NEW YORK (AdAge.com) -- U.S. banks seeing the highest returns on their advertising investment are not necessarily those spending the most but instead have the heaviest TV budgets.
A new report from financial-services research firm Aite Group, which examined ad-spending trends and return on advertising performance of 32 of the largest 50 U.S. retail banks from 2006 through 2008, found that top 25% highest-performing banks are those with TV-heavy buys.
The 32 banks included in the report accounted for 75% of ad spending by the top 100 bank advertisers, a group which spent $1.9 billion on advertising in 2007, according to market-research firm TNS. Yet according to Aite, sheer budget size does not always yield high returns. "There are a lot of factors that figure into bank performance," said Ron Shevlin, senior analyst at Aite Group and author of the report. "Sales ability, ad execution and asset optimization are all things we found done particularly well in the top quadrant of banks."
He said banks in that top quadrant -- which include big names such as Citibank and Wachovia, as well as smaller companies Huntington, BB&T and Hudson Bank -- did best in driving deposit, loan and IRA account growth, which is, after all, the ultimate goal in bank marketing. While other banks succeeded in ramping different traditional metrics of advertising return, such as awareness, he said those ad dollars were ultimately lost because they did not result in new deposits, loan or IRA growth.
Ads' ability can max out
"The ability of advertising to create awareness and influence consideration maxes out after a certain level for each bank," Mr. Shevlin said in the report. "The connection between [return on advertising] and deposit and loan growth -- and to efficiency ratios -- is strong. Bank chief marketing officers should include return on advertising metrics like ad spend per deposit and deposit growth per ad dollars in their marketing dashboards."
In general, the report finds that print accounted for the highest percentage of ad spending: 41% overall, followed by TV, which garnered 36%. To that end, the top ad-spending performers invested 50% of their ad dollars in TV (as compared with second-quadrant banks, which allocated 36%, and third- and fourth-quadrant banks, which committed between 23%-28%).
Bank of America and Citibank were the two largest advertisers, together accounting for 23% of the top 100 banks' ad spending from 2005 through 2007. TD Bank tripled its ad spending from 2005 to 2006, and then cut back by 33% in 2007. Comerica was another bank that significantly increased its ad outlays in 2006 from 2005, bolstered by a huge 506% increase in TV-ad spending.
Just six of the 32 banks in the study increased total ad spending in 2006 and in 2007. Among those: Capital One, with a 97% increase in 2006, followed by a 132% increase in 2007; and HSBC, with a 29% and 21% increase in 2006 and 2007, respectively.
"The highest performers in terms of return invested a higher percentage of their ad dollars in TV than other banks," Mr. Shevlin said. "If there's any one lesson to be learned, it's that you cannot apply a shift of pulling everything out of one channel and putting it into another." He added that the relationship between a bank's ad spending and the results it sees down the line are "more a correlation than causation."
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