3 Things Bank and Credit Union Marketers NEED to Know About Budgeting

The speed at which the marketing discipline continues to evolve is astounding. As budgeting season approaches it's imperative that your credit union or community bank's approach to budgeting for marketing initiatives evolves too. It's more important than ever that marketers recognize their efforts are far more than "just expenses" and are able to appropriately communicate that within their institutions.

Here are 3 things every credit union or community bank marketer should know about budgeting:

1. Present Your Assets Separately From Your Liabilities
2. Marketing Generates Growth Not Revenue - Know the Difference
3. How to Create a Dynamic Budget Structure

Know Your Assets From Your Liabilities

This is one of the areas most credit union and community bank marketers struggle with. Typically labeled as an "expense department," many marketers view budgeting season as a time to prepare for battle as they fight for the expenses they'll be "costing" the organization to do their jobs.

Any good financial professional will tell you that an asset produces income while a liability creates expenses. Since you're surrounded by financial professionals, change your approach to budgeting to properly align your assets and liabilities.

Online advertising, direct mailings, tabling at events, etc. generate leads at a cost. Those costs are expenses. The tools you use to manage these incoming leads are assets. This is where many marketers fail to leverage the value they bring to the institution.

Take your website for example. Your digital branch is open more hours than a physical branch and it provides access for people to become new members/customers, open new deposit accounts and loans, sign up for services, access resources, and get answers to questions. A visitor can do nearly everything they can in a physical branch on your digital branch and they can do it 24/7.

Your website does all of this with no property taxes to pay, no utility bills, no fire or flood insurance, and no maintenance fees for mowing the lawn, removing snow, and landscaping. When comparing the costs associated with your website to the costs of a physical location, it likely produces a higher income percentage than every one of your branches. It's an asset, not a liability.

Related Content: Listen Now - How Much Should Your Bank or Credit Union REALLY Spend on a New Website? 

Your CRM and email automation tools work tirelessly around the clock providing service and support to more members and potential members than any staff member could.

The software charges to own these tools are far less than staff salaries and benefits packages to employ people to manually provide these services. And these tools provide the right experiences to people who prefer the digital experience and don't necessarily want to speak with a live person. Automation tools are cost-saving, money-producing assets for any organization that can't afford a 24/7 staffing solution to manually power a digital experience.

The line items in the marketing budget for marketing assets should be viewed the same as comparable physical branch line items. While there is a cost associated with running them, just like there are costs associated with running a branch, they are assets that make the institution money. The marketing budget allocated to generate leads (expenses) shouldn't be hindered by the budget allocated to run the assets.

Marketing Generates Growth Not Revenue - Know the Difference.

By definition, and in its simplest form, Marketing is responsible for brand awareness and generating leads. These efforts generate growth, and revenue is a by-product of healthy growth. However, revenue is not created directly by Marketing in financial institutions as it is in other industries.

Here's why.

Marketing can generate the highest quality leads available in your marketplace but if your online applications, loan underwriting procedures, and approval processes are not meeting consumer expectations those leads won't convert to revenue.

Because third-party software solutions and the sales and/or service teams are between marketing and the bottom line, it's impossible for Marketing alone to directly produce revenue. This is a huge struggle for marketers. Marketing's success in producing revenue hinges on these other factors.

If Marketing bases its success on revenue produced by only the people who make it through a poor online application, and/or only the people who make it through stricter than average underwriting practices, and/or lengthy service and funding turnaround times the results won't be an accurate representation of how effective the marketing efforts (ahem... budget) were.

Be aware that Marketing can also inadvertently hurt revenue goals. When focusing on growing membership, it's possible to attract unqualified leads who are eligible for membership which helps attain membership growth goals, but if those members are subsequently going to result in net revenue losses over time then the marketing efforts to bring them in hindered the larger goal.

Finding the data to support which leads generate growth and which generate losses is essential to Marketing fine-tuning their processes to garner more of the qualified leads you're looking for.  

Marketing has the greatest impact on growing awareness, leads, and membership but saying those efforts directly correlate to revenue is like saying planting seeds results in a harvest with no consideration for soil quality, sun exposure, and the other factors that influence yielding crops. It's shortsighted.

 Related Content: What Bank Executives MUST Know When Investing in Digital

Create a Dynamic Budget Structure

Have you ever found yourself in a conversation with your peers debating if the Paid Social Media Ad line item in your budget should be $20,000 or $25,000 when you're the only person in the room who understands how paid social ads work and the quality of leads you can garner from the channel?

Funny how everyone becomes an expert in what Marketing needs to spend in each channel during budgeting season, huh?

Better position yourself for success by staying higher level and grouping budget items into dynamic categories like "Digital Ad Spend," with an amount that represents the sum of all the channels it will be used on. Then explain to your budgeting counterparts that Marketing will use the funds differently each quarter and each campaign depending on the target audience and the results you're seeing from each channel. There's no reason to put on the boxing gloves out of the budgeting season gate defending a particular channel when no one can predict if the next big social media app is just around the corner!

A prime example to support adopting this budgeting structure is the continuous changes in social media ads. The platforms, providers, and channels that marketers use to do their jobs change so rapidly that a static budget line item for each specific platform doesn't work in such a dynamic environment. The Apple^® iOS changes are a prime example. Knowing what will and won't work on which channel and which channels will be relevant can't be hypothesized 14 months in advance.

In Conclusion...

At FI GROW Solutions we often hear clients say "use it so we don't lose it," which roughly translates to "Spend this money on anything possible so I can keep the same amount on this line item for next year's budget."

Likewise, we also hear "That would be perfect for us, we just don't have money left on that line item to do it." If this sounds familiar to you, your budgeting strategy is broken.

To avoid these types of budget failures, you need to revamp the way you budget. You can't operate efficiently in a dynamic environment with a static budget structure. The skill sets, tools, and platforms required to be successful in marketing are continuously evolving and your budget strategy must also adapt.

If you need help with your digital marketing spending, contact us here at FI GROW Solutions for help!