At its most basic level, marketing seeks to match a company’s products and services with customers who want access to those products, thereby ensuring profitability. As we all know, marketing has become crucial to businesses and industries everywhere, and the financial industry is no exception. Financial services marketing is the process of promoting products and services of companies in the financial and banking sectors. Financial institutions use various marketing strategies and techniques to create and drive awareness of financial products, capture leads, and turn them into loyal customers through ongoing marketing campaigns. However, one of the main differences between marketing for financial institutions and other industries is that the former must adhere to many requirements and regulations. To shed light on the importance of marketing in this industry and its relevance for participants, it’s noteworthy that in 2022, financial services spent an average of 10.4% of company revenue on marketing. This article describes how marketing currently functions in this industry and among its various players.
What Are They Doing?
Currently, one of the main trends is using customer-centric strategies. Financial institutions are focusing on high-quality customer experiences, as customers want personalized experiences and approximately 63% of them become annoyed by generic marketing blasts. Moreover, financial institutions emphasize good customer service, since around 86% of buyers are willing to pay more for excellent service. They are also investing and creating partnerships for better outreach and customer relationships. Approximately 80% of financial institutions are implementing new technologies to engage with customers, 73% are adding new processes and procedures for the same goal, and 51% are working with outside vendors to achieve this. Likewise, over two-thirds of financial companies are increasing their investments in marketing. Evidence of this is seen in the fact that U.S. brands overall spent more than $74 billion on network, cable, and spot advertising in 2021, well above the $57.4 billion spent in 2020.
They are doing all these things because having an agile and adaptable marketing strategy is more important than ever. The high level of standardization of financial products has made it harder for customers to differentiate between competitors. Contributing factors include digital transformation across various industries, with digital-first customers expecting enhanced, personalized digital experiences. The ever-growing presence of fintechs in the financial landscape contributes to the need to adopt technology to remain competitive. Other reasons for the necessity of an agile and adaptable marketing strategy include the industry’s regulatory barriers and customers’ lack of trust in banks and other institutions.
How Do They Do It?
Banks and other financial institutions use different tactics to reach their customers. These can be divided into two main groups: traditional and digital. Traditional marketing includes TV advertising, radio, print, signage, public relations, and purpose-driven initiatives. Most companies in the financial industry primarily rely on this type of advertising. Digital advertising usually involves inbound channels to engage the customer with the brand, and outbound channels to increase visibility. The advantage of digital marketing is its extensive reach, but companies often struggle with restricting the information flow and adjusting targeted audiences. Two other significant trends in the industry are omnichannel marketing and the use of data. Omnichannel marketing creates a cohesive, integrated experience across a brand’s touchpoints, including physical locations, events, mobile devices, and online sites. It uses data and analytics to create consistency whenever shoppers encounter the brand. This tactic achieves an average engagement rate of 18.96%, compared to 5.4% for single-channel campaigns, and a 90% higher retention rate. Meanwhile, most banks are just beginning to use data, segmentation, and digital engagement. They are starting to implement cross-departmental integration to unify information within the organization.
The reason behind these methods, particularly the reliance on traditional advertising, is mainly historical precedent. The financial industry is known for its stringent regulations when it comes to advertising, leading companies to opt for tried-and-true techniques. However, this approach can come at a cost, as many customers believe that financial institutions miss opportunities to strengthen relationships with their clients. Another trend worth spotlighting is the customers’ emphasis on their financial institutions’ involvement in social initiatives. In the image below is the response of marketers worldwide about the importance they place in ESG (Environmental, social and governance).
Current Strategies
Current strategies can be divided by their intended purpose, whether acquiring new customers or retaining existing ones. For new customers, financial institutions use both traditional and digital tactics. Traditional methods include print, TV, radio, events, and billboards, while digital tactics encompass websites, blogs, social media, SEO, SEM, online events, email, etc. Financial institutions are also exploring new advertising formats, such as podcasts, brand integrations, chatbots, and sponsorships. Nielsen’s data shows that host-read ads drive a brand recall rate of 71%, highlighting the success of these new advertising formats.
For existing customers, banks’ main goal is to improve customer experience. They are collecting data and using it to understand their customers, standardizing and optimizing their platforms and mobile apps, and employing customer relationship management to enhance client relationships. They are also focusing on creating high-quality and useful content for their community. One benefit of this approach is the potential for cross-selling, as selling additional products to existing customers is more cost-effective. However, a challenge is that 40% of customers who have received communication from their provider were “unhappy” with the generic advice they received.
In the image below, there is a breakdown regarding whether financial institutions have prioritized acquiring customers or keeping them.
How Do They Measure Success?
Financial institutions measure success using Key Performance Indicators (KPIs) tailored to their campaign’s goals and advertising methods. For traditional advertising, popular metrics include return on investment, increased sales, customer retention rate, and brand surveys. Digital marketing KPIs include similar metrics but tend to be easier to measure. However, only around 54% of financial institutions have confidence in full-funnel ROI measurement, highlighting a potential problem with measuring success.
What About Credit Unions?
Currently, credit unions are focusing on attracting a new generation of customers. Many have been slow to adopt digital technology, but they are starting to embrace financial tools and develop mobile apps. Strategies may include improving community outreach, enhancing in-branch visits, and improving member service and personalization.
In Summary
When it comes to marketing in financial institutions, the main trend is focusing on customer-centric strategies. These strategies are typically divided by channel and purpose and may be traditional or digital. Financial institutions’ current emphasis on creating a seamless and personalized experience for customers is more vital than ever. Whether targeting new or existing customers, banks, and other organizations are adapting to a rapidly changing landscape to keep pace with evolving customer demands and industry trends.
📚 Quoted References:
