As competition for customers intensified, bank marketing budgets ballooned 18% in two years, to an estimated aggregate of $10.6 billion last year, according to the American Bankers Association.
After surveying members, the group predicted that the figure will dip to $10.45 billion this year.
Experts attribute the rise to three factors: As banks grow, they must spend more to reach larger audiences; as more banks fatten their marketing budgets, rivals follow suit to keep pace; and improvements in measuring marketing's effectiveness have convinced executives that the money is well spent.
"Marketing is becoming more of a blend of art and science where you provide data to show what you are bringing in and why you are doing it the way you are doing it," said Hillary Theriault, the marketing manager at the $563 million-asset Community Bank of Tri-County in Waldorf, Md.
Ms. Theriault would not give exact figures, but she said its spending has multiplied, because marketing is seen as an important ingredient to growth.
"It is becoming more competitive, and we're growing as an organization. In order to keep up with the growth and to keep meeting our goals in an area that is having a population boom, our budget is going to get bigger," she said.
The ABA survey's results showed retail trumped small business in bank marketing budgets.
Last year banks devoted 73.3% of their marketing budget to promoting retail products and services, up from 66.5% in 2003.
Marketing to small businesses got 12.4% of bank budgets last year, down from 23.2% in 2003.
Banks spent 8.9% of their budget on middle-market business, up from 7.4% in 2003, and 2.5% on large corporations, up from 1.3% in 2003.
The survey found that banks with assets above $5 billion spent 48% of their sales promotion dollars on point of sale materials such as displays and brochures. Banks with less than $5 billion spent on average 32% of their budget on giveaway items and 21.3% on in-branch marketing.
Alisha J.R. Johnson, the director of marketing at Highland Bank of St. Paul, said she is providing more analysis to justify a larger budget.
"When I do my budget, it is not 10% over last year. It is a clear identification of a calendar and what we are going to accomplish and how we are going to accomplish it," she said.
For example, the $391 million-asset Highland found multiple direct mailings brought in more new accounts. From January through the end of July it opened a net total of 170 accounts, compared to 64 in that same time period last year.
Ms. Johnson said marketers need to work with a bank's finance officers to see how much customers are worth and whether promotions are cost-effective.
"If you can ascertain those numbers, you will see the marketing dollars continue to grow, because it goes from being a cost center to being an investment," she said.
She noted that some large competitors have entered Highland's market, such as the $51.5 billion-asset Marshall & Ilsley Corp. of Milwaukee, which has bought three banks in Minnesota.
Jim Badger, the vice president of marketing at the $1.3 billion-asset First National Bank and Trust of Kokomo, Ind., a subsidiary of Hasten Bancshares of Indianapolis, said competition with like-size players has made it tougher to get his bank's message out in the past few years.
"We're competing against everybody. The same-size banks and also the credit unions are big players. We have to get through the clutter that is out there," Mr. Badger said.
First National decided to try and stand out by helping people fill their gas tanks. It gave $25 gas cards to customers who made referrals to First National. The bank typically opens 250 to 300 accounts a month, but in each of the last three months, he said, it has averaged about 1,000.
"We have upped our marketing budget from a couple years ago to now being at least double to triple what we were spending," Mr. Badger said.
Other findings from the ABA survey:
- Last year banks spent 52.9% of their marketing budget on advertising, 23.2% on public relations, 16.4% on sales promotion, 1.5% on market research, 1.5% on staff sales training, and 4.5% on other expenses.
- Banks increased newspaper ad spending to 31% of total advertising dollars last year, from 26% in 2003. Radio spending decreased to 12%, from 15%, and television spending was flat at 6%.
