In the rapidly evolving business landscape, the role of the Chief Marketing Officer (CMO) has been facing an alarming decline across various industries.
Fortune 500 companies are averaging a mere 4.3 years of tenure for CMOs (marketingweek.com). Despite the pivotal importance of marketing in building brand awareness, attracting new customers and driving revenue growth, many organizations — including those within the banking sector — have sidelined or even eliminated the CMO position from their executive leadership teams.
This concerning trend of minimizing the CMO role appears to be counterproductive and potentially harmful to long-term growth prospects.
Extensive research by Harvard Business Review conducted among Fortune 500 decision-makers and marketing leaders has revealed a striking correlation: companies that integrate marketing as a core component of their growth strategy are significantly more likely to outperform their peers. Specifically, organizations that prioritize branding and advertising as one of their top two growth strategies are twice as likely to achieve substantial revenue growth of 5% or more compared to those that don’t (67% vs. 33%). This pattern holds true across both consumer-facing and business-to-business companies, underscoring the universal importance of effective marketing across diverse industries.
In the highly competitive and often commoditized banking sector, the consequences of deprioritizing marketing and the CMO role could be particularly detrimental. By sidelining the CMO and minimizing the role of marketing, banks risk falling behind competitors who recognize the long-term value of building a distinctive brand and fostering enduring customer relationships.
Drawing insights from Rivel’s interviews of 25,600 consumers in Texas, the following three points underscore the imperative for banks to strategically and financially support marketing efforts as a driver of sustainable growth.
1. Reinvent marketing as an ROI tool
Several factors contribute to the marginalization of marketing. One key issue is the perception that marketing is a cost center, responsible for flashy campaigns with little measurable impact on the bottom line. This perspective often stems from a lack of understanding of marketing’s evolving role, which extends far beyond traditional advertising. Today, effective marketing encompasses customer experience, data analytics and brand storytelling, all of which play a crucial role in driving revenue and growth —something that a CMO needs to guide, nurture and take ownership.
The banking industry’s investment in brand and marketing efforts directly correlates with deposit growth and overall performance. Based on an analysis by Capital Performance Group (https://thefinancialbrand.com ), in 2022, U.S. banks, with assets between $2 billion and $10 billion, spent an average of 0.07% of their total assets on marketing, accounting for 2.80% of their non-interest revenue. Notably, marketing spend grew by 14.78% between 2021 and 2022, indicating that banks are recognizing the need to increase their investment in this area.
This increased spending has paid dividends, with banks in the group experiencing an average deposit growth of 2.19%, loan growth of 16.11% and overall revenue growth of 9.95%. Interestingly, the top quartile of banks that spent the most on marketing, allocating 0.09% of their assets and increasing their year-over-year spend by 20.13%, saw even bigger growth in their deposits (4.82%) and loans (18.70%), underscoring the direct impact of robust marketing efforts on attracting and retaining customers.
2. Drive a recognizable brand
Once a bank is committed to supporting growth through a robust marketing investment, the next step is to understand the need for distinctive branding. Moreover, it’s one of the few things a bank can wholly own and manage. It’s a true opportunity to let the marketplace know what the bank stands for and, more importantly, how the bank can improve their financial standing.
Rivel’s research from Q1 2024 reveals that the average bank faces intense competition and a significant challenge in building brand recognition. Among consumers, the average bank’s “Brand Awareness” measure stands at a mere 33%, while its “Would Consider Banking With” score is only a low 6%.
In Texas, among institutions with at least 10 branches, the competition is particularly fierce, with 67 institutions in-state scoring above the average awareness level. This crowded landscape makes it increasingly difficult for banks to differentiate themselves and stand out from a plethora of national, regional and community banks — not to mention credit unions — vying for customers’ attention. Moreover, most Texas consumers have relatively low perceptions of banks as institutions, notably under 60% agree that local banks are trustworthy, offer good technology and provide strong customer service.
Banks that fail to invest in building and maintaining a distinctive brand identity risk being overlooked by potential customers who may gravitate toward more recognizable and well-marketed alternatives that have successfully captured mindshare and loyalty.
You need to be distinctive
According to Forrester’s CMO outlook for 2024, there is a pressing need for profitable growth amid a backdrop of an even more divisive, mobilized and activist consumer base, causing values-based marketing to go on hiatus. This means that CMOs will favor practical marketing practices in 2024 over purpose-led marketing campaigns, starting with their own customers.
The scattershot method of marketing and customer service has not been successful for a long time. It’s especially important to align the bank’s benefits and messaging to those who are most likely to switch their primary bank.
Based on Rivel’s Q1 2024 insights, Millennials — with 37% vulnerability — are the target in Texas. Because of that, this group’s particular needs are paramount for both retention and acquisition. Namely, 56% of them are using their mobile app more than 10 times per month, 27% are seeking a new savings account this year and 84% are saying it’s very important for their bank to offer good value for fees. Simply reminding current customers of the bank’s services is something that is commonly pushed aside for the focus on growth, a mistake in this market.
In today’s digital age, CMOs must also prioritize omnichannel marketing strategies, ensuring a consistent and seamless customer experience across various touchpoints, including online banking, mobile apps and physical branches. Millennials in Texas prefer social media advertising (52%), internet/web advertising (45%), and word-of-mouth referrals by a trusted friend or family member (44%). By delivering a cohesive and engaging experience, banks can enhance customer satisfaction and reduce the likelihood of customers switching to competitors.
3. The case for consistent branding
The banking industry stands at a crossroad facing immense competition from neobanks, decoupling of accounts from traditional institutions and rapidly shifting consumer preferences. In this landscape, the strategic role of the CMO and the importance of effective marketing initiatives cannot be understated. Banks that fail to recognize this reality risk falling behind their more forward-thinking counterparts who understand the power of strategic marketing in driving growth, cultivating brand loyalty and forging enduring customer relationships.
Ultimately, the banks that will emerge triumphant are those that embrace marketing as a critical investment rather than a mere cost center. By allocating appropriate resources to build distinctive brand identities, deliver seamless omnichannel experiences and leverage data-driven insights to anticipate and meet evolving consumer needs, these institutions will not only attract new customers but also foster deep, lasting bonds with their existing clientele. The CMO should be well-equipped to be both the driver and implementer of these ambitious goals for any bank.