Recent trading updates indicate that the local banking sector is continuing to cash in on the consumer boom. This has been reflected in marketing spend, as the big four banks — Standard, Absa, FirstRand and Nedbank — tussle for market share and customers. In 2004, the total media spending of the big four increased 24 percent. This follows strong media spend growth in 2003 for Standard Bank, Absa and FirstRand.
The big fours’ relative media spend and asset market shares (based on their DI900 returns at the end of May 2005, and stripping out all other banking sector players). The numbers reveal two interesting points. While Standard Bank and Absa’s respective media spend roughly matches their relative market shares, FirstRand punches significantly above its weight. Two consecutive years of media spend increases of over 30 percent have pushed the smallest of the big four by assets into second place in the media spend rankings. In a similar vein, Nedbank’s media spend share of 13 percent is far smaller than its relative asset market share of 24 percent. The latter can be ascribed to the group’s internal restructuring focus over the last two years, which has seen it slash costs and sell off non-core assets.
In the last three years the banks have expanded their range of media types, although television remains the most used platform industry-wide. Paul Wilkins, CEO of MediaCompete, comments that this is unlikely to change in the medium-term, citing Millward-Brown research that demonstrates that television is three times more powerful as an advertising medium in Africa than in the USA or Europe, although he is cognisant of the threat presented by ad-delete technology.
But now radio and outdoor have also found their place in the sun and, speaking to the various marketing executives, it seems they are likely to continue increasing their share.
Overall, it seem that the banks’ media spend will continue to grow for at least the next three years. Wilkins comments that media spend is related to economic growth and that will determine future growth. With economists forecasting increases in real gross domestic product (GDP) in excess of four percent for the next two years at least, things look rosy.
But this masks the advent of a significant underlying change in the banks’ approach to marketing.
Luisa Belter, MindShare’s MD, believes that adspend investment is likely to become more aggressive, but refined. “With all the money being thrown around I don’t think sufficient care is being taken to properly audit results. The Barclays entry into the market will change the dynamic in the next three years and we’ll see battle for driving entry into Africa, thus the focus may change.”
Marketing executives at the banks confirm this is the case.
Nikki Twomey, Standard Bank’s brand director, is not planning a significant increase in adspend. “Media will have to be used in a smarter fashion and our money will have to work that much harder to reach our customers effectively. In the next three years we will focus on leveraging media channels in a far more cohesive way and we continue to expect breakthrough creative work from our agency in line with our business objectives.”
Brendan O’Donnell, Absa’s marketing director, notes that tougher competition may require more investment in marketing from the industry. However, Absa is now more focused on its return on marketing investment. In addition, the Barclays takeover means that the organisation will focus on its costs and “marketing is one obvious area”.
“Media will have to be used in a smarter fashion and our money will have to work that much harder to reach our customers effectively.” Nikki Twomey, brand director, Standard Bank
In contrast to Standard and Absa’s consolidation phases, both FirstRand and Nedbank seem likely to increase their marketing spend.
Derek Carstens, FNB’s brand director, says that the bank’s drive for customer resonance and its strong product offering will continue to drive adspend, particularly in radio.
But it’s Nedbank that’s set for a corporate makeover that will change its public face through its marketing campaigns.
Greg Garden, Nedbank’s marketing director, says that Nedbank’s adspend will increase for two reasons. Firstly, the Nedcor brand has been consigned to history and the group has chosen to focus on Nedbank instead. This change to a single brand strategy will see Nedbank benefiting from the rechannelled marketing budget of other brands, such as Peoples’ Bank. In addition, Nedbank now needs to establish itself as a “bank for all”. Although it has traditionally enjoyed a strong relationship with its corporate customers, its retail franchise is weak. This focus will now need significant marketing support.
The biggest change in the industry’s marketing is likely to be not in how much it spends then, but in how it’s spent.
Belter hits the nail on the head when she comments that although the banks’ campaigns are generally effective in creating brand awareness, with the paucity of news and a stable environment most banks are relying on image campaigns with very little to differentiate them — except colour. Says Belter: “I’m not certain that this will drive conversion. In our analyses, service and costs are two important factors that drive customer consideration, so unless banks begin focusing on this very little will change”.
All four of the large banks rate attracting new customers as a priority. But scrapping over existing market share is unlikely to meet their targets. Belter believes there will be a rush to convert the unbanked — a trend already well established with the recent opening of the 500,000th low income-targeted Mzansi account.
Says Belter: “Funds will be channelled towards one-to-one contacts and opinion leaders where word of mouth is an important and trusted source of information. Educational platforms must become core growth opportunities for banks. Going forward I wouldn’t be surprised if banks take a more retail approach in customer acquisition: giving away more and increasing their added value offerings.”
One likely outcome will be more below-the-line activity, including sponsorships of large sporting events and community programmes. O’Donnell believes that the 2010 Soccer World Cup will fuel outdoor investments and “cleverer alternatives” with promotions and linkages to the main event. He notes that these campaigns have to start early due to the contractual lock-in, so he believes it should begin to kick in next year.
So, despite the likelihood of slowing growth in the big banks’ marketing spend, it’s likely to become more innovative and exciting as they adapt to the changing market.
Kirsty Laschinger, a former JP Morgan business analyst, is a freelance journalist and regular contributor to Finance Week.