Is Necessity the Mother of Invention?

Financial services firms are top of mind these days.

Unless you’re living completely off the grid, your business and household finances are inextricably tied to institutions that lend money, manage savings and retirement accounts, and more.

Speculation abounds that these firms, among others, will slash marketing budgets in the coming year. Indeed, belt-tightening already set in last year when some lenders were forced to write off bad loans.

Is there a silver lining? Could leaner budgets force financial services to innovate and improve customer experiences on- and offline?

A number of marketing executives are pressing ahead with marketing initiatives, including experimental ones in mobile and social media. These examples came from marketers speaking at this week’s Net.Finance East, a conference focused on innovations in financial services marketing.

Social Media: Small Bank, Big Aspirations

Take Umpqua Bank, an Oregon-based community bank with 147 locations. You may have read about the company’s 2007 “Lemonaire” campaign aimed at elementary-school-aged children. The bank spent $1.2 million on the campaign, which included publishing newspaper ads targeting 90-plus cities in Oregon, Washington, and northern California where Umpqua operates.

Umpqua invited children to apply for one of 2,100 lemonade-stand kits that included Upmqua-branded cups and napkins, $10 in startup capital, and a booklet on what they could do with their earnings. “Spend a little bit, share a little bit, and save the rest,” said Eric Lucero, VP of marketing strategies at Umpqua. The two-month campaign was credited with bringing 10,000 unique visitors to Upmqua’s Lemonaire Web site, plus obtaining 2,331 new bank accounts and $113 million in new deposits.

On another front, Umpqua set up an online local business community called LocalSpace. Launched in 2007, the site includes a searchable business directory and other community features. To date, 400 merchants have signed up and 300 businesses have enrolled in Umpqua’s. While Umpqua eliminated its advertising budget in 2008, Lucero’s hopeful some funds will be allocated to promote initiatives like LocalSpace in 2009.

Mobile Marketing: Big Banks, Small Aspirations

The Royal Bank of Canada (RBC) is testing mobile commerce applications. It has launched an SMS service that enables people to send and receive money on mobile devices, according to Avi Pollock, RBC’s head of strategic innovation. While RBC is also working on other mobile banking and customer service applications, Pollock’s team is trying to figure out how to meet customer needs in the mobile channel.

Wachovia Bank has also been investing in mobile commerce to retain and attract customers. “Our goal is to maintain leadership in mobile cash management. We don’t want RBC and other banks to run off and leave us,” said John B. Watkins, SVP of online services director at Wachovia.

The challenge is that the mobile channel is changing so rapidly, it’s difficult to keep up with developments. “You have to be in the game if you are going to compete,” Watkins insisted.

Tips for Financial Marketers

Rowena Track, SVP of Web and e-business strategy at TIAA-CREF Financial Services, has a few more suggestions for financial marketers facing budgetary restraints:

• Dig into the data to learn about your customers. There’s a myth that digital services, such as online banking, should target the mass market and that advisors should be assigned to high-net-worth customers. For Track and her team, an a-ha moment came when they realized 60 percent of high-net-worth customers were among the most active customers online. “We have a captive audience on the Web, and we can build a one-on-one relationship with them through this digital space,” Track said. To do so, businesses must first invest in data management and customer relationship management systems, in addition to analytics tools.
• Measure more than return on investment. Sometimes, other measures, such as return on relationships and return on expectations, are more relevant. “During the past few weeks of market volatility, our customers expected us to serve them around the clock. We leveraged our Web functionality to serve and respond to our customer needs,” Track said in a follow-up e-mail. With that in mind, return on customer expectation should be more important than return on investment.
• Look to other sectors for benchmarks. When examining its online services, TIAA-CREF looked beyond rivals. “The bar for digital experience is set high outside of our industry. Our customers are used to the interactive experience they get on Google, Barnes & Noble, Amazon.com, and Dell,” she said. “They expect comparable experience when they visit our Web sites.”
• Web sites will become less relevant. Consumers are aggregating more information in one place, using tools such as RSS feeds and widgets. Businesses must start to think about what this means on several fronts — from e-marketing strategies to the way it sets up its infrastructure and delivers data to customers.
• Don’t wait to innovate. “Digital disruption will impact organizations in ways never seen before and at a speed that is not imaginable to many,” Track said. “Spend time on the data, understand your customers, pilot emerging technologies, don’t wait for the killer application, build continuous change as part of your plans, iteratively innovate, deploy scalable architecture, and expect the unexpected.”

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