions you must make when choosing your singular marketing focus, this is the toughest one.

Intuitively, most financial services marketers will choose the checking account. But this isn't the best or most optimal choice for every bank and credit union.

Over the years, your newsletter editor has witnessed several credit unions being very successful focusing almost exclusively on auto loans. Their laser-like focus on auto loans enables them to become the market leader.

For many years in Northern California, World Savings focused its marketing budget almost exclusively on CD rate advertising – becoming the market leader for Certificates of Deposit. Founded in 1963 by Herb and Marion Sandler, their exclusive focus on CDs resulted in World Savings becoming the second-largest savings and loan in the country. They sold the bank to Wachovia for $2.3 billion in 2006 – at the peak of the housing bubble.

While it's possible to choose a product other than checking for your singular focus, checking would seem to be the best choice for at least the following seven reasons:

1. It's the core account required to establish a long-term customer relationship with your financial institution.

2. Unlike other bank accounts, the checking account is sticky which means it stays with you a long time.

3. The checking account provides your institution with ongoing, internal cross-sell opportunities.

4. Checking account balances enable your bank to increase its loan volume.

5. Checking accounts are a reliable source of funds for your institution.

6. They provide a source of fee income from a variety of fees.

7. They provide an ongoing branding opportunity both on checks and the debit card.

Each of these seven reasons was covered in detail in the January 2010 issue of our newsletter.

And let's not forget that the checking account is your financial institution's last remaining franchise. Unlike consumer loans, credit cards, and savings options, it's the only account available almost exclusively from banks and credit unions.

SELECTING THE MOST EFFECTIVE MARKETING CHANNELS

The list of marketing channels available to marketers continues to expand as seen by the list below:

• Television
• Radio
• Newspaper
• Magazines
• Direct mail
• E-mail marketing
• Outdoor (billboards)
• Transit
• Sports marketing
• Mobile
• Twitter
• Social media
• Buzz or word of mouth
• In-branch
• Statement inserts
• Retail co-op
• Website
• Internet (e.g., banner ads)

When selecting channels you must consider target audience, reach, frequency, cost, compatibility, and measurability of each one. Failure to do so results in less than optimal return on your marketing dollars expended.

For example, while e-mail marketing and social networks are all the rage today, they may not qualify as the most efficient channels for soliciting new checking account customers. Allocating scarce marketing dollars to these channels simply to be able to say you are using them is not a rational decision.

Every time you allocate your already scarce marketing dollars to additional channels, you risk weakening the impact of your overall message.

Remember, sacrifice is the essence of corporate strategy. Without sacrifice, you have no strategy. Without sacrifice your bank or credit union becomes weak.

Effectively managing limited marketing budgets demands sacrifice.

One of the best, if not the best, examples of singular channel focus is that of Motel 6.

Who hasn't smiled listening to the down-home voice of spokesman Tom Bodett inviting you to stay at a friendly, low-cost Motel 6 while on the road? The radio-only campaign began in 1986 thanks to the marketing folks at The Richards Group in Dallas. Twenty-four years later and we are hearing the same folksy spots on the radio. But now, thanks to the laser-like focus of the campaign, Motel 6 has over 800 locations across the country.

If channel sacrifice works for Motel 6, it should work for your bank or credit union.   

It's not hard to do, it just takes the courage of your conviction that it's the right thing to do.

BRANDING VERSUS SELLING

Making focus difficult, if not impossible for many financial institutions, is the presence of multiple marketing vendors – all requiring some share of your limited marketing budget.

At a minimum, most banks and credit unions have a general media agency, a direct response marketing agency for direct mail, and more recently an online agency. Of course, this list is often much longer given the variety of marketing specialists that have emerged over the years.

Of all the conflicts that arise as a result of using multiple marketing agencies, perhaps the most prevalent is that of branding versus selling.

Historically, general media agencies responsible for TV and radio spots, newspaper ads, billboards and transit signs are the champions of branding. They love creating and running ads without valid offers and calls-to-action. They hate asking for the order.

Their goal is to create uncluttered art and pass it off as an exercise in "branding."

Fortunately for these general media agencies, it's almost impossible to determine if these marketing efforts actually work. When was the last time your general media agency tracked response and provided you with a response report?

Remember, what's fortunate for them is unfortunate for you and your bank or credit union.

Such expensive branding efforts might work for deep-pocket marketers like McDonald's, Toyota, Proctor & Gamble, Wells Fargo, Citibank, Bank of America, Chase, and Microsoft.

But they are an unaffordable luxury for most banks and credit unions.

When you are operating with a limited marketing budget, every marketing dollar should be spent on marketing programs where offers are made, customers and prospects are given several options for responding, responses are tracked carefully, and response reports are delivered, reviewed, and acted on consistently.

You simply must know whether or not every marketing dollar spent is generating new customers, selling additional products and services to existing customers, growing market share, and delivering the desired ROI.

This is what direct response marketing is all about.

The most efficient way to achieve your desired marketing results is to limit the number of marketing vendors you use – preferably one, two at the most. And think long and hard about the need for a general media agency.

Every time I think about all the money companies spend on general media, John Wanamaker's famous comment comes to mind: “I know that half of my advertising is wasted, but I don’t know which half. I spent $2 million for advertising, and I don’t know if that is half enough or twice too much.”

Again, we are talking about sacrifice here – sacrificing general media for the more accountable direct response marketing. Remember, sacrifice is the essence of corporate strategy.

THE DILEMMA OF MULTIPLE PRODUCT, BRAND, AND CHANNEL MANAGERS

One major advantage smaller banks and credit unions have over the much larger banks is the absence of a large marketing department staffed by a variety of brand, product, and channel marketing managers.

A small marketing department avoids the ongoing conflict over allocating the marketing budget among a number of marketing managers, each with his or her own performance goals and agendas.

With multiple marketing managers there are always issues of product priorities, professional status issues, staff size considerations, and budget allocation conflicts.

Each product or marketing manager believes his or her product is the most important to the bank and its customers and therefore feels he or she should command a commensurate portion of the budget.

Each product, brand, or marketing manager is driven by self-interest. Each is hired and paid a salary and expected to establish and meet some goals. In the pursuit of these goals each manager hires one or more people to help do the work. Managing a staff elevates their status as a people manager. Along the way, each manager aggressively lobbies for his or her share of the marketing budget.

This annual ritual of dividing the often static – and sometimes shrinking – marketing budget pie generally results in an inefficient allocation of marketing dollars. 

Having worked for years at two major banks with huge marketing departments and multi-million dollar marketing budgets, your newsletter editor can attest to these ongoing conflicts.

What is required in these instances is a classic tradeoff analysis. Such an analysis helps determine the effect of decreasing or eliminating one or more activities in order to simultaneously improve one or more other activities.

For example, a $500,000 marketing budget is spread equally among the following marketing initiatives:

1. Checking acquisition
2. Savings and CD acquisition
3. Consumer loan products acquisition
4. Account retention
5. Cross-sell

With $100,000 allocated to each of these five initiatives for the year, will the bank's revenue and market share be at a level equal to, or better than, what could be achieved if the entire $500,000 was spent on growing the customer base via a dedicated free checking acquisition campaign? Or a dedicated high rate CD campaign or pre-approved auto loan program?

Looked at another way, is it worth giving up some revenue and market share each year in order to spread scarce marketing dollars among a number of different managers, products and services, initiatives, and campaigns to make everyone happy?

The latter approach to budgeting is like throwing a plate of spaghetti against the wall and waiting to see what, if anything, sticks.

A case can be made that smaller banks and credit unions would be better off allocating almost their entire marketing budget to their best performing product and marketing it exclusively through the most effective channels during the year. After a couple of years of results, senior management can then begin experimenting with a tradeoff analysis.

The goal here is to determine the impact of taking money from the primary product and allocating it to other marketing products and initiatives during the year and measuring the impact on market share and revenue.

As the old saying goes, "Too many cooks spoil the broth." In the case of multiple product or channel managers, when there are too many people trying to accomplish something with a limited budget, they generally produce less than optimal results.

SUPPORTING MULTIPLE MARKETING FUNCTIONS

Within any bank or credit union marketing department there's always an ongoing debate over collectively funding the following marketing functions:

• New customer acquisition
• Customer retention (also known as attrition management)
• Cross-selling to increase both cross-sell ratios and share of wallet
• New product development

A case can always be made that it is necessary to allocate scarce marketing resources across all four, or more, functions.

But is this the most cost-effective approach to marketing? Will it yield the best overall results from a market share, revenue, and ROI perspective?

It's highly unlikely unless you have one of the mega-bank's billion dollar marketing budgets.

But for most banks and credit unions, the annual marketing budget is insufficient to adequately support more than one of these important functions.

Again, as a marketer, you are faced with the necessity of sacrifice.

Achieving a laser-like marketing focus dictates you sacrifice all but the most important of these functions – at least from a marketing budget perspective.

With few exceptions, the most obvious choice for your focus should be new customer acquisition. After all, with attrition running, on average, about 20% annually, you must generate a significant number of new customers each year just to stay even.

Growing your customer base and increasing market share requires outpacing attrition year after year. And the larger your customer base, the harder you have to run to stay in place.

Focusing almost exclusively on new customer acquisition doesn't mean jettisoning the other functions. It simply means they receive very little, if any, marketing dollars for promotional campaigns. Customer retention and cross-selling activities are really branch employee activities falling under direct control of the branch managers with assistance from the marketing department.

The toughest marketing task on an ongoing basis is generating new customers. As a result, it should be the primary focus of your annual marketing budget.

Whether or not your financial institution thrives or fails over time depends more on a steady source of new customers than on the number of relationships each customer has with your bank or credit union.

Besides, once you bring a new customer on board, whether or not he or she brings you additional relationships, and recommends you to others, depends more on the service received in the branch, on the phone, or via email on your website, than on some aggressive cross-sell program.

Remember, people like to do business with people they like. It's one of Professor Robert Cialdini's weapons of persuasion from his book, Influence: The Psychology of Persuasion.

In the long run, it's your bank's or credit union's customer contact employees who determine the lifetime value of your customers – not on ongoing plethora of marketing initiatives.

AVOIDING MESSAGE CLUTTER

According to Professor Barry Schwartz, author of the book, The Paradox of Choice: Why More Is Less, "The average American sees three thousand ads a day."  

What Schwartz is talking about is ad or message clutter.

The best approach to break through the message clutter created by your competitors is to:

• Select a lesser-used but a proven channel like direct mail.

• Select a channel that provides an extended shelf-life for your message. For example, while radio messages are quickly forgotten, a direct mail piece can be set aside for reading later.

• Provide a consistent message over a long period of time.

• Ensure as much frequency as possible within the channel or channels chosen.

Don't follow the crowd – your message will get lost in the clutter.

When making channel and product choices, avoid the "diversification" approach consistently touted by the investment industry. "Diversification" really means we don't really know which are the best investments over time so you should put a little of your savings into several different stocks, bonds, and mutual funds and hopefully, over time your winners will outperform your losers.

While this might work in investing as you can spread a small amount of money over lots of choices, it won't be effective for choosing marketing channels and an assortment of product and service messages. A small amount of money spread over multiple channels and different product messages is ineffective. It won't allow you to break through the clutter.

In marketing, especially with limited budgets, you must do your research and then stake a claim and stick with it.

STAYING FOCUSED

It's important to be disciplined when making your marketing decisions. You must have the strength to say "no" to many of the requests you get from vendors promoting new ideas while promising exciting results. Agreeing to a small test allows these folks to get their foot in the door, which often becomes a giant distraction.

Remember, market disruption happens. It might be a technological breakthrough, a shift in consumer demand, or the rise or fall of an important market. Or it might be as simple as a change in your marketing mindset.

Any of these disruptions can rewrite the future of your financial institution.

It's time to change the way you run your bank's marketing department and present your marketing messages to your customers and prospects.

Consider testing a laser-like focus approach.

It worked for World Savings, it continues working for Motel 6, and it can work for your bank or credit union.