Beyond the Abstract: A Structured Approach to a Market Plan

Transcription

1 Beyond the Abstract:

2 Table of Contents Executive Take-aways...2 Beyond the Abstract...2 Achievable goals...3 Planning the Plan...3 Setting the right tone...3 Forging a plan of action...4 Components of the Market Plan...5 Competitive analysis...5 Market potential/demographic overview...5 Target market identification...6 Market potential review...7 Key highlights of Table Case Study for a Community Bank...9 Results...9 When Market Planning Expertise is Needed...9 1

3 Executive Take-aways While there is undoubtedly a creative aspect to product marketing, it is often stereotyped as a creative endeavor. The truth of the matter is a successful marketing initiative depends on a well-planned, detailed, methodological approach similar to any financial services project. A good marketing plan as it pertains to market assessment the understanding of the competitive environment and where the bank s brand fits within it is a case in point. This structured market plan is a methodical, structured process the type that can ensure not only the success of a product launch, but the long-term viability of the product. Once the practices and principles that make up a market plan are identified, practiced and mastered, they can be repeated and reapplied with situational tailoring to different scenarios. The structured market plan is distinguished by its ability to yield identifiable, achievable goals: Creating a targeted marketing strategy and communication approach for the product or program Maximizing the bank s marketing budget and promotion of the new product/program to those prospects or clients most likely to purchase it Outlining the marketing strategies aimed at helping the bank attract new customers for the product/program, sunset from legacy products (if any) that are being replaced and enhance competitive product package design Developing a roadmap for the bank as it begins communicating both internally and externally about the new program/product A planning session serves as a kick-off to the initiative during which the bank defines its purpose for launching the product and what constitutes a successful launch. Participants include a project manager, marketing director, operations supervisor, IT director, retail sales manager and a representative from executive management. A third-party consultant, if involved, is also part of the team. The structured market plan consists of the following four components: Competitive analysis A review of competitor banks that offer a similar product in the bank s market areas. Demographic overview A summary of the demographic segments and characteristics of the residents in the bank s market area. Target market identification An outline of the product/program target market and appropriate marketing message to build an effective communications strategy. Market potential review A review of the current potential existing in the bank s geographic markets for the new product/service. A case study, based on a real FIS Consulting market assessment is provided at the end of this paper to demonstrate the tangible results from a structured market plan. Beyond the Abstract Any marketing initiative has its creative aspects, many alluring enough to galvanize an organization s collective imagination. It s hard to keep things in perspective, as instincts and intuition hold sway and the marketing department takes on the creative process. 2

4 The above depiction exaggerates the case, but there is a tendency to overlook the fact that a decidedly less abstract skill set underlies most successful product marketing initiatives the same kind of meat-and-potatoes management disciplines that ensure any large financial services project meets or exceeds its goals. So it goes with the marketing plan as it pertains to market assessment, the foundation of a new product launch or the introduction of an existing product, such as personal checking accounts, consumer loans, debit cards, credit cards or bill payment services, into a new market. The work that goes into developing an understanding of the competitive environment and where an offering fits may not be glamorous, but having a methodical process in place is necessary for the success of the product in question. It can be leveraged over time and across product lines by being reapplied with situational tailoring to different scenarios. Inherent consistency removes guesswork so that sustainable results can be achieved repeatedly. In each case it paves the way for smooth, successful product implementation. The structured marketing plan also facilitates a substantial return on investment (ROI) for the bank. This is particularly significant, given a bank s frequent reluctance to invest in marketing research due to questionable returns potential. Since a good marketing plan results in quantifiable goals and projects detailed results, the intangibles that make banking executives nervous are reduced. They know that by following a disciplined approach a bank can maximize its marketing dollars by promoting the new product to those customers/prospects most likely to purchase it. Bank uncertainty, combined with a reluctance to spend, can result in bad marketing decisions. Some financial institutions attempt to undertake their own market assessments with staffing that lacks adequate expertise because the bank perceives the cost of that expertise (bringing in an experienced third party, for example) will outweigh its value. However, the financial impact from a poorly conceived market assessment one that fails to adequately identify the competitive landscape, target demographics, most effective modes of communication to those demographics and whatever else it takes to make a product launch successful almost always dwarfs the time and effort needed to get out of the gate correctly. A bank can t hit its target market when achievable goals as they pertain to that market are unclear or undefined. Achievable goals Because of the way it is constructed, the structured approach to market assessment does yield identifiable, achievable goals: A targeted marketing strategy and communication approach for the product or program Maximization of the bank s marketing budget and promotion of the new product/program to those prospects or clients most likely to purchase it Outlined marketing strategies aimed at assisting the bank to attract new customers for the product/program, transition from legacy products (if any) that are being replaced, and competitive product package design A roadmap for the bank as it begins communicating both internally and externally about the new program/product Planning the Plan Setting the right tone What occurs at the beginning of a market plan sets the tone for its development. If the end result is success, the initiative probably got off on the right foot. 3

5 The first phase of the market plan is the planning effort. During this stage, the bank defines its purpose in launching the product and what constitutes a successful launch. This is important because quantifiable results have no meaning without a baseline to which they can be compared (an example of this kind of comparison can be found in the case study found at the end of this paper). One can easily see the value of this kind of benchmarking in the case of a retail product for which ROI has been determined to be a relevant metric. If a target for ROI is proposed during the planning process, the market assessment team can determine whether the projection is realistic before it commits to implementation. If the metric is deemed achievable, when product rollout commences results can be checked at intervals against the benchmark. The ultimate goal is promoting the new product to the target market groups and the geographic regions that have been identified as exhibiting the strongest market potential. Establishing baselines on verifiable research ahead of time greatly increases the chance of success, with the fringe benefit of creating a sharply focused objective toward which the bank s assessment team can work. Forging a plan of action A valuable characteristic of the planning meeting from the bank s perspective is it doesn t require a major investment in time; it can take place in less than a day. Participants usually include a project manager who functions as the point person for the product launch, marketing director, operations supervisor, IT director, retail sales manager and a representative from executive management. If a third-party consultant is part of the mix, they participant as well and interface regularly with the project manager from the bank as the market assessment progresses. The planning session includes an evaluation of current marketing resources and strategy and the forging of a plan of action to be referenced and referred to when changes in strategy are necessitated, misunderstandings surface, or conflicts arise in other words, the creation of a common base of understanding: a documentable blueprint for the introduction of the product into the market. Roles, responsibilities and accountability are assigned at this time, not only for the assessment phase, but for the product launch and implementation. Tasks like ad template revisions, ad template delivery to the advertising agency, prospect purchases and direct mail fulfillment gain ownership. Related tasks such as product training, software implementation and support, while not technically part of market assessment and outside the scope of this paper, may also be assigned. If an outside consultant is utilized, their role is likewise identified and codified. Ancillary meetings, if necessary, can take place in a relatively short time period after the first planning meeting, but before the market assessment work begins. These discussions consist of topics deemed necessary to identify and understand to keep the market assessment on track. One example might be a meeting to analyze recent advertising strategies and evaluate current media usage including newspaper, , web and mobile banking. It would be perfectly acceptable in this case for an outside relevant party, such as the bank s advertising agency, to be involved. As market assessment and product implementation unfold, the initial planning group remains involved through a series of regular meetings that last until product rollout is complete. These reviews, often taking place on a monthly basis, serve as safety measures that allow for strategic adjustments to ensure implementation continues to follow the blueprint. More often than not, the first of these meetings is a discussion about the findings of the initial market assessment, which, depending on the efficiency of the process, may take place in as little as four weeks after the discovery phase. 4

6 Components of the Market Plan The personality of a structured market assessment varies based on the specific product launch, but in every case the planning structure consists of four distinct components. Competitive analysis This is a review of competitor banks that offer a similar product in the bank s market areas and may include a selection of local community banks, online banks and national bank competitors. A summary of the bank s current product offerings including product structure, pricing and advertising strategy is part of this effort, as well. Questions answered in this part of the market analysis include: How competitive is the market for the product being introduced? What are the characteristics of the current product and how do they compare to the bank s products? What are the prospects for change? And just who are the competing banks and why are they so defined? If the product is fee-based or interest-based, the details of the rates being charged by each of the identified competitors should be part of this analysis. If there are different variations or tiers of a product, each with its own fee/price schedule, these need to be included as well. These components provide the source material out of which a product can be positioned as a market leader. Demographic overview This is a summary of the demographic segments and characteristics of the residents in the bank s market area. It includes a review of the prospects who reside in the geographic areas that surround the bank s branch network. Current year and five-year projections are outlined for a variety of key demographic indicators, including: population growth, household growth, median age, average household income, etc. The information gathered during the demographic overview section of the assessment provides the background used to determine the target market for the new product or service. Research may extend outside the area to include national or global situational analysis that may ultimately affect the targeted market, as is the case of the following graph that shows the growth of online banking: 5

7 Figure 1. Growth of online banking (sample metric). After the demographics for the market are identified, they can be used to filter analysis. In this example, they can be juxtaposed against the general growth of online banking to produce a context that is specific to the product being introduced: Target market identification Figure 2. Who fuels online banking growth (sample metric)? This is an outline of the product/program target market and appropriate marketing message to build an effective communications strategy. Based on the competitive landscape and demographic overview, both of which were 6

8 identified by the previous component, a target market is identified for the product in question. At this time, marketing messaging and a communications strategy is recommended for each target market. If there are similar products available in the target market, they are referenced at this time, specifically: The percentage of residents within the specified market radius of this location that currently uses a similar product. If account balances are relevant to the product, their averages should be specified. The larger geographic area should be broken down into specific locations if the bank has more than one branch. Based on this demarcation, an analysis should be undertaken that breaks use down by location, in the process defining which seem most promising for product introduction, that is, how many residents currently use the product. When the above is compared to the general demographics established in the previous component, location potential can be realized. Does the use of the product, for example, exceed the national average? Or is the location showing little interest in such products? The dynamics of the population in the designated location can also be folded into the assessment. Is the region demonstrating population and household growth now? In the future? What is the general profile of the targeted demographic in the targeted geographic area? In the example provided (see Figure 2), Generation X and Y were called out as our target demographic. The target market identification would then identify the locations within the target market in which the highest percentage of these users resided. Market potential review This is a review of the current potential existing in the bank s geographic markets from activities related to the program/product. In other words, now that the target market has been identified for the bank s surrounding areas, it is time to find out how many potential customers with the key demographic exist within the bank s target market those that have shown the strongest use of products similar to the one being introduced by the bank. The following market potential summary in Table 1 provides an overview of one of four branch markets for a sample client bank that wished to introduce a high-interest checking product (see the case study that follows in the next section for a sample summary of results). In reality, a similar table is prepared for each of the branch markets. The bank s market assessment team would then make recommendations for each of the markets based on the comparative details of each. 7

9 1234 Main Street Number of Accounts In 3- Mile Radius % of Area Households Number of accounts in USA % of Accounts in USA Households Average Balance of Accounts in 3- Mile Radius Average Balance of Accounts in USA Households Deposits Retail Non-interest DDA 2, ,628, ,692 5,149 Interest DDA 3, ,135, ,445 9,256 Money Market Checking 5, ,881, ,688 7,919 Regular Savings 5, ,142, ,898 20,911 Money Market Savings 1, , ,154 32,625 CDs (including IRAs) 1, ,867, ,109 61, K Plans 3, ,424, ,679 55,583 Stocks 1, ,449, ,790 77,917 Mutual Funds 1, ,866, ,667 87,769 ATM/Debit Cardholders 4, ,727, N/A N/A Internet Banking 3, ,625, N/A N/A Online bill pay 2, ,379, N/A N/A Online trades ,150, N/A N/A Online transfers 1, ,410, N/A N/A Deposit Totals 38, ,979,911 Loans (MM) Retail 1 st Mortgage 3, ,906, , ,984 2 nd Mortgage ,114, ,864 35,143 Auto 2, ,890, ,081 15,649 Student Loans ,523, ,214 20,332 Bank Credit Cards 5, ,481, ,636 5,255 HELOC 1, ,842, ,425 25,223 Loan Totals 12, ,759,541 KEY HIGHLIGHTS OF TABLE 1 Table 1. Market Potential for Sample Branch Market Average interest bearing checking account balances in this market area are above the national average ($9,256) at $12,445. 8

10 Over percent of the residents in this market area are ATM/debit card holders. This exceeds the national average of percent. Use of online bill pay, trades and transfers in this market area exceeds the national average. Case Study for a Community Bank A theme running throughout this paper is the importance of quantifiable results gleaned from a well-planned market assessment and, if possible, the establishment of a baseline against which they can be compared to determine success after implementation. The best way to illustrate the effectiveness of a structured market assessment is by providing a case study describing a successful product launch resulting from the approach. One community bank, an FIS client, introduced a high-interest checking product to complement its existing product set. Using the four components of the structured market assessment as established, FIS Consulting then helped the bank implement a product launch and tracked the product s performance over a six-month period. Actual results, by month, were tracked against the projected results formulated as a result of the preliminary analysis, with variances documented both in terms of dollars and percentages. The key metrics tracked over this period of time included: Total balance Average account balance New balances New accounts Rewards qualification rate Results The results of the product launch were almost uniformly positive over the six-month period: The total number of checking accounts equaled 361, exceeding projected results (280) by 81 accounts. $6.35 million in total balances exceeded projected results by $4.1 million ($2.24 million). Average account balances of $17,503 exceeded projected balances of $8,000. $2.93 million in new account balances were realized, versus the projected balances of $1.25 million. When Market Planning Expertise is Needed The uncertainty surrounding a new product introduction can cause inaction on the part of a bank which, in turn, can lead to missed opportunities to grow market share and revenues. In an economic landscape distinguished by rapid change and fierce competition, optimal alignments of retail products and the markets poised and ready for them can vanish in the blink of an eye. The financial service institution that wants to capitalize on new product/market opportunities can neither afford to be hesitant nor be blindly impulsive. This is why a well-planned market assessment holds more value than perhaps at any time in the history of the financial services industry. 9

11 There is little question that planning an effectual market assessment is a challenging task. It must be in-depth enough to take every potential variable into consideration, and leave virtually nothing to chance. At the same time, it must be completed in a relatively short time frame without wasting resources in an effort to realize the full potential of revenue growth resulting for the product launch. Given the complexity inherent to this task, the bank may find it prudent to seek the assistance of outside expertise. If this is the case, FIS Consulting Services is ready to step in and make an immediate impact. FIS Consulting Services has amassed extensive experience in market assessment for retail products and their implementation. Since we have successfully executed many initiatives of this type, our expertise is founded on proven capability in the market with demonstrable results in tight time frames. FIS Consulting Services welcomes the opportunity to work with the bank on its market assessment initiative and provide whatever support is deemed necessary to its success. Our expertise is unique; our effectiveness a matter of record.. 10