Our 8 KPIs To Power Your Bank Marketing

We received many questions on our ranked effectiveness of some of our content strategies (HERE) and our priorities when it comes to marketing (HERE). Many of the questions revolved around how we measure marketing effectiveness and what key performance indicators (KPIs) we use. The questions are highly relevant, as determining marketing attribution has historically been difficult. Further, there is an equivalency question - What is $1 of revenue worth regarding leads, likes, opens, clicks or follows? Would you rather have one qualified sales lead, fourteen unqualified marketing leads or 5,000 social media followers? In this article, we rank our metrics and delve into the comparative value of bank marketing KPIs.

Profit/Revenue – The King Metric

Few bankers would argue that the Holy Grail of marketing is profit or at least revenue. Throw one $10,000 bank event to land one new commercial customer that has an $86,000 lifetime value, and you can term that as a good investment. Anytime you can show direct revenue attribution to a marketing campaign you are doing OK. To the extent, you can show an immediate positive return on the marketing investment, so much the better. But, what happens when you can’t? If you throw a $10,000 cocktail party and end up with five qualified leads is that a good return? 

Sales and Marketing Leads

After profit or revenue, the next most important metric to us is a sales lead followed by a marketing lead. Next, to gaining a new customer or placing a new product with an existing customer that creates revenue, the qualified sales lead comes next in importance.

One important distinction we make is the difference between a bank sales lead, a marketing lead, and just a lead. A sales lead is a marketing lead that has been qualified as being the right customer for the bank, has an articulated need for a banking product and has a reason to move to your bank. A known commercial prospect that would like a term sheet for a loan refinancing is the classic example of a sales lead.

The average bank retail lead is worth between $2 and $800, while a commercial customer lead is usually in the $3,000 to $400,000 with a median value of around $60,000.

In contrast, a marketing lead is a prospect that has been verified as being interested in a bank product or service, but without knowing if they are the right customer for the bank or validating their need for a given banking product. While some banks call these “suspects” instead of “prospects” we are not fans of that nomenclature and so go with sales and marketing lead. An unknown prospect that calls and wants a quote on a 10-year fixed rate loan is an example of a marketing lead.

Since marketing leads have lower conversion rates, their expected value is approximately five to fifty times less than a sales lead. Thus, if a high-value 10-year, fixed rate loan commercial customer, is worth $350,000 in profit from loans, deposits and fees, and our conversion rate is running at 30% (about average for a community bank), then that sales lead has a value of $350k x 28%, or $98,000. Since we only convert about 4% of our marketing leads, the value of that marketing lead would be approximately $14,000. 

By comparison, a “lead” is anyone else that has expressed some interest in a bank product. The CFO that comes to your website to request more information about a line of credit is an example of a lead that has yet to be validated or qualified. A typical lead that inquires about a commercial loan has a value of closer to $200 since not only is our conversion rate much lower, we also don’t know the quality of that customer.

Sales Pipeline Influence & Engagement

The biggest source of confusion for banks is around pipeline movement. A typical commercial sales pipeline from pre-prospecting to close is about 34 months. Sales and marketing effort that can move the customer through the sales funnel is valuable, and the question is what is it worth? While this varies by product and channel, a generic approach is that the average cost of sales and marketing for a commercial bank customer is approximately $11,000 of time and resources on a fully allocated cost basis. If you exclude pre-prospecting time, the commercial customer sales cycle is approximately 32 months, thus resulting in a cost of about $344 per month. 

Again, while not all stage movements are equal regarding effort, $344 per month gives banks a starting place to value how sales and marketing can help not only produce revenue, but can save costs. If a referral program can cut 12 months off the sales cycle, then the value of that referral can be thought of as 19 x $344, or $6,536.

As a side note, we could have also approach sales pipeline movement value from a profit/ revenue perspective, but it gets more difficult. While events such as a referral are easy, understanding the impact of other events is less clear. For referrals, as an example, we can also view it as those sales leads that have a higher probability of closing. We now have to get into referral quality, which is why we trust the revenue method less, but on average a referral improves our conversion rate by about 2%. Thus, going back to our commercial customer example with a $350k cumulative customer lifetime value, that 2% is worth approximately$7,000, or close to our cost basis analysis.

One way to move the prospect through the pipeline and sales funnel is by engagement. Each point of engagement whether it is a click on the website, a phone conversation or an opening of an email potentially helps the sales process. Every engagement at the bank should be designed to revolve around a point in the sales funnel with the goal of moving the customer to the next pipeline stage.  Over time banks learn approximately how many points of engagement it takes to move the prospect to the next stage. For example, it usually takes five points of engagement to qualify a commercial bank customer to the point that you can move them from a marketing lead to a sales lead.  

The best examples of these are banks that utilize an email drip campaign that educates the customer through blogs, emails, and videos. This content can be targeted at helping the customer qualify themselves; provide the bank’s value proposition and assists in satisfying their concerns. The customers that engage with this content are more likely to move to the next step in the sales process and often more likely to move at a faster rate.

What is a “Like” Worth?

While it is all the rage to be “Insta-famous,” have tons of real followers, and garner likes we often get asked why we rank social media metrics so low, and behind things like clicks, email opens, and form completes. The answer is that social media views have very little, if any, causation to behavior for our bank. While clicks, open and videos viewed are roughly correlated with moving a prospect through the sales pipeline, we have found social follows and Likes do not.

This brings up a trap that many bank marketers fall into – the difference between correlation and causation.  It is easy to conclude that social media is helping out marketing when you notice that your bank’s followers are largely composed of customers. Unfortunately, we have found it rare that non-customers, with a neutral feeling towards a bank, follow a bank and then get converted to customers. As such, it is hard to assign a value to follows or likes.

For proof, try this – find a random group of people in the community and invite them to follow you on social media. Cull out the people that do like you and then offer them a quantifiable promotion such as $100 to open a new checking account. Do the same with a random group of non-followers. Your conversion rate is likely to be the same – somewhere around six to eight percent.

For that matter, when it comes to conversion, we have found higher conversion rates using traditional referrals, when compared to referrals on social media.  This has diminished the value of social media value in our eyes.

While we will discuss this more in future posts, using retargeting focused on social media followers tends to be more effective than retargeting those potential customers that visit your website. This is why we place social media value just ahead of non-customer website traffic.

Putting This Into Action

Our metrics and the rankings may or may not be similar to the ones you use at your bank. Every bank has a different customer base, different demographics, different marketing channels and different messages, all of which can impact the metrics you use and the value of marketing. That said, our bank is fairly typical, and our KPIs are probably not that different than the metrics that you are using.

In future articles, we will discuss how we track both marketing attribution and the progress of a prospect through the pipeline. We will also discuss how we score our leads to establish prioritization and how we assign different values based on from which channel the prospect has come.  We will also be looking at the effectiveness of voice search, new predictive algorithms, local mobile marketing, and the use of influencers. 

Next to having clear marketing objectives, using KPIs to help monitor marketing effectiveness gives banks the basis for determining the value and dramatically assist banks in making their marketing more profitable. If your marketing lacks effectiveness or your effectiveness is unknown, we recommend using these KPIs as a starting place.

If you use other KPIs or have thoughts on our methodology, we would love to hear from you. We are always looking for new ideas to make our marketing more effective, particularly against the backdrop of changing technology, improving data analytics and new marketing approaches. 

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CenterState Bank is a $10B, publically traded community bank in Florida experimenting our way on a journey to be a $25B top performing institution. Financial information can be found HERE. CenterState has one of the largest correspondent bank networks in the banking industry and makes its data, policies, vendor analysis, products and thoughts available to any institution that wants to take the journey with us. For more information about why we share you can go HERE.