A message from the Community. Community Bank Strategic Advisory Board

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1 A message from the Community Bank Strategic Advisory Board To: Community Bank Boards From: Glyn Yates Co-Chair, Community Bank Strategic Advisory Board Russell Jenkins Co-Chair, Community Bank Strategic Advisory Board Bigger than a bank strategy Marketing is an integral part of business success and the banking industry is no exception. At the most recent meeting of the Community Bank Strategic Advisory Board (CBSAB) we discussed and considered the Bigger than a bank strategy presented by Owen Davies, Head of Marketing and Communications. The CBSAB considered the need for the campaign in light of mounting evidence that we need to develop and deliver a national marketing strategy that cascades down into state, regional and local campaigns to develop brand awareness and to help drive business growth. The 2008 Olympics campaign was by any measure very successful and in the almost six years since that time we have not developed or delivered an overall national brand awareness campaign. It could well be argued the time for such a campaign is overdue. Based on the recognised need, we discussed how to fund such a campaign and as is demonstrated in the attached information most of the marketing dollars resided in the Marketing Development Funds of community companies. Using the proposal from Mr Davies if community companies contribute $2.5 million then the Bank will match this funding and also completely fund the $2 million in production costs. Therefore community companies would be contributing some 35 percent of the funding required. Our place in the banking market is being vigorously challenged and surveying over recent years has seen the customer satisfaction gap between us and our competitors closing (as they try to reconnect with their communities) we need to act decisively and together to ensure success now and into the future. Based on this evidence and a commitment from Mr Davies to ensure the campaign cascades into state, regional and local campaigns the CBSAB has endorsed the proposal and strongly encourages boards to work together to help achieve success for all. Should you wish to discuss the CBSAB position in more detail please contact one of your representatives. In closing please have a safe, joyous and happy Xmas and prosperous 2014.

2 Collaborative marketing campaign: Bigger than a bank A proposal to co-invest with Bendigo Bank in growing our market presence We are asking your Board to invest with Bendigo Bank in the public launch of our new consumer proposition that Bendigo Bank is Bigger than a bank. This launch is the national linchpin of the Bank s new marketing strategy that will be cascaded down to state, regional and local level. It reflects our 2008 national sponsorship of the Olympic Games television coverage, which launched It starts with U, a platform that has served us well for five years but now requires a new approach under the Bigger banner. A successful, high profile launch of Bigger than a bank will boost public awareness and understanding of our community banking proposition and we are confident this will flow through to higher business growth for all. Why a collaborative investment? All successful franchises are based on collaborative marketing that ensures all local franchisees can leverage a strong national brand. Successfully marketing any franchise Community Banking included has simple requirements: Consumers must be aware of the franchised brand They must know and like what the brand does They need to feel the brand can deliver something they need In each case above, the more consumers who know and feel these things, the more business that will come to the... Local franchisee, whose job is to deliver well on the brand promise If McDonald s weren t out there advertising and building profile, the local Macca s franchise would be just another burger shop struggling to compete. Same with us. If Bendigo Bank is not well-known, well-regarded and appealing, then our local branches will simply not see as many opportunities to acquire new customers. If your franchise brand (Bendigo) has a low profile, it won t matter how well you market locally, you will be fishing in a smaller pool of potential customers.

3 Bendigo Bank recognised this 15 years ago when we started Community Banking. Our problem then and therefore a problem shared by our franchisees was we couldn t afford the big-scale advertising needed to build brand. This was particularly true in markets new to the Bendigo brand. For example, when Kulin was our only WA branch we could not justify spending big money to build brand profile. We helped our franchisees solve this problem local market by local market by paying franchisees a Market Development allowance to build brand profile. So right from the outset, brand building was the key intent of MDF. It still is, but with 300 community branches, we have come full circle we now have enough coverage around Australia for all branches to benefit from a national advertising campaign. Ironically, though, because of our success, the biggest chunk of our marketing budget now sits in MDF. It means Bendigo alone is no longer able to fund big brand-building advertising campaigns. Nor can McDonald s by itself, actually. That s why they require their franchisees to pay a marketing levy to help build McDonald s brand to the benefit of all. We re not doing that instead we hope your Board will recognise that by allocating a small part of your MDF to a broad campaign, you will more effectively help lift the profile of your brand, Bendigo Bank, than by allocating all funds locally. Why Bigger than a bank? Many of you will have seen Marketing s presentation of Bigger than a bank at the 2013 National Conference or at your State Conference earlier in the year. To recap: Working with internationally renowned advertising agency, McCann, we reviewed the Bendigo Bank brand in early Research included a national quantitative study, ten focus groups covering five demographics, and in-depth ethnographic studies where we spent time with consumers in their home environment. Summary of findings: The banking market is tougher. In the wake of the GFC, consumers are less likely to shift banks or to buy new products. They are more likely to favour banks they see as being big, secure and competitive. The major banks have improved service and their customer satisfaction is now not far behind Bendigo s, making it even harder for us to win new customers. Our brand has some perception problems. Consumers love us for community banking, but go to a real bank for their banking. MDF $14 million $2.5 mil Group Marketing Advertising budget We want to reposition the brand in order to improve business performance Bendigo is seen as: Small and/or local Lacking expertise in products Uncompetitive And needs to be viewed as: Bigger than I thought Has everything to meet my needs Is competitive

4 Bigger than a bank The core organising idea for our brand repositioning is Bigger than a bank. Being bigger is not about size; it is about our actions. It is the actions people don t expect from a bank. Like sharing revenue with community partners and those partners contributing more than $100 million in grants that have profoundly improved communities and people s lives. To be bigger than normal banks is to feed into prosperity, not off it. It s to be prepared to share value created by our business interactions. We are confident Bigger than a bank will reframe people s perceptions of Bendigo Bank and therefore your business. The concept has been tested and resonates with people. But to gain cut-through, we need to make sure consumers notice us. We need to buy media which: Gets us noticed Increases understanding of what we offer Grows the number of people who consider banking with us Increases our account openings and product sales Our strategy We need to launch Bigger than a bank on a big national platform. You can hardly claim to be bigger otherwise. This launch will drive immediate awareness think Olympics 2008 and how that boosted our profile and drove an immediate uplift in customer numbers. We ll demonstrate nationally and in your local market how and why Bendigo is bigger than a (normal) bank. At the same time, we need to show we are just as real as the big banks but even bigger because of the benefits we bring to the community. Your local advertising and activities are therefore important to leverage our increased awareness. Our campaign will also engage consumers through digital media, where we will be showcasing our products. Some directors have observed that digital advertising doesn t help our branch, but with 80 per cent plus of consumers now researching products and suppliers online, we are cutting our own throats without a strong digital presence. Customers buying from us online get to nominate their local branch to receive their business. If they don t nominate, Bendigo will ensure the business goes to their nearest branch. While our media investment will be concentrated on a strong launch phase, we re aiming to be in market for as long as possible through F15 to ensure that having raised consumers interest in us, we don t slip out of the picture. It is therefore critical that your board continues to promote Bigger locally throughout the year. The launch media campaign This is not only a brand campaign it is designed to increase business by driving new customers and sales. Our media partner Mitchells have devised a launch plan designed to: drive awareness of our brand increase understanding of our capabilities engage consumers prompt them to join or buy from us We plan the linchpin of the launch to be Bendigo s sponsorship of a high-profile, national television program. This is currently in negotiation and we will advise you of the program as soon as possible. As sponsor, we would receive brand exposure on the program s website and social media platform essential elements in modern marketing. Importantly, our sponsorship would provide in-program exposure, thereby negating those viewers who record programs and skip ads. We are negotiating to use the program s intellectual property in our branches and websites. We will launch with a brand TV advertisement that explains what we mean by Bigger than a bank. This will be supported by digital and printed information and selected radio. Following the brand phase, we will move immediately into product advertising to show consumers how we can help meet their financial goals. Basic Black credit card has been chosen as the first product because: It is a product all Australians are familiar with Black is extremely competitive (low interest rate) It is a good acquisition product. Consumers can buy it to start their banking with us; it s then up to us to grow the relationship Customers with credit cards are among our strongest contributors with an average of 3.6 products and a relationship value of $123,500 Future stages of the campaign will include: Home loans (agribusiness in rural areas) Personal loans Business banking

5 Proposed launch schedule Dates Funding Production December 2013 January 2014 Bendigo Bank Pilot (South Australia) February 2014 Bendigo Bank & Community Banks Initial evaluation * May 2014 National May/June 2014 Bendigo Bank & Community Banks Evaluate results and report Late 2014 By the end of 2014, both Bendigo and partners will be in a position to determine future media investment. By launching late in F14, we can most effectively spread two years collaborative investment across the campaign, which will continue through a substantial part of F15 as well. Connecting the campaign to your local market This will be done in a number of ways: Marketing will provide you with promotional materials to showcase your community investments, so people see tangible local evidence of how Bendigo is bigger how you go beyond what they expect from a bank. This part of the campaign is critical, because it demonstrates the truth behind our new positioning. Marketing Central will provide you with a suite of advertising and promotional tools to leverage the national advertising. Your staff will undertake a training program Being Bigger & Better that will show them how to translate key brand messages into sales conversations. Our TV sponsorship works in two directions. Because we are able to use the show s intellectual property, we can promote the program through our branches and communities prior to its launch driving more people to view it and engage with our brand. The Marketing team is also developing a branch-based direct Member-get-Member campaign to capitalize on Bigger by enabling your customers to actively recruit on your behalf. We ll tell you more about this in Campaign funding plan Bendigo will fund the entire production costs for the campaign estimated at $2 million. Media will be co-funded equally by Bendigo and Community Banks on the basis of a $1000 per month per branch commitment of MDF for 15 months ie. $15,000 per branch for sites in profit. We re conscious that this is a large investment for some businesses, so we ve also included a $500 per month option for sites not yet in profit. These MDF contributions are voluntary. While we encourage boards to participate and most have indicated a willingness to do so no one will be coerced into participating. However success will be predicated on us all working together. Why $15,000? Increasing customer acquisition and sales requires us to build brand equity, particularly in non-victorian markets where the brand is newer to people. We need to be prominent in the market for as long as possible. The requested investment delivers an adequate launch budget.

6 What do you get for the money? Mitchells are now consulting with Bendigo and McCann to build a media plan. We expect to have this to you in February. This plan will not be as detailed as you would like. It will be the big picture that we then need to connect to local markets. Mitchells are Australia s biggest and best media planners and buyers. All of us have to trust their expertise in delivering us the biggest bang for our buck to reach as many of our target consumers as possible through formats that encourage them to engage directly with us. The plan will have a national linchpin. Thereafter, as best we can we will allocate monies to those markets from which they are drawn eg. regional Victorian contributions will be spent in regional Victoria. How do we accept the proposal? Through an online form accessed via the link in the accompanying this proposal. (Please contact the Marketing team if you are unable to access the link.) How do we pay? Bendigo will start deducting payment from your MDF allocation in April Deductions will continue until June Those that have already made contributions this year will have monthly payments reduced to allow for amounts already received. What happens if not all boards accept? In the three major collaborative campaigns run to date WA, Victorian metro and Victorian regional there were boards that did not contribute to the campaign. We achieved around 90 per cent participation. In each instance, boards and Bendigo agreed to proceed on the basis that there was overwhelming participation and that it was in everyone s interest to run the campaigns. Broadly, we would regard 80 per cent participation as being definitive. That is, if 80 per cent of boards in any given market agree, then the campaign will proceed. We would prefer not to be definitive about participation rates, but to judge each case on feedback from the network. What are the expected campaign outcomes? We can t say for certain there are many variables. What we can say, though, is that we have a proven track record of driving good business outcomes from our media campaigns. To provide some examples: Through the 2000s, the Bank increased customer acquisition by an average of 840 per month when we were actively advertising The 2008 Olympics campaign launch of the U campaign resulted in a net increase of 4390 customers per month for the four months of the campaign (compared with the four months prior). This translated to business growth of $312 million The spring 2013 Big Local Home Loans campaign drove a 17 per cent increase in settlements Victoria s collaborative campaign from April to June 2013 drove a 12 per cent uplift in customer acquisition WA s You Like campaign in early 2013 produced exceptional consumer engagement with around 5000 Facebook likes How do we measure and report results? We will measure: Brand health awareness, familiarity, consideration (building these measures is critical to future growth) Perceptions of Bendigo Bank. Rebalancing perceptions is a critical element to our success Engagement audiences delivered, online hits, inquiry Business new customers, business growth, product sales Results will be regularly reported to the network. Brand measures will be quarterly and business results monthly. Be part of something bigger You have an important decision to make at your first Board meeting for A successful launch of Bigger than a bank can usher in the next round of strong growth in customers and new business. Please lodge your acceptance of this proposal by the end of February so we can all be part of something bigger. Owen Davies Head of Marketing & Communications