Innovation

Calling All Data-Driven Markets — Banking Needs You

Take Action Now To Build Skills Around Understanding Data

Rick Hall

June 24, 2020

Social Media | Image by Gerd Altmann from Pixabay

Talk to any banker these days, and the topic of customer acquisition challenges is bound to come up. Growing and differentiating is more difficult than ever — especially with the current rate environment for deposits. Thinking strategically about this conundrum is tedious but crucial.

Data-driven marketing is arguably one of the most critical functions banks need to be leveraging when it comes to new customer acquisition. According to the Boston Consulting Group, a majority of new bank customers said that a data-driven personalized approach was a major factor in their decision to move to that bank.

In the past, banks could get away with using baseline demographic attributes for targeting prospects and relatively simple product analysis for cross-selling programs to existing customers. These demographics have also been used to measure the efficacy of those programs. But those days have passed, and bankers can no longer ignore the reality of the gig economy.

In today’s digital-first world, bank marketers need to use real-time tools to better understand detailed behaviors to form their acquisition strategies. In recent studies, many digital consumers view banks as simply a place to park money.

Therefore, the concept of straightforward segmentation — used for years by bankers — has evolved. It has moved from a lifestyle grouping model that includes age, income, and homeownership to a behavioral grouping model that looks at elements such as online subscriptions, affinity affiliations, charitable interests, and virtual payment appetites.

It is also a misconception that this highly valued set of disparate customers cares that much about choosing from a menu of five different consumer checking products or relationship product features. It’s more about how much these customers create a real (albeit often digital) connection with their bank in support of their goals. The challenge is that many bank marketers are typically working with outdated perceptions of value and irrelevant or “dirty” data to do their jobs. This should be alarming for bank marketers.

So is this a “close up shop” moment? Not yet, but it is a serious threat to the future of many institutions. I’m one of the first to scoff at market influencers and fintechs that constantly fuel the flame of fear.

However, if you take a step back to understand what’s happening in financial culture these days, you would be wise to admit that most of the future is out of your control. And you are not likely to get the genie back in the bottle. It’s time to figure out how you are going to catch the right part of the wave that banks can still own: data.

Big data was a buzzword years ago that got a lot of attention, but it only went away in the headlines. No one has solved the underlying issues. Many have just viewed the problem as too big or complex, and they pass it to another part of the organization or rely on a partner to figure it out.

But as marketers, we should know more about customers, markets, and prospects than anyone else in the bank. And that knowledge can drive growth. It’s not because we have met customers in person or read a credit file, but because we have access to behavioral data. We just need to know what to do with it. When data is structured properly — cleaned, normalized, and analyzed — it gives modern bank marketers more insights than ever.

How to Use Data

It’s easier said than done, but getting data in shape can be done. You just need to know what steps to take to harness it so you can gain the insights buried within.

1. Identify data sources and make fixes as needed. First, bank marketers need to figure out which data sources they need to analyze, identify the gaps in those data sources, and determine how to fill them. This is a key area where marketing and technology leaders need to build a working relationship. Marketing data progress cannot succeed without support from the technology side, which is charged with maintaining controls and mitigating fraud and risk.

Many companies are beginning to understand that marketing and technology are partners in bringing value to their organizations. These groups can bring together data to gain a clearer vision of customers, which leads to more personal relationships and a better understanding of what customers will need in the future.

2. Get help building data strategy. Finding partners and tools will help you build your data strategy and gain buy-in from other parts of the institution. This is often where data initiatives get derailed. Once one line of business, such as commercial lending, hears about what you’re trying to do, that group then has a full suite of needs, requirements, and restrictions for what you can do with “its data.”

3. Figure out the quality of your data. You need to discover whether the data you have is any good. In reality, most core data is flawed. It’s not because of the core — but because, over decades, processes have allowed manual data entry that no one has cleaned up. Many banks just decided to deploy data standards once the technology for platform automation was available and then archive old signature cards and other records in storage.

4. Develop a data culture. Finally, you need to help your organization develop a data culture and ensure the work done is scalable, iterative, and flexible. The first step is to define the customer segments you want to target. Then, determine the needs of those segments and what it will take to successfully address those markets. Without this, institutions will fail. To do this, you need to understand the data that underlines the segment and why you’re focusing on it.

Bank marketers should take action now to build skills around understanding data, how it works, who you can partner with, and how it can be used for your initiatives in 2020 and beyond. This is not a trend that will reverse itself. As the consumer market decides how it wants to do business with you, banks will be better positioned to create real value.

The bar set for today is way too low, and we need to take this opportunity to reposition marketing in financial institutions as the center of fact-based initiatives that demonstrate what your customers want. Building strong banking relationships with customers means that you will still be serving them five to 10 years from now.

Rick Hall is the managing director of the Banking and Financial Services practice at BKM Marketing, a boutique marketing communications and strategy firm based in the Boston area with a deep focus on the financial services industry.

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