Since the late 1960s, the percentage of American households with TVs has consistently remained above 95%. As such, it’s hard to imagine people being more “connected” to society than they have been for decades. In today’s digitalized society however, channels to consumers are now more direct than ever before. After the invention of the internet and email sparked the beginning of the age of instant access, the rise of personal handheld devices has all but ensured that people nowadays are nearly interconnected 24/7 through the addition of mediums like social media.
While television advertisement spending will still continue to remain the dominant force, based on predictions shown in the charts below, marketing efforts are clearly projected to significantly ramp up in digital channels, all while the average American’s actual television consumption slowly wanes. Whereas traditional forms of marketing were expensive, indirect, and stationary, companies nowadays are able to cast a wider net in targeting consumers and at more cost-effective prices to boot. Although not all companies have been quick to adapt to new technologies, it’s hard to ignore the profit potential that these new direct digital channels offer.
In the exhibit below, European strategy consulting firm Roland Berger conducted a 2015 survey in which they found 28% of all European banks estimated that over 20% of their new clients will be acquired via direct digital methods, whether they be online or mobile. What this graphic ultimately indicates for the future of banking is that banks with a deficient online presence will fall further by the wayside in terms of customer growth.
To put this in a cost perspective, take a look below at a marketing study that compares the costs of various forms of advertising as measured in Cost Per Thousand Impressions (CPM), which is a metric that gauges how much a company spends to reach 1,000 people. Traditional media advertisements are clearly the most expensive demographic; even billboards, the second cheapest category at $5 CPM, is still double the cost of social media. Therefore, strictly from a cost standpoint, it’s almost fiscally irresponsible for banks nowadays to neglect their social media marketing efforts; although larger banks may have a bigger cash cushion to put off on building their online presence, smaller banks would surely have a much harder time remaining competitive, should they refuse to capitalize on such cost-efficient marketing methods. Ultimately, lower advertising costs will lead to higher profit margins, which should be something that any company can get on board with.
Digital Engagement Methods
Let’s take a deeper look at the methods banks are utilizing to directly reach out to their customers. While television consumption still commands the lion’s share of typical consumer media consumption preferences, the proportion of TV consumption to digital consumption is slowly but steadily eroding in favor of the latter, as evidenced by Figure 1. Unsurprisingly, a study by CGI reveals that 58% of banking customers today prefer online banking, which allows them to eschew the inconvenience of face-to-face meetings or drawn out phone interactions. Although online banking has already become the preferred mode of banking for many customers, it’s also important to highlight the growth in popularity of mobile banking through phone or tablet. For anyone with a smartphone, it’s no longer necessary to visit a bank ever again to deposit a check (subject to a certain limit). In other words, banks are attracting customers by selling them the convenience appeal of their digital wares.
The evolution of GPS has also carried over to the ways in which companies target consumers today. Through geotargeting (targeting people within a certain radius of your place of business), companies can more specifically tailor their advertisements to people that they think are more likely to frequent their location. In a similar vein, companies have also achieved success in identifying customers through social media by advanced targeting metrics such as drawing correlations between a user’s followers, keyword searches, and tagged interests in user profiles.
In addition to the ability to reach people instantly, another one of the tremendous advantages of digital marketing is the ability to pinpoint traffic generated through number of clicks or volume of site visits. This enables companies to more precisely gauge the effectiveness of their ad campaigns or marketing efforts.
The evolution of digital marketing in the day and age isn’t necessarily meant to be an end to the traditional bricks-and-mortars style of banking, as the human element is still very much respected and vital to how business is conducted and relationships are maintained; instead, it is meant to highlight shifting consumer preferences and how companies nowadays can achieve growth by adapting to these behaviors.