The Opportunities and Challenges of Marketing Analytics for FinServ Firms
The arrival of the 21st CMO Survey in our inbox prompts us to lift our heads up from our day-to-day work with Financial Services clients and to think retrospectively about where the industry has come in the last year. It affords us an opportunity to compare our “on-the-ground” client experiences with the experiences of the financial services survey responders. What are the trends we are seeing within our clients, and how do those compare to the surveyed firms? What are the best practices that are emerging? What are some the unique marketing analytics and data challenges in this industry, and how can we help clients solve them?
More importantly, it helps us sharpen our focus on those issues that will be critical to achieving breakthrough go-to-market improvements moving forward into 2019. Specifically, what roles can and should analytics, customer data and insights play in helping to drive performance and growth in the Financial Services sector, and how can companies ensure they are receiving maximum value from their investments in analytics/data?
With that context, here are some highlights based on the survey findings, and our thoughts about implications for the financial services industry moving forward into 2019.
FinServ Expects to Double Marketing Analytics Investment in the Next Three Years – But Challenges Remain
Despite the hype and promise of AI, Predictive Analytics and Big Data, survey results suggest that spending on analytics as a % of total marketing budget has not changed significantly over the last 6 years. (For FinServ respondents, this mean was 7.05% in the August 2018 survey).
FinServ over-indexes on analytics spend vs. many other industries in the survey, but we have found that market leaders spend significantly more than 7% on analytics and data. As an industry with a long actuarial history in credit and risk analytics, the extension of these capabilities to sales and marketing has come relatively quickly, as most finserv firms have a strong history of working with data and data science. That said, our experience has shown that credit risk and actuarial experience do not necessarily translate into effective marketing analytics as FinServ firms look to build their marketing analytics competency. Different skill sets are required to convert customer insight into effective customer engagement across multiple touchpoints.
Despite several years of relatively flat investment in marketing analytics, FinServ survey participants expect to more than double their investments in marketing analytics over the next three years to realize the promise of advanced analytics. Still, these investments come with a number of challenges. The biggest challenge identified by survey participants to increasing investment in analytics/data is the “lack of processes and tools to measure success through analytics”. Without clear ROI, executives are hesitant to increase investment – something our Chief Analytics Office talked about in an earlier blog (see below).
See how leaders are instrumenting marketing analytics efforts to measure “Return on Marketing Analytics”
To justify investment increases, analytics leaders in FinServ firms must put measurement frameworks, tools and processes in place to make analytics a truly measured function, with clear quantifiable benefits to the enterprise. Functional groups like the Marketing Accountability Standards Board are working to “establish marketing measurement and accountability standards across industry and domain … for the guidance and education of business decision-makers and users of performance and financial information”. This includes guidelines for analytics. FinServ firms should consider participation in promulgation of these standards, and/or adoption of these standards as they are deployed.
The second most cited challenge to increased investment is the “lack of people who can link marketing analytics to marketing practice”. At MarketBridge, we refer to this as “activation”. Without the ability to drive analytic insight into action across multiple points of customer engagement, FinServ companies (and indeed, companies in all industries) will continue to underinvest in analytics.
Solving the activation challenge will require investment in workflow integrators and/or partners who can embed analytic output into the multiple platforms, technologies and workflows that support customer engagement across the entire customer journey. This is especially true when providing insights to sales teams and intermediaries. Analytic insights and prescriptive guidance must be communicated to salespeople in their vernacular, and with sufficient context and explanation to promote adoption – otherwise insights will be ignored. This “last mile” activation continues to be a barrier to adoption for many firms. Leading companies are now spending nearly 50% of their analytics investment on driving insights into customer-facing business processes and workflows.
Investments in Data Will Increase – But the Mix is Changing
58.3% of FinServ respondents believe that their investment in online customer data will increase over the next two years as FinServ firms continue to look for timely customer signals, while only 25% believe their investment in third-party customer data will increase.
Clearly the hunt is on to find more timely, verifiable and predictive customer intent signal data on line. This will require more agile methods of identity resolution, increasingly flexible data storage and stronger data governance. Central, flexible data repositories such as data lakes should be well-stocked with transactional data, but FinServ firms should also be experimenting with other less structured data sources such as call center recordings that can benefit from speech analytics, particularly in high value customer interactions.
“Trusting Relationship” Remains a Top Customer Priority – Followed Closely by “Excellent Service”
No surprise that Trusting Relationship is still a top priority for FS customers in light of the 2008 global meltdown. Despite significant regulatory changes to instill liquidity and protections back into the system – the passage of Dodd-Frank, the creation of the CFPB, and the (recently-vacated) attempt to implement the DOL Fiduciary Rule – trust is still an issue for nearly all in this sector.
Trust extends beyond “do no financial harm” to include more abstract harms such as misuse of customer information and abuse of trust. Proper protection and usage of customer data and security and privacy will remain a top priority in an increasingly digital and interconnected world – especially for financial services firms.
See how financial services firms can use content to increase customer trust: “Why FinServ Businesses Need To Rethink Content. Period.”
Interestingly, 73% of those surveyed believe “Excellent Service” is in the top 2 list for their customers. When viewed through the data and analytics lens, this means FS firms must do a better job of developing a 360° view of their customers across multiple lines of business and multiple channels of customer engagement. This remains a major challenge for most of the clients we work with today, and will likely persist into 2019 and beyond.
Market leaders will need to recognize their customers wherever and whenever they choose to engage, understand the full extent of that customer relationship, and anticipate their needs to deliver Excellent Service and to build a Trusting Relationship. This will require not only breaking down internal data, technology and organizational silos, but also increased investments in gathering and utilizing online customer data and signals to understand and anticipate customer needs.
The Majority of Organic Growth (78%) Is Coming from Existing Products (57%) and New Products (20%) into Existing Markets
Financial Services firms are investing ¾ of their marketing spend in driving growth from existing markets. This means continued focus on retention and cross-sell activities – areas where predictive analytics can be especially powerful in helping to identify, target and prioritize white space, cross-sell and new product opportunities within the existing client base.
The good news is that the application of analytics to these growth areas can create tremendous efficiencies, thus freeing up additional investment capacity for other higher-cost growth areas. (See for example, the cross-sell case study included in this newsletter for an example of the significant productivity improvements analytics can drive when applied to this important use case.)
Building a prioritized roadmap of analytics use cases is critical for Financial Services firms. Deploying analytics into marketing and sales workflow and driving adoption are key. The resulting efficiencies in existing markets can be deployed against more expensive growth in new products and new markets.
In summary, FinServ firms will likely be increasing their investments in marketing analytics and customer data – but they must do so in a disciplined, prioritized and measured fashion. These investments must be aligned with strategic customer priorities, like building trusting relationships and providing excellent customer service. This will require increased investments in customer data and agile data management capabilities to support the increase in online customer data that must be tracked, stored and analyzed. Emphasis and focus must be placed on activating the resulting insight at each customer touchpoint, and on building a centralized capability to manage the customer experience across multiple channels. Value will only be realized if companies can convert these insights into action, and coordinate that action across all of the customer touchpoints.