FAIRFAX, Va. — As financial institutions begin to shift their marketing dollars from traditional media to digital, analysts say online spending can be good for credit unions — but only if they wisely allocate budgets in this marketplace.
While the digital space offers credit unions a better chance to stand out from deep-pocketed banks, which dominate mainstream media, CUs should be certain that investments in digital advertising — a medium that often returns unclear results — return bottom-line dollars.
"Because marketing dollars at credit unions are so precious, you have to be very careful what you do with digital," said marketing consultant Paul J. Lucas. "Those who sell digital will give you all kinds of great numbers and data. But I have worked with a number of credit unions on digital, and often they can't find effective ways to track the ROI. I am not saying 'Don't do digital,' I am saying pick your strategies wisely."
Data from the latest Cornerstone Report shows that credit unions are dedicating about 5% of their marketing budget to online channels. Traditional media and direct mail still claim 52% of marketing spend. The Cornerstone Report focuses on 16 operational areas of 62 credit unions with assets of $250 million and above.
Sam Kilmer, senior director at Cornerstone Advisors, Scottsdale, Ariz., said online channel spending — as well as research and data mining — are increasing. "They are claiming a sliver of the budget, but that sliver is growing."
Growing, But Just How Fast?
Yet it's not at a pace, Kilmer said, that some may think.
"If you just go by what you read, the conventional wisdom and what's trendy and hip, you might think traditional media spending, donations and other types of marketing have gone away and everyone is spending their money on analytics and online channels," said Kilmer. "That is not the case." (See related chart on this page.)
Data from a recent Aite Group marketing study shows that traditional media spending is shifting to the online channels among all financial services companies.
Ron Shevlin, senior analyst in retail banking at the Boston-based Aite, explained that in comparing the first quarter of 2013 with the same period this year, among FIs with $500 million to $1 billion in assets, marketing spend in traditional media dropped about five percentage points to 48%.
At the same time, Shevlin pointed out spending for online and mobile increased 7%. "Not huge swings in one year, but a seven-point swing in a single year, after a few years that adds up."
The shift to online advertising can be good for credit unions because big banks are "crushing" smaller financial institutions with traditional advertising, particularly TV. Shevlin said he was surprised his study revealed how consistent marketing spending is across all bank and credit union asset sizes. The study excluded FIs below $100 million in assets.
What Are CUs Spending?
"Spend is consistently about 1% of assets," noted Shevlin. "If you are a $500 million to $1 billion CU, which is a decent number of credit unions, your marketing budget is less than a million. You are going up against banks that are spending millions, and some over a billion."
Shevlin insisted that credit unions, with their smaller budgets, have to find ways outside of traditional media to stand out.
"Credit unions have to be more creative and go after different channels. You can't possibly win in the traditional media areas — you think you can get awareness by running TV spots at 3 a.m. versus banks running commercials in prime time?"
Andy Mattingly, COO at the $938 million FORUM CU in Fishers, Ind., recognizes the uphill battle against banks with mainstream media.
"Almost every large regional and national bank in our market is spending in two months what we spend in a year," said Mattingly.
Despite online somewhat leveling the playing field due to more choices and often lower costs, Roy MacKinnon, VP of marketing at the $1.1 billion First Entertainment CU in Hollywood, Calif., cautions that the channel can be a risky investment, since it can be difficult to track strong business results from online advertising.
MacKinnon said "sophisticated tracking" is required to be certain online is paying off. "Take banner ads. One part of the story is click-through, and that is easily tracked. We can see who clicked on our auto loan banner and landed on our page where we want to close the sale. The hard part is writing the custom software to follow the person all the way through the loan application and funding."
Mattingly said FORUM has tracking methods and is working to further refine them to gain a better understanding of online marketing's impact. "Tracking is an area than needs to improve even more — having the right analytics to measure what is coming back."
FORUM uses high-level metrics, such as Google Analytics, but then adds custom measurements onto back-end reporting, according to Mattingly. "We do a lot of different types of testing, going beyond click-through to really tying back what ROI actually is," he added.
Credit union executives and analysts all stressed that measuring results from social media may be the most difficult among online channels.
"I am not huge fan of social media [for advertising results]," said Shevlin. "I think Facebook and Twitter are fine for interacting and communicating with existing members, but for driving awareness, I don't know."
MacKinnon sees value in social media, if it is managed daily by the credit union. He is unsure, however, how much marketing impact the websites offer.
Not Chasing After 'Likes'
"We have 1,700 followers on our Facebook page, but I never run a campaign for the sake of pulling in 'likes,' " observed MacKinnon. "A like does not move a loan. And a like does not mean someone comes back to your page daily. It means they clicked a button once, big deal. I have never seen any analytics that says having more Facebook followers and likes drives more business."
But social media can provide a credit union with a better understanding of its membership, something analysts insist is critical to any online advertising and, indeed, all marketing efforts.
Due to the wide range of online channels, and their unique appeal to different age groups and demographics, experts encourage credit unions to know where there members are spending their time online before making a digital advertising investment.
Lucas reminded that the audience for a community chartered credit union is likely far different than a SEG-based shop, and therefore the memberships' use of online will be different.
"Don't get into online just for the sake of getting into it," advised Lucas. "Do that and you waste your money. You better know what you are doing."
