We regularly update this article with the latest information pertaining to Digital Marketing Budgets for Credit Unions.
Last update: September 2020 (note: this information has been updated to include adjustments resulting from the COVID-19 pandemic, but further changes could be needed as the long-term impact become more clear.)
We’ve written extensively about online marketing budgets, but as we’ve worked with more and more credit unions, we’ve come to realize that many of the standard marketing budget calculations for traditional B2B and B2C companies do not apply.
Each year, credit union marketers are pressured to improve results and grow the books. At the same time, consumer behavior is changing, and the traditional marketing channels are not performing the same as they had in the past.
All this leaves marketers wondering, how much should be budgeted for marketing? And, which marketing channels are most appropriate for credit union marketing?
Use Historical Data As A Basis Of Budgeting
If you’re in the position to build your marketing budget for 2021 and beyond, you'll probably start first by analyzing the previous year’s budget. Based on last year’s performance, you try to assess what performed well, and cut the areas that may have under-performed.
Because 2020 has been a year of far reaching changes in every industry due to the ongoing pandemic, it's not enough to base your budget on what you've done in the past. Many credit unions are searching for answers as to how conservative they should be with their marketing spend going into 2021. Proceed with caution when considering scaling back a great deal—many of the credit unions who kept their foot on the gas in 2020 were rewarded with impressive results even during this challenging time.
How should your 2021 marketing budget compare to previous years?
Data published in a special COVID-19 edition CMO Survey from June 2020 showed marketing budget for the banking and financial industry as a whole sitting at an average of 13% of overall firm budget. This is actually up from 2019 numbers, which reported that marketing budgets as a percentage of a firm's total budget ranged from 11.99%-12.51% for the banking industry.
At the time of that survey, marketing budgets had been slowed for 2020, and banking and financial services marketing professionals were asked when they anticipated overall marketing budgets returning to pre-pandemic levels. The majority, 78% predicted a full return within 6-24 months.
Data published in the CMO Survey in February 2020 suggested annual marketing budgets would increase in the next 12 months by an average of 7.6%, with the banking and finance sector being one of the top 3 growth sectors. While these projections were surely altered as a result of COVID-19, that data point combined with the June study is compelling and should make credit unions wary of cutting their marketing budgets and potentially falling behind competitors who are more optimistic in their spending.
According to the Harvard Business Review article, "Don't Cut Your Marketing Budget in a Recession," companies that have bounced back well from recessions of the past did not cut their marketing spending, or even increased it. What they did do is to spend their budget very strategically, maximizing marketing dollars where they would have the biggest impact.
Compare Your Budget Against What Other Credit Unions Are Spending
Evaluating what other credit unions are doing can be helpful, though there is considerable variance from one organization to another when considering the size, location, competition, charter and other factors.
In a Financial Brand study published in 2019, the average credit union marketing budget as a percentage of assets was 0.12%. In 2018, 67.9% of the sample group spent over 0.10% of assets on marketing, versus 53.3% in 2015.
As you might expect, a higher percentage of assets is generally spent by smaller credit unions. In 2018, credit unions with less than $500 million in assets allocated an average of 0.13% to marketing, while credit unions worth over $10 billion in assets spent 0.09% of that. Other factors come into play such as how competitive your local market is, how aggressive your growth strategy is, and how well known your brand has become.
When expressed as an amount spent per member, in 2018 the average marketing budgets ranged from $12.96 to as much as $20.19 per member. This amount can vary widely, with some outliers spending a whopping $203 per member to as little as $.05 per member, but somewhere in the average range is where most credit unions will want to aim for.
Of course the amount spent per member is a much different figure than the amount invested per net NEW member. The average investment for that is much higher, at an average of $281.
When broken down further into advertising dollars, we've found that among our extensive group of credit union clients, the average advertising spend per member per year is $1.16, with the highest spend among our clients being $3.60 per member and the lowest being $0.21.
As advertising spend relates to asset size among our clients, we're seeing an average spend of $91.13 per million in assets per year, with a high of $319.15 per million and a low of $20.13 per million.
Not surprisingly, there is a strong correlation between the amount of marketing dollars invested per member, and membership growth.
Breaking down your marketing budget across channels
Diving into the June 2020 special CMO Survey, marketers in the banking and financial services industries said they planned to spend in the next 12 months:
- Social media- 18% of marketing budget
- Customer experience initiatives- 12% of marketing budget
- Training and development- 12% of marketing budget
- Mobile activities- 19% of marketing budget
Other key marketing expenses not mentioned in that survey would include employees or outsourced marketing, advertising, SEO, technology, analytics and community events or sponsorships.
How much do credit unions spend per year on social media, content marketing, digital advertising and other channels? Download our digital marketing calculator for a recommended budget by channel.
The Shift To Online Marketing
Like other industries, credit unions are steadily shifting dollars from traditional marketing channels to online channels.
It's no surprise that digital took on new levels of importance almost overnight during the COVID-19 crisis. According to the June 2020 CMO Survey referenced above, financial institutions were pivoting to meet consumer needs, with 70% shifting resources to customer-facing digital platforms. Spending on social media and mobile marketing reached new highs as banks and credit unions strove to meet consumers where they were actively engaged and seeking information.
In August 2020, eMarketer reported that digital ad spending for the financial services industry would grow 9.7% to $19.62 billion in 2020. While 9.7% represents a large decrease in growth compared to 27.4% growth in 2019 and 29.4% growth in 2018, it is significant to note that digital ad spending still grew almost 10% during one of the worst periods of economic retraction in US history.
Traditional advertising fared much worse. While traditional media spending has been steadily declining for several years, it fell off a cliff in 2020.
eMarketer predicts that digital ad spending will recover some of the impressive growth gains in 2021, growing 20.1% to reach $23.56 billion.
Much of the digital growth in the financial services sector has focused on mobile. Mobile ad spending is predicted to grow 13% in 2020, accounting for 70.9% of all digital ad spending in financial services.
In a February 2019 survey by eMarketer, the average company planned to allocate 62.3% of its total media ad budget to digital in 2021, with that rate increasing to 66.8% by 2023. While credit unions are expected to fall short of that on average, we are seeing progressive credit unions with strong goals for growth spending closer to that amount.
It's important to note that those percentages relate specifically to ad spending, not marketing spending as a whole. However, we generally see a commensurate percentage allocated to online versus offline channels across the entire marketing budget.
In an example, a credit union with $300 million in assets could have an annual marketing budget of $330k-$450k with $198k-270k spent directly on online marketing in 2021.
Attracting Younger Members
Every credit union we’ve spoken to recently has mentioned attracting younger members (aka, millennials) as a key objective. Don’t overlook Generation X, who is currently considering their options for financing their children’s college, and caring for their aging parents while trying to figure out how to save for retirement.
To connect with Gen X and the elusive millennials, being selective with the online channels is smart, but the marketing message needs to resonate as well.
If you want to attract both audiences, plan on investing more in creative development and more for campaign management targeting the audiences separately across more digital channels simultaneously.
Investing in Marketing Technology
According to a Forrester Research report from April 2018, US marketers planned to increase their investment in marketing technology by 27% over the next four years. Forrester projected that marketing technology will account for 30% of total marketing spending in 2018, and an August 2018 report by Gartner aligned with that, with marketing leaders reporting that they expected to spend 29% of their marketing budget on marketing technology in 2018, up from 22% in 2017.
Within marketing tech, the areas of highest investment growth, according to Forrester, are data, ad technology and marketing automation.
As noted above, investment digital technology was accelerated by the virtual nature of most interactions during the ongoing pandemic.
Which Marketing Channels Are Most Effective?
This is a question we get all the time, and as you might expect, the answer depends.
First, let’s source some data provided by other marketers. When marketers were asked how they rate each of the channels in terms of return on investment, email, SEO, content marketing and paid search came out on top.
The survey data above was from 2014, but if this same survey was conducted today, the responses would likely be similar, however the categorization of digital marketing channels requires modification.
As content marketing and SEO have evolved greatly over the past 3-4 years, the lines between them have become even more gray. To many marketers, content marketing is SEO, and social media is content marketing.
Social media, while not rated well in the chart above, has evolved from a mediocre source of leads using organic posting, to one of the more successful channels for engaging new leads as well as existing members, using the precise targeting capabilities of paid social advertising. Visit our article to read more about how much credit unions should spend on social media marketing.
As online advertising platforms have become more sophisticated, and targeting has gotten better, categorizing all online advertising that is not paid search as online display is misleading.
In our experience, we’ve had great results with email marketing for cross-selling and retention. Paid search is great at account acquisition. And the various forms of online display can be powerful for branding, acquisition or cross-selling depending on the exact channel, campaign objectives and targeting.
SEO is no longer a tactic for consideration – It’s required!
Make sure your website ranks well for obvious non-branded, local searches (like, Richmond, VA credit unions). If it doesn’t, fix it. Make sure each of your branch locations shows up on local search results, including Google Maps, and that the listed information, like branch hours, is accurate.
Plan on investing about 3-5 hours per branch location to get the core local SEO items done right.
Business Objectives Should Be The Key Driver
The best approach to budgeting would be to first consider all of the business objectives, and to have the right system of measurement in place to accurately determine your acquisition costs.
For example, let’s say your credit union has a goal to originate $4 million in new home loans this year. If you can confidently forecast that mortgage applications can be obtained at $200 each through paid marketing channels and your average mortgage is $200,000 and applications close into funded loans at a rate of 10% (then each funded loan actually costs you about $2000 each to acquire). It would take 20 loans of $200,000 to reach your $4 million goal. So you could expect marketing costs of $40,000 to achieve that objective (20 new loans at a cost of $2000 each).
These types of calculations require knowledge of and access to both internal data (like average loan size, and loan funding rates) as well as complete and accurate digital marketing data. If you don’t know how to track digital marketing performance, you’re at a heavy disadvantage when it comes time to develop budgets and secure C-suite and board approval.
Marketers have regularly expressed concern over their ability to measure return from online marketing channels. The chart below clearly conveys this. While 52% of marketers feel good about the ability to track paid search, 20% or fewer feel good about tracking the return from social media, display advertising, or video advertising.
Credit unions are slowly getting better at measuring ROI though, and getting better at marketing effectively. In 2018 credit unions generated an average net income of $16.39 for every marketing dollar spent, according to The Financial Brand. Compare that to $12.22 in 2015 for the same credit unions.
Final Thoughts About Developing Credit Union Marketing Budgets For 2021
It will be essential in the year ahead to plan and execute your marketing spending very strategically—there is no room for wasteful spending when marketing budgets are under so much scrutiny.
If you don’t have a good handle on your website and online campaign tracking, commit to investing in setting up the proper systems of measurement and good quality dashboard reporting. Credit unions we talk to continue to rate results tracking as a top priority that has been difficult to solve.
Identify your target market and invest in developing buyer personas so your marketing can connect with their unique pain points and motivations.
Diversify your marketing tactics and look for creative solutions to reach your target audience(s) in new places and to find new acquisition channels in the year ahead.
Many organizations will spend more than 60% of their marketing budget online in 2021. Will yours?
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