In today's struggle for financial survival, the budgets that banks and thrifts set aside for marketing are coming under increasing scrutiny. In many institutions, marketing is the fourth-largest budget item following net interest expense, salaries and benefits, and occupancy.

More and more CEOs feel a need to get their arms around the marketing budget, not just because it makes good business sense but because they are being held to a higher standard of accountability by their boards.

Because of its size, and because it is hard to equate marketing costs with results precisely, the marketing budget is vulnerable to the meat ax approach when in fact delicate surgery and inquiry are the right answers.

Getting firm control of the marketing budget is not easy. Marketing plays a critical role in the success of your bank. It brings in and holds customers. It helps introduce, promote, and price important products and services.

Highly Specialized Field

Done properly it can make an important contribution to your bottom line. But today's world of marketing is so complex and so costly that it requires a high degree of specialization plus a sophisticated, disciplined approach to budget properly.

When you have budgeted properly, you can say with confidence that the marketing budget is being spent prudently with maximum effectiveness and efficiency in pursuit of the bank's business goals. You can say that it is the right size given the bank's markets, asset size, and competition. How many banks can say that today?

Where do you go for objective advice and counsel? The most logical place to look is your own marketing department. After all, that's what you pay them for. And in many cases, particularly in the larger institutions, the marketing department has the right mix of experience and perspective to be objective.

But often the marketing manager has achieved his or her position because of a great job, for example, in operations. "Barbara had the central branch (or region) humming. The customers loved her. Let's give her marketing."

Barbara may well have a strong intuitive feeling for building the business, along with good managerial skills. But, how effective will she be in planning and controlling the budget? Can she assure you that every dollar is being spent well? Can she ask the right questions?

Is she up to directing the advertising agency and evaluating media plans and pitches? Can she handle vendors of collateral materials? Is she spending too much for color separations, signage fixtures, direct mail and data based marketing, primary and syndicated research, and media planning?

Advertising agencies or other vendors are not particularly good sources of objective counsel either because they have their own axes to grind. Often their compensation is tied directly to the size of the budget.

So what's a CEO to do? What are the questions you need to ask to get a handle on your marketing budget and its use? Let me suggest 10, based on nine years' directing the marketing and advertising of America's largest savings bank, $50 billionasset dollar Home Savings of America, 10 years with two of the country's Top Ten ad agencies, and 13 years in marketing at Procter & Gamble.

A Plan for All Budgets

Before you say that these questions apply only to multimillion-dollar budgets, please know I've applied these disciplines to smaller units of the bank with spending under a quarter of a million. Certain truths apply, regardless of budget size.

* Can you relate each and every line item on your marketing budget to a defined goal in your business plan? Or are some items there just because they've always been there, because they placate a department head, because they seemed like a good idea five years ago? What's in your budget because someone took one of your executives out for golf and sold him a sure-fire scheme?

* Is your budget allocated properly? Is spending on individual line items related to the importance or the profit potential of the products or services the spending supports? Is geographic spending or spending against particular customer segments in proportion to the value of that piece of geography, or those particular customer segments in proportion to the value that piece of geography, or those particular customers?

Said another way, if you spend 26% of your budget on home equity loans, do these loans generate a similar percentage of your profits? You don't need to spend in line with profits rigidly, but you should have a fairly good explanation for significant deviations.

Investment spending, lucrative opportunities or significant competitive threats may in fact justify disproportionate spending.

* In your advertising, do you have the right media mix for your budget and your markets? It's very satisfying to the marketing and corporate ego to be on TV, radio, billboards, and in newspapers. But, you may be spreading yourself too thin and not making an impression anywhere.

* Are you spending enough tracking results? Are your even doing any tracking? If not, how do you know what, if anything is working for you? How do you set up a tracking system?

* Are you getting your money's worth? Are you overpaying for collateral? For media advertising? For advertising agency or vendor services? Are your media buys targeted or are you being fooled by low-cost spots which may miss your audience completely. It's a slick trick that be pulled every day.

* Do you have systems in place to minimize the expensive cost of last-minute changes? I found that last minute changes often double the cost of materials.

* What's in the marketing budget that isn't remotely connected to marketing? Occasionally that budget serves as a catch-all for charitable contributions, for corporate logo golf balls and ball point pens, for operational items, for certain regulatory compliance expenses.

No doubt each of these expenses is important, but unless you've got them properly categorized, you're not in proper control.

* What is your marketing cost per new account acquired? How can you reduce that cost? Is that a cost you will ever recover over the life of an account? Lots of banks develop major marketing programs without ever asking this question, and then they wonder if the money was well spent. And just what is the life of an account?

* How effective is your spending against current customers? Does it hold them and increase their business with you or are they leaving you? Does your marketing department have systems in place to answer this critical question?

* And finally, is your budget the right size for your institution, your markets, or the results you expect marketing to achieve? How does it stack up against the competition? Are you spending too much, or maybe not enough?

John Wanamaker, the legendary Philadelphia retailer once said, "Half my advertising is wasted; I just don't know which half." With the questions and disciplines I've suggested, you can go a long way toward finding and eliminating that half.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.