Competition for Wealth Management Customers Increasing

At a time when retail banks are finding it difficult to achieve pre-recession levels of growth and profitability, the competition for wealth management business has never been more intense. But while increased marketing and significant monetary incentives are being used to lure customers, recent research indicates that organizational barriers remain that could hamper growth. 

A just published Retirement Plans Trend Report conducted by the direct and digital monitoring firm Competiscan found that retirement rollover direct mail, electronic media and digital communication volumes increased during the second half of 2012 as did the value of offers used to entice customers. While many of these offers came from investment firms, more marketing was done by traditional banking organizations than in the past. 

In 2012, Bank of America was one of the most aggressive wealth management marketers, cross-selling the services of their brokerage unit, Merrill Lynch to current higher value bank customers and prospects.

Bank of America/Merrill Lynch Cross-Sell Mailing (December 2012)

"Over the past couple years, we have seen more banks use targeted direct mail, email and digital communications to encourage 401(K) and other retirement rollovers from both customers and prospects", stated Richard Goldman, CEO and founder of Competiscan. "We have also seen the amount of incentive increase, indicating a greater focus on the affluent customer and the $200K+ rollover relationship."

Offers over the previous six months have ranged from $100 to as high as $600 for people who transfer higher amounts from existing plans. While some institutions have a sliding scale based on the amount transferred, others have a set offer with a minimum rollover balance requirement.

ING 401(K) Rollover Direct Mail (December 2012)

Direct mail isn't the only direct channel used to promote wealth management services, however. Institutions have used email and digital channels much more in the past 12 months according to the study from Competiscan. As can be expected, the majority of email communication is to existing customers, and includes a jump page link to more detailed information on the organization's website. Below is an example of email used by Capital One.

Capital One Email (November 2012)

Interestingly, in conjunction with more extensive marketing initiatives has come more extensive disclosures related to the products and offers. This is likely the result of the greater involvement of compliance that we are seeing in the development of all marketing communication over the past 18-24 months.

"Although the bonus rewards via direct mail and email continue to rise, we are observing an ever-growing amount of disclosures and caveats for reward redemption", stated Goldman from Competitscan. "The fine print seems to be growing proportionately with the proposed offers."

As with almost all financial services offerings, digital marketing is also increasing in use. Not only are banner ads being used within online banking sites, but banners are also being targeted to shoppers across the Internet. Below are examples of online banners used by Charles Schwab and Scottrade to generate leads. Both of these banners were used extensively on sites frequented by investors and used in conjunction with online search results.

Charles Schwab Online Banner Ad

Scottrade Online Banner Ad

Opportunity For Significant Growth

The increased marketing and incentives make sense for many banks given the search for additional revenues and fees. According to recent research from Novantas coordinated with the Bank Insurance and Securities Association (BISA), historical revenue contribution from wealth management has been modest compared to other lines of business, providing only 6 to 9 percent of revenues over the past several years. 

The research entitled, Growing the Wealth Business in Retail Banking, included interviews with senior retail and wealth management executives from major banking firms across the country. Interestingly, despite increased marketing, the percentage contribution to revenues has actually decreased over the past couple years compared to the past as shown below.

Given the changing demographics of the retirement marketplace, the opportunity for growth is evident. According to Novantas, with existing relationships with baby boomers who are retiring, banks should be able to increase the revenue contribution from wealth management services to as high as 15 percent to 20 percent.

"As baby boomers prepare to retire and many households begin to search for longer term credible investment solutions, retail banks should increasingly view the wealth business as a strong alternative source of revenue," said Wayne Cutler, partner and head of the Wealth Management Practice at Novantas and author of the study.

To accomplish this, however, banks will need to substantially improve their wealth service cross-sell effectiveness which currently is only 3 to 5 percent at most large banks who took part in the research. The good news is that some participants in the study have already achieved a cross-sell penetration of between 10 to 15 percent of their retail base.

While marketing of wealth and retirement services has increased, it is not a top priority for all financial institutions based on the recently released 2013 State of Bank and Credit Union Marketing conducted by The Financial Brand. In fact, when more than 300 financial organizations were asked about the priority of marketing different products and services, retirement services was ranked #15 as shown below.

Marketing May Not Be Enough

Despite increased marketing that may get the consumer in the branch or visiting a jump page, the lack of senior management commitment to integrating the retail and wealth management businesses could be an impediment to optimal growth according to the Novantas study. In addition to a lack of top down commitment, challenges could include a lack of clearly defined strategy, insufficient product differentiation and the need for internal integration of the branch, call center and technological infrastructure.

The Novantas study found that several service models are being deployed by the largest institutions with varying results. While many firms believed a 'hub-and-spoke' approach to deploying wealth advisors was preferred, the success of this approach was contingent on strong relationships between the advisors and branch personnel, education of the front-facing staff and a strong referral discipline.

The good news is that many of the leading financial institutions have made wealth management and the affluent customer a top priority. Instead of parallel but disparate silos within the organization, many banks are trying to mesh the retail and wealth organizations to achieve an improved partnership. As this partnership improves, new products will be developed and a consistent sales model can be implemented across the organization.

As the sales model improves, the effectiveness of the direct channel communication will also improve since many leads and opportunities are currently lost due to organizational issues.

Additional Resources

Competiscan Q2 2012 Retirement Plans Trend Report - Available upon request by emailing richard@competiscan.com

The Mass Affluent: An Elusive Bank Target - Bank Marketing Strategy (November 2012)

Growing the Wealth Business In Retail Banking - Novantas (February, 2013)

2013 State of Bank and Credit Union Marketing - The Financial Brand (February 2013)

Improving Bank Onboarding, Cross-Selling and Retention With Personalized Video

At a time when self-service banking models are replacing one-to-one interaction, personalized videos can provide a highly engaging and relevant communication option that can improve engagement, increase sales and reduce churn. 

Combining real-time data with highly customized content, marketers can turn big data insights into differentiated 'wow' experiences.

Online video is coming into its own, no longer being just an add-on component to institution's Web site. Partially due to the explosive growth of tablets, web videos have evolved beyond being used just for education or brand building to become a viable direct marketing messaging and selling tool, deserving of dedicated resources.

Online Content Booming

According to recently released data from comScore, 180 million U.S. Internet users watched almost 36.2 billion online videos in January of 2013. While the majority of these videos were for entertainment purposes, nearly 25 percent were promotional content, helping companies communicate with new and existing customers. In fact, video ads were the fastest growing category of online advertising in 2012, with U.S. spending increasing 46 percent to $2.9 billion.

More and more sophisticated viewers don't want to watch a repurposed 30-second TV spot on their computer, tablet or phone. They want online content that is personalized, compelling and interactive. "People are sitting viewing content online wanting to push a button -- give them a reason to push a button," said Jay Miletsky, CEO of online video network MyPod Studios in an interview with CMO.com. If done right, online video can be both a strong branding opportunity and an effective engagement tool.

A survey by Digitas found that 51 percent of online video viewers in the sought after 18 to 44 year old demographic would look up a new brand or product they saw on an online video, and 58 percent of 18 to 34 year olds who follow brands on social media would watch a video that a brand posted online. In addition, the just released Global Video Index : 2012 Year in Review conducted by video analytics provider Ooyala, found that while viewership differs between devices (desktop, tablet, mobile), the overall amount of viewing doubled in 2012.

Personalized Content Drives Engagement

At a time when video content viewership is rapidly increasing, the State of Online Video Report, published by SundaySky, found that personalization fosters significantly higher levels of viewer engagement. Specifically, short-form videos designed for communication to a mass audience (one-to-many product videos) are viewed with a 50 percent completion rate, while viewers will spend 2.5X more time watching a slightly longer video if the content is personally relevant to them.

The impact of videos has already been seen with email marketing, where it can increase the likelihood of having the email opened. While typical email opening rates can range from 11-22%, the addition of video can improve open rates to as high as 30%. According to SundaySky, open rates can increase to 40-60% if the content is personally relevant. Furthermore, the click-to-play rate for personalized video ranges from 80-99% according to the study. Additional KPIs of personalized videos include:

• 4-8% increase in products per customer
• 5-10% increase in revenue per customer
• 20% reduction in churn rate
• 30-50% lift in value-added service cross-sell rate
• 5-20% increase in offer take rate
• 80-94% positive experience rating
• 5-10% lift in Net Promoter Score (NPS)

These results have not gone unnoticed. Forrester Research indicated in late 2012 that personalized videos are an important emerging technology that can combine big data and digital video content for deeper levels of customer engagement. Early adopters of personalized video include cable operators and telecommunications providers who are using this technology to deliver personalized video billings.

Humana also announced in late 2012 that they would be using personalized videos similar the example below to deliver a customized explanation of benefits to customers.

According to Kelly Ford, vice president of marketing for SundaySky, there are also a handful of 'first mover' financial institutions that are building personalized video solutions for their customers. "Several top U.S. banks, particularly in the credit card and lending businesses, are developing ways to increase engagement and educate customers using personalized videos," states Ford. "We expect many of these applications to go public in the next few months."

How Does Personalized Video Work?

Today, more than 80 percent of online video ads are simply repurposed television campaigns that are either available on demand or included within other forms of communication (email, jump pages, etc.). Going forward, however, it is possible to economically leverage behavioral, transactional and relationship insights to 'build' 1:1 video experiences that are personalized, real-time, measurable and optimized through ongoing analytics.

By addressing the viewer by name, using 'just-in-time' contextual and behavioral insight, an engagement communication, cross-sell message or important retention offer can be delivered to a desktop or mobile device even reflecting the device and time of day the message is consumed.

As shown above and in an available video, in the case of SundaySky, personalized and non-personalized data are integrated and served to a video template system called Videolets™. These Videolets leverage the data, logic, creative, channel and analytics to optimize the delivery of the message to the customer.

Individual scenes and personalization assets are selected for each customer in real time and these are populated along with any animation, custom voiceovers and interactive call to action overlays. This process allows for customization on the personal level that is scalable to the millions.

The resulting videos are also responsive to various delivery methods including websites, email, social networks, mobile devices and even SMS to take advantage of customer or institution preferences. And since the video is created at the moment the viewer clicks 'play', it ensures that the viewer is receiving the most recent and relevant information pertaining to their own relationship with the institution. The platform even gathers and analyzes viewer behavior in real time allowing for immediate analytics and performance optimization.

Financial Institution Customer Lifecycle Applications

At a time when the traditional economics of banking have been forever altered, it is important for financial institutions to embrace the 'New Normal' and look for opportunities that will leverage data and digital technology to improve results at every stage of the customer lifecycle. This will require new ways to engage with customers who are being encouraged to use online and mobile tools as opposed to visiting branches. 

Personalized online video provides a solution that can boost online search engine results, increase engagement, improve cross-selling and reduce churn thereby improving customer base growth, share of wallet and revenues. While the technology is still in its infancy, the potential should be evaluated along with other digital marketing strategies.

New Customer Acquisition

For financial institutions that are already leveraging Search Engine Optimization (SEO) strategies for generating prospect inquiries and new customers, video is the fastest growing format. This is because Google favors pages and sites that include videos. In a recent report, Forrester found that video results on Google have a 50X better chance of appearing first on results lists compared to text-based sites.

However, simply adding videos to a website or email is only the first step. Google and YouTube are always changing their search algorithms for video (and everything else), seeking the best way to present information that searchers find relevent. In October, YouTube announced that they would rank videos based on 'watch time,' giving prominence to videos that are watched for a longer stretch of time than just a few seconds.

As Google, YouTube and others continue to tinker with their search algorithms, it will be important to continually test your marketing efforts to ensure your placement is where you want it to be as changes happen.

It was also found that click through rates were significantly higher for video links than for text links. One reason was because a video thumbnail appears in the search results, providing greater real estate as well as attracting eyes to the results. Bottom line, including video helps brands to get found online. Digital video technology allows for extensive customization of the video based on product search criteria, including features and benefits.

Digital Retargeting

As discussed in my 2012 blog post on retargeting, banks can no longer afford to have website visitors or online shoppers abandon their search or account opening process without converting the visit to a sale. With more than 95% of website visitors and 50% of prospects who begin an online account opening not resulting in new business, reconnecting and reengaging with these site abandoners is a very worthwhile investment. According to eMarketer, retargeting can increase website visits by 726 percent, with retargeted consumers being 70 percent more likely to complete a sale than other visitors.

Videos personalized based on the shoppers initial search and behavior while on the bank's website takes retargeting a step beyond simply sending a broad product message. Since the retargeting efforts are personally relevant to the prospect's search, there is an improvement in site visits (up to 20% more), conversion (up to 10% more) and spend levels (up to 30% more). 

New Customer Onboarding

No matter what product or service a customer buys from your institution, the likelihood of the customer actively using the product and making your product their primary relationship is determined in the first 90-120 days of the relationship. As referenced many times within the Bank Marketing Strategy blog, as much as 40% of the new accounts opened can be lost in the first year, with many of the relationships established being inactive and unprofitable. 

While there are still many banks that are not doing the 'basics' of onboarding a new customer such as sending a 'thank you' email or direct mail letter that discusses how to use the new service and expand their relationship with the bank, a personalized video would be an excellent way to educate the customer about their specific account. This custom video could outline additional elements of the relationship they may be receiving (cards, PIN numbers, checks, etc.), explain how online banking, mobile banking and bill pay work, provide pertinent contact information and give insight into how to maximize the value of the relationship. 

An example of the way this could be done for insurance is provided below. As can be seen, the ability to customize both the audio and video content is extensive, allowing for an unexpected and pleasant new customer 'first touch'.

Some financial organizations are even pursuing using personalized videos to deliver statements as shown in the example below. Again, the level of real time personalization is possible by connecting customer behavioral and transactional insights with digital video content.

Cross-Selling

Ever since I entered the financial services industry (much) more than two decades ago, cross-selling has been the focal point of a great deal of employee training and marketing investment. It has also been the focus of several Bank Marketing Strategy blog posts due to the potential impact on revenues. With the banking standard of excellence usually considered to be Wells Fargo, with a cross-sell rate of 5.9 products, and with an average household having roughly 16 financial relationships, the objective of every financial institution is to have the greatest 'share of wallet' possible.

While many organizations already have lifestage and event triggers and programmed cross-sell initiatives built into their marketing communication strategies, the ability to leverage highly personalized videos to support current direct mail, email and online communication can only improve results. With the majority of the foundation already set through the development of targeting models, the ability to engage customers in a contextualized manner is a logical next step.

Retention

As the industry saying goes, "It costs 5 times more to acquire a new customer than to retain a current customer." Unfortunately, we sometimes forget those households that provide the highest value until they have either indicated a problem or have already left the bank. As a result, many financial institutions have built rewards and even recapture programs to reduce churn and extend customer lifetime value.

Different forms of loyalty programs include points-based programs as well as merchant-funded rewards. While both usually include the offering of merchandise or discounts, the value of these programs is based on the redemption rate as opposed to the earning rate of rewards. Until the reward is redeemed, the value to the customer is minimal.

Engaging customer in a contextualized manner allows a bank to both show that they understand who the customer is (based on their profile with the bank) as well as what the customer's interests may be (based on purchases). The result is a loyalty communication process that integrates the value of their reward available with an offer based on the customer persona.

As can be seen, the potential use of personalized videos is limited only by a marketer's imagination. While the majority of development in the financial services industry at this time is around onboarding, video statements as well as share of wallet build and retention, there are even some institutions looking into the possibility of using this technology for dispute reviews and dispute status updates.

"There is really no limit to the possibilities of personal videos to support engagement along the entire customer lifecycle, especially with industries like banking where the nurturing of a relationship is ongoing", states SundaySky's Kelly Ford. "The ability to have video engagement on Day 1, Day 7, Day 60 and thereafter that is entirely different, leveraging the latest insight into the customer's behavior, relationship growth and preferred channel of receiving the message is exciting."

Potential Roadblocks

Not surprisingly, the primary challenge for most financial institutions around evaluating and potentially implementing this or any digital marketing solution is centered on prioritization of initiatives. With so many pressures on most bank marketing departments, finding time to pursue a new technology or innovative process is difficult.

While compliance, privacy and security are always concerns for financial organizations, since the videos are encrypted, do not include account numbers and are served in real time, many of these challenges have been addressed.

When SundaySky was asked about primary competition to their service, Kelly Ford said, "At this time, for most financial organizations we have talked to, the alternative to personalized videos is 'do nothing', which is because of competing priorities".

Given the need for revenues and importance of aggressively attracting and retaining customers, it is likely that 'do nothing' will not be an alternative for long.

Additional Resources

SmartVideo Advertising: The Intersection of Brand & Performance Marketing : SundaySky (2012)

2012 State of Online Video Report : SundaySky (December 2012)

How Does SmartVideo Work : SundaySky Video (November 2012)

2012 Global Video Index : Ooyala (February 2013)

Emerging Technologies for CMOs to Watch : Forrester Research (August 2012)

The Future of SmartVideo Advertising : SundaySky (August 2012)

FreeWheel Video Monetization Report - Freewheel (February 2013)

Maximize Bank Marketing Results With CRM Retargeting

From the beginning of a relationship, banks and credit unions capture and store customer data within a CRM database. This data is often enhanced with transaction history, purchase behavior and contact history and used as the foundation for building models to better target communication through direct mail and email marketing.

But what if you could leverage your offline CRM database for digital marketing campaigns as well, transforming your data into anonymized online segments through a process called data onboarding? These segments would then receive messages as a follow-up to your direct mail and email campaigns, improving all direct marketing results.

In the whitepaper, "Data Onboarding: The Key to a Successful Marketing Kingdom," Epsilon and LiveRamp discuss the benefits of integrating offline CRM data with online digital marketing. "Using CRM data to market effectively across channels is essential for marketers who want to reach their target audience multiple times with engaging, relevant and consistent messaging," says Auren Hoffman, CEO of LiveRamp.

What is CRM Retargeting?

Unlike regular retargeting (covered in Bank Marketing Strategy last October), CRM retargeting uses your internal offline customer and/or prospect database to reach individuals and households online, not just after they visit your website. By 'onboarding' your offline data, you can reach your customer and/or prospect segments with highly targeted display ads appropriate to their purchase history and interests.

CRM retargeting provider ReTargeter founder and CEO Arjun Dev Arora says, “With CRM Retargeting, marketers can seamlessly integrate display ads with their existing email and direct mail initiatives to create effective cross-channel campaigns with ease.”

Simply put, it's the marriage of the precision of using direct mail or email combined with the rich content and context of display - bridging the worlds of offline and online marketing for more successful customer communication. Since not every customer visits your website regularly (if at all), CRM retargeting is a great way to re-engage these customers and welcome them to key areas of your site.

How Does CRM Retargeting Work?

CRM Retargeting (also referred to as Data Onboarding) matches your internal CRM data with online registration information from hundreds of websites to allow marketers to reach a customer (or prospect) as they search the web as a follow-up to an offline campaign as shown below.

While there are several approaches to this matching process, here is how LiveRamp (Direct and Digital Marketing Agency New Control's primary CRM Retargeting vendor) does it:

• We provide LiveRamp with a client's encoded CRM file safely through a secure upload portal
• LiveRamp matches our client's offline customer and/or prospect data keyed off either an email or postal address to an anonymous online audience via cookies with extensive coverage and high accuracy
• LiveRamp places the matched online audience on our client's existing DSP or DMP and the campaign runs in conjunction with a direct mail and/or email campaign
• Our client's customers see a relevant and timely message supporting other media communications
• There is no buying or selling of data, cookies do not contain any PII, and no audience information is passed to a third party (thereby adhering to privacy regulations)

Source: LiveRamp (2013)

It is important to note that onboarding data is anonymized -- aggregated based on customer segments (such as customers without a specific product) who will receive a specific message (special offer to open an account). And while each physical address can't be matched to a digital online counterpart, the ability to have customers or prospects who have been marketed through email or direct mail see your display ads as they search the web and brought back to your sales site is a powerful enhancement to your marketing efforts.

What Are The Benefits of CRM Retargeting?

How powerful could CRM retargeting be? According to a recent study by Oracle, 78% of people will research a product over at least two channels before committing to a purchase. Serving a retargeted online ad to those that have receive direct mail or email will remind them of your brand and the product/service being marketed. Retargeting also can reinforce a desired action from the customer without leading to direct mail or email fatigue.

By adding an additional channel to your targeted direct marketing program, you are more likely to reach your targeted audience with their preferred channel. And, each time your audience sees your retargeted ads, your brand gains more traction and recognition. The results is higher click-through rates and increased conversions.

Should Banks and Credit Unions Do CRM Retargeting?

Banks and credit unions have the most thorough and up-to-date customer databases of any industry. In addition, many financial institutions have prospect databases for their primary trade areas that have almost as much valuable data which is the perfect foundation for CRM retargeting.

With most marketing budgets of financial institutions being kept flat or even reduced over time, the importance of using relatively inexpensive marketing tools that can improve ROMI has never been greater. In addition, with every basis point of response rate and account opening rate for direct mail and email programs being scrutinized, the value of a tool that can improve the returns on both channels is well times.

Best use cases for financial institutions include:

• Leverage CRM retargeting as an enhancement to a direct mail and/or email cross-sell campaign, generating a higher response rate for every channel (see below)
• Use CRM retargeting to quickly respond to trigger marketing opportunities. Due to the speed and channel benefits of CRM retargeting, this is an excellent way to connect with a customer that has a lifestage, behavioral and/or purchase level opportunity
• Test attribution models using direct mail, email and online display advertising
• Leverage CRM retargeting to enhance the power of a prospect direct mail campaign, matching postal addresses to online databases

CRM Retargeting FInancial Case Study

New Control tested the value of CRM retargeting with a client wanting to generate new checking account customers from both current non-checking account customers and pure prospects in current branch trade areas. Rather than simply using saturation mail or traditional targeted direct mail for this effort, we assisted the client by developing three different communication strategies for the proposed target audiences:

• Direct mail to prospects (50% of targeted audience also included CRM retargeting)
• Direct mail to current non-checking customers where email address was not available (50% of targeted audience also included CRM retargeting)
• Direct mail and email to current non-checking customers where email was available (50% of this audience received an email follow-up with the other 50% receiving only direct mail. Both of these sub-audiences had a 50/50 slip of CRM retargeting)

The results of this test showed that the most powerful combination from a ROMI perspective was the audience that received direct mail, email and a CRM retargeted display ad. The segment with the lowest ROMI was the prospect segment that received just direct mail, while the volume of accounts generated from the customer group receiving direct mail was the highest of all combinations. The customer segment with direct mail and email was the second most powerful ROMI.

Overall, CRM retargeting improved the ROMI in every case where used due to the lower cost of engagement and the power of the other channels. CRM retargeting used alone was not effective with any segment in our test.

Selecting a CRM Retargeting Partner

When selecting a CRM onboarding partner, the following questions should be asked:

• Scale: Look for a partner that has the largest scale of the existing match networks. The best partners should be able to match 30% to 40% of your offline database with online cookies.
• Accuracy: You should be looking for the strongest 1:1 matching between the offline data and the online network. Inference or model matching may provide a higher match rate, but the accuracy of the match will be less. In financial services, accuracy of the match avoids issues down the road.
• Security, Compliance and Privacy: Make sure the partner selected has demonstrated experience in handling sensitive CRM data and that they adhere to strict data privacy standards.
• Integration: Your partner should be integrated into all of the Demand Side Platforms (DSPs), Data Management Platforms (DMPs) and online measurement tools.
• Speed: Top CRM retargeting partners have engineered systems that allow for matching and marketing within hours. This is important when you are trying to do trigger marketing programs where minutes count.

“CRM Retargeting represents a leap forward in terms of serving the right users the right ads at the right time,” said ReTargeter Director of Marketing Hafez Adel. “It offers the unparalleled ability to leverage a business’s existing CRM to create a compelling new engagement channel that works for both brand advertisers and direct response marketers alike.”

Additional Resources

Data Onboarding: The Key to a Successful Marketing Kingdom: LiveRamp and Epsilon (March 2013)

Cross-Channel Commerce: A Consumer Research Study: Oracle White Paper (March 2011)

LiveRamp Blog

Digital Marketing Capabilities Lacking At Many Banks

With continued rapid growth of both online and mobile banking, banks and credit unions need to come up with better ways of marketing through digital channels. 

The technology is readily available, and best practices can be found at companies like Google, Amazon and others, but many banks are still at the infancy stage in terms of digital marketing capabilities.

To succeed in the future, financial institutions need to have a single view of the customer across channels, be equipped with advanced analytics for predicting behavior, be able to deliver offers to customers in real time and effectively integrate social media into the marketing mix.

A just released study by Efma and Wipro Technologies entitled, 'Global Retail Banking Digital Marketing Report', found that only a few banks are prepared for the digital marketing revolution, with the potential for improvement significant at most organizations. This first ever study also revealed that social media is not yet a part of mainstream marketing and is not a key customer interaction channel for most banks.

According to Rajan Kohli, vice president and head of banking and financial services at Wipro, "Digital technologies, social media and the explosion of data are redefining customer engagement models. The CMOs that we spoke with made it clear that the role of the CMO is changing as banks adapt to the development of new channels and capabilities."

For most banks surveyed, digital delivery channels were seen as complimentary to branches, being more important for processing transactions than for customer service and advice. With this transition across channels, it is believed interactions will be more frequent, insight collection will be more prolific and communication opportunities will be more direct.

As part of the Efma/Wipro study, a Digital Marketing Capability Index was created to benchmark capabilities vis-a-vis the best in class. Only 13 percent of banks surveyed demonstrated the highest level of maturity in digital marketing. The survey measured eight different capabilities including:

• Ability to get real time single customer view across channels
• Segmentation using customer lifetime value
• Ability to microsegment
• Availability of predictive analysis
• Real time, event driven marketing
• Personalization of offers on a 1:1 basis
• Implementation of test and learn approach
• Measurement of return on marketing investment (ROMI)

While banks in developed countries scored higher in most categories, key takeaways of the research illustrated the following potential for improvement:

• One of the weakest areas for banks is the ability to get a real time, single customer view of products held and transactions occurring across all channels.
• There was a surprising lack of test and learn processes and measurement of return on marketing investment in digital channels.
• While most banks are proficient at the use of advanced analytics (such as predictive analysis), most don't have the capability to integrate this insight in real time for marketing on a multichannel basis.
• While involvement in social media is standard practice at many banks, these channels are only used for outbound marketing and monitoring complaints. Using social media for transactions and digital interactions is lagging.
• Effectiveness of 'big data' projects (in the few places where implemented) has been modest, yet several of those surveyed believe big data will play a significant role in the future.

Interestingly, many smaller banks scored relatively well on digital marketing capabilities, possibly signaling an advantage of relatively new, non-legacy IT systems. The two direct only (online) banks in the survey both scored high in digital marketing capabilities.

Marketing Spend

The marketing mix at banks continues to change in response to the growth in digital channel usage. While the research indicated that traditional advertising comprises around 50% of a bank's marketing budget, this spend was less than 50% for banks in developed countries and as low as 20-25% of the budget at some of the more progressive banks surveyed.

When asked to project what the marketing mix will be in 5 years, traditional advertising and sponsorships continued to slide, with non-traditional (digital) and direct marketing increasing due to the potential for better targeting and measurement.

The Digital Marketing Capability Index

Using data collected from the survey, it was clear that big differences existed between the leaders and laggards in digital marketing. While significant work would be needed for many banks to reach 'best in class' status, the index provides a valuable index to measure opportunities for improvement.

Review of the actual study will provide additional insight into the measurement process and weightings, but a standard 'bell curve' was the 'digital maturity' output of measuring over 100 banks from 38 different counties from November 2012 and April 2013. Sixty-two percent of the responding banks were smaller banks, while 38% were medium/large institutions. Fifty-eight percent were from 'developing' countries with 42% being from higher income, developed countries.

As can be seen below, on average, banks feel most proficient at developing predictive analysis and segmentation. Deeper discussions with the banks in the study, however, indicated that very few banks are able to do analysis in real time or link the analysis back to individual customer offers on a channel level.

In addition, most banks fell short on the ability to leverage real-time, event driven marketing or 1:1 personalization which is becoming expected by customers in the digital age.

Real Time Single Customer View

Not surprisingly, most banks have a real time, or at the least a periodic, view of retail customer product holding, product use and transactions. What is less likely is for a bank to have a view of all accounts within a household or across business and personal accounts. All of these capabilities were projected to improve significantly over the next five years according to the study.

Segmentation

Segmentation for better targeting and customer experience is not new at banks or credit unions. In fact, 90% of the banks covered in the Efma/Wipro research are increasing their segmentation efforts to take into more detailed demographic categorization and even channel use. This is important since traditional demographic segmentation (age & income) has recently been found to have limited use. (see Bank Marketing Strategy coverage on the weakness of demographic segmentation here)

The missing element in many cases is lifetime value segmentation for use in dynamic, real-time marketing. In addition, online data such as web clicks and social media is still used rarely for segmentation purposes by banks while used extensively by other industries like retailing and travel.

Business Intelligence

One of the more significant challenges for financial marketers today is the collection and analysis of unstructured data from within and outside the bank. As mentioned earlier, while predictive analysis was still found to be done in the majority of institutions, the use of this analysis to drive real-time decisioning was still rather rare. The same could be said for micro segmentation as shown below.

Real Time and 1:1 Personalization

The surprising lack of use of lifestage behavioral triggers and and 1:1 personalization of offers by financial institutions have both been covered recently by the Bank Marketing Strategy blog. The findings of the Efma and Wipro digital marketing capabilities study found the same deficit. 

According to the study (and realizing that the numbers are marginally better in developing countries), only 36% of the banks can do any real time event marketing, and only 47% make 1:1 personalized offers. 

Obviously, with more banking and credit union customers using online and mobile channels for the majority of their everyday banking, the inability to be agile with offers puts many banks at a disadvantage. 

Test and Learn

The concept of 'test and learn' has been used in banking since the early 1980s, with large credit card companies being the earliest and most well known proponents of this strategy. More recently, other large banks, such as PNC, Chase, U.S Bank, Bank of America and others have integrated this technique as a standard operating procedure within their direct marketing and knowledge management teams.

Surprisingly, the global banking study found that 70% of banks reviewed use test and learn in less than 25% of their digital marketing campaigns, with only 10% of the banks using test and learn in more than 75% of their campaigns. Possibly more disturbing for seasoned financial direct marketing professionals would be the finding that while test and learn was used for individual programs, the findings were not retained and retested as part of an ongoing process.

Return on Marketing Investment

Despite the importance of measuring the results of marketing campaigns to justify future investment and determine which programs should be continued or curtailed, only 25% of the banks surveyed measured ROMI in more than 75% of their digital marketing campaigns. It was also found that the confidence in the measurements done was not high, potentially the result of different attribution strategies.

Interestingly, several of the banks surveyed also believed that almost all digital marketing campaigns were effective and that it was not necessary to measure the impact of any one campaign result. This is obviously a faulty assumption.

Social Media in Banking

It comes as no surprise to any financial marketer that the growth of social media has realized a parallel trend to digital marketing. Facebook, Twitter, YouTube, Pinterest, LinedIn and other popular social media sites have become the focus of discussion and debate within the financial industry as to the effective use and potential value of these channels. Adding to the confusion is the fact that most social media site users skew towards the younger demographic segments (that traditionally have a lower immediate value to banks and credit unions).

Because of this doubt, and despite a great deal of 'noise' that seems to point to the contrary, the spending on social media efforts by banks is still relatively small, with less than 500,000 Euros ($637K) being spent by 80% of the banks, with a very small number of banks spending over 1M Euros ($1.3M).

1M Euro = Approx. $1.3M

Not surprisingly, Facebook continues to be the primary channel invested in by banks, followed by Twitter and YouTube. Interestingly, while user generated content was currently used least, this is an area of social media where more future investment seems to be heading.

Currently, social media is used more as a branding and broadcast communication tool and as a way to monitor customer comments and complaints. Despite some well documented successes in developing countries as well as in Australia and other countries overseas, most banks are not looking to social media as a transaction tool at this time. This may change as perceived security of these channels improves, but demand for integrated social banking does not appear to be strong in many countries.

Social Media 'Plateau' in Banking

Given the doubts surrounding the value of using social media extensively for bank marketing, the researchers involved in the Efma study believe the use of social media by banks has reached a 'plateau'. "While some banks are of course just catching up, the leading banks are still working out how to best use social channels in the future, conducting experiments, and looking for indicators from other industries," states Efma.

Other social media observations include:

• Social media is proving useful as a customer engagement tool.
• Most banks do not see social media as a strong ‘channel’ for product sales in the near future.
• Banks are considering using social media to ‘promote’ their services through advice and support, such as forums around house purchase
• Some banks are looking at how to make use social media for advocacy – using promoters to get positive messages out relating to new products or service
• Measurement of the effectiveness of spend on social media has been relatively basic, looking at high level metrics such as the number of “likes”on Facebook. (many banks are beginning to view these metrics as misleading)
• It is unlikely that most banks will try to offer transactional services through Facebook or Twitter in the near future, although some will make it possible to do small person-to-person payments to Facebook friends.

Note: A very detailed look at current social media initiatives globally is provided within the EFMA/Wipro research report available here.

Big Data in Banking

Despite a lot of noise and trade press that may give financial institutions the thought that they are 'falling behind' in the capture and use of 'big data' (no definition attempted here), the Efma/Wipro survey shows that only a few retail banks have begun to work on big data projects. Of those that have initiated big data projects, the effectiveness for increasing revenues or reducing costs is relatively modest so far.

In my travels across the country and in speaking to many marketers at some of the largest banks, it appears that most banks are using new technology to gather and analyze new 'small data' sources such as transactional data and money in / money out movements. While these would usually be considered 'structured' data uses, most banks want to maximize value of these data sources before tackling 'unstructured' data.

In other words, with digital marketing, social media marketing and big data, taking small steps may make sense before trying to 'boil an ocean'. The key is to not move too slowly . . . since the marketplace is moving at breakneck speed.

Additional Resources

'Global Retail Banking Digital Marketing Report' - Efma and Wipro (May 2013)

Digital Shopping Has Transformed The Bank Purchase Funnel

Historically, customers came into a branch to research financial products prior to purchase. Today, the majority of customers have done significant online research before entering the lobby, transforming the bank and credit union purchase funnel. 

Unfortunately, these digital shoppers get confused as they try to navigate tedious web pages or become unimpressed when they encounter unprepared branch personnel, requiring financial institutions to develop an improved multichannel sales strategy.

When respondents to the Novantas 2012 Multi-Channel Sales Survey were asked to identify their preferred channels for product research, online was cited as the top avenue by 63 percent of respondents with only 13 percent of the respondents stating that the branch was their primary research source. A majority of these same respondents, however, preferred to open an account at a branch, with only 36 percent preferring to open an account online.

The Novantas research found that preferences differed based on the account the customer was researching, with customer using the online channel more when shopping for a new checking account (69%) than for a mortgage (57%) or investment product (55%). Again, the branch channel was not the first choice for initial research.

Multichannel Purchase Funnel

But the online channel was not the only channel used by consumers shopping for bank or credit union products. In fact, Novarica research in conjunction with FindABetterBank found that consumers who were about to open a new checking account in the next 90 days expected to use several channels before deciding on a new financial institution.

The customer trend towards 'having it both ways' (digital shopping and branch-based opening) has a variety of implications, especially when the impact of mobile marketing through smartphones and tablets is taken into account. According to a recent Novantas Review feature entitled, "Winning With Online Shoppers", banks and credit unions must realize that their websites need to drive sales traffic to the branch and help complete sales online.

Gaining Visibility Online

Now more than ever, banks need to gain visibility online, since more and more consumers use search engines like Google to start their research process for a new product or new financial services provider. It is important for a bank or credit union to be visible as close to the top of searches as possible to have a chance in today's marketing warfare. As Novarica managing director, Robert Rubin put so succinctly in an online interview, "Improving online visibility in search and on third party sites is imperative. These are the online resources consumers use to shop. If they can’t find you, how will they know you exist?"

Despite all of the hype around paid digital placement, the Novantas research found that most consumers (roughly 80%) only clicked on organic search results that depend on keywords and search relevance. To consistently rank in the top five organic results, a bank or credit union must optimize their website so that: 1) the site has greater relevance to keywords used in local searches; and 2) the site reflects indexing activity of search engines. Novantas also recommends a program that establishes inbound links from related websites to stimulate traffic.

Although only 20% of online shoppers click on paid links through search engine marketing (SEM), the links still provide visual cues and reinforce brand presence. The value of SEM can only be determined through testing and ROI evaluation. As mentioned, the power of engaging third parties for referrals and mentions is one of the most powerful tools to reach online shoppers.

Improving the Internet Banking Sales Experience

Expanding the relationship of current customers who are comfortable shopping online is probably more important than many of the prospecting strategies discussed above since the cost of expanding a relationship is lower than finding a new customer. 

According to a recent study from Mapa Research entitled, "Digital Sales: Enhancing Existing Customer Relationships," personalization of the buying experience is core to successful conversion of customers. In reviewing the sales strategies from over 30 providers in 10 different countries, Mapa found that relevance is imperative in both the targeting of customers and the tailoring of offerings. 

The sales messages can occur at any point while the customer is engaged in their online banking activities. Obviously the account activity screen is often used for customized messaging. The key is to provide pertinent offers without being obtrusive or interrupting normal digital activities. While some of the personalized messaging is in a static position on the account summary page (NAB Bank 'My Offers'), other institutions were found to use pop-up windows to draw additional attention (NatWest). 

With Bank of America, Mapa found that when a customer wanted to open a new checking account they were shown additional 'go with' services within the account opening process. If the customer does not want to open an account online, they can schedule an appointment with the phone number provided.

Providing support options at key moments of the sales journey is also important according to Mapa. For instance, Natwest provides a link to an advisor if a customer looking for a new service wants to abort a sales process, while Citibank also provides assistance prompts throughout the sales journey. Many examples of integrated sales support are offered by the larger banks as part of their internet banking sales experience.

The 85 page Mapa Research report (available for free review and purchase here) also provides many visual examples of institutions that cross-sell products to existing customers upon the log out of internet banking. While some organizations provide several product promotions on the log out screen, the best limit the products promoted to those relevant to the customer.

Selling Through Mobile

The frequency of engagement via mobile is higher than with either internet banking or tablet engagement, yet the length of engagement is significantly shorter on average. This makes the sales journey using a smartphone much different than through other channels.

For several institutions reviewed as part of the Mapa study, the sales message preceded login or was integrated within the login process, with product information, news and links to the bank's website provided at the onset of the mobile experience. Where this was done, it was important to provide a 'one click' option for the customer to receive more information or begin the sales process.

As with internet banking, there are many ways banks are beginning to provide customer service and agent access through the mobile device, While less prevalent in the U.S., many organizations overseas that have integrated customer service within their sales process.

Similar to the internet banking examples, Mapa provides many visual examples of banks that include selling as part of the logout of the mobile engagement. This is to avoid any interruption in the primary reason the customer is using their mobile device (balance check, transfer funds, etc.) 

The good news is that any message on the mobile device will usually be seen multiple times during any period due to the number of times many customers use their mobile device and since many customers access their accounts using multiple devices (desktop, smartphone, tablet).

Additional coverage of mobile sales and servicing innovations can be seen on my previous post entitled, "Banks Accelerate Mobile Banking Innovation".

Tablet Banking Sales Experience

Since many tablet applications continue to be non-customized versions of a bank's internet banking experience, the integration of selling using the tablet has lagged other channels. 

Despite the slow start, there are some examples of how banks have leveraged the tactile experience and social interaction capability to provide a better sales dialogue. Tablets also provide a much better graphically oriented tools that can build engagement. Since the time spent on during a tablet engagement is significantly longer than a customer spends on a smartphone, the potential for sales success is greater with this channel. 

The tablet also is a much better media to integrate live chat and other forms of customer support that can improve sales results. While the tablet should not be considered the channel to place all product information, it does provide a very valuable stepping off point to a bank's website. Through links and redirection, the tablet can be a great asset to any bank wanting to improve their digital sales results.

Closing The Multichannel Sale

The advantage of cross-channel integration is the possibility to sell with each interaction through each channel in a consistent and relevant manner. In other words, each interaction becomes a sales opportunity. The objective is for banks to allow prospects and customers to switch between channels, at will, without breaking the sales cycle.

In conjunction with online visibility and internet and mobile/tablet marketing, it is clear that most financial institutions need to significantly simplify the customer journey from online or mobile inquiry to completed sale. According to both Mapa Research and Novantas, the majority of banks are lagging other industries in their multichannel shopping experience, potentially losing potential customers who get frustrated. There is definitely a revenue consequence to not investing in process and site simplification (e.g. fewer clicks and clearer communication).

Complexity and lack of personalization in products and/or process creates an immediate wall for consumers that are increasingly mobile, less tolerant of difficulty in completing a process seamlessly online, and more sensitive to non-customized offerings. In addition to improving the channel experience, forms must be simplified as well as links between channels.

In addition, once a shopper is engaged, the best strategy is to provide a number of channel options for fulfillment since research shows that shopping and buying can be disjointed. Integration of channels is necessary. Do we enable online account opening? How about through mobile channels? Can customers connect directly with a live agent? Can the ATM channel assist in the process? Has social media been considered as part of the digital sales strategy?

Robert Rubin provides this advice, "Look for opportunities to present add-on offers within a sales process. Also, PFM solutions from vendors like Intuit and MoneyDesktop provide opportunities to cross-sell within the online banking interface. For example, letting the customer know that your credit card has a better rate then the card they’re currently using."

Finally, banks and credit unions should consider segmentation around channel use since customers differ so much with regard to how they interact with their financial institution. According to Novarica's Rubin, "Consumer behavior is changing and branches are a very large fixed cost for financial institutions. Successful cross-selling requires channel use segmentation to allow the ability to provide customers the combination of 'right time, right offer, right channel'. Understanding how customers use channels is essential."

Need For Management Buy-In

A relevent sales experience needs to meet the content and functionality needs of the customer. Both Mapa Research and Novantas believe a shift in management mindset is required to eliminate current channel silos and to support the investment in the overall sales process regardless of where a sale begins or ends. This will require improved measurement of sales results across channels and a rethinking of products suites based on the needs of the online and mobile customer.

Note: The Mapa Research report provides some excellent examples of global banks that are succeeding in integrating channels for improved multichannel selling. In addition to ABN AMRO and ASB and others, the report provides a case study of Commonwealth Bank's personalized sales process.

Additional Resources

Winning With Online Shoppers - Novantas Review (June 2013)

Digital Sales: Enhancing Existing Customer Relationships - Mapa Research (April 2013)

Winning With The Multichannel Consumer - Novantas (March 2013)

Winning in a Multichannel World - Novarica (April 2013)

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