Marketing Optimization Modeling

1. 1 Marketing Optimization Modeling Banking & Financial Services

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3. 3 Across 9 regions where this bank operated, the overall contribution of marketing was quite low at 8.4 percent of total revenue. What is remarkable here is this 8.4 percent applied to very large bank balances of $21.5B. Thus, marketing expenditures of about $39.5 million was responsible for generating $1.8B in revenue. With margins of about 5%, this means that the bank�s marketing spending was very profitable. This very high level of ROI suggested that the bank was under-investing in marketing and could drive substantially higher growth and returns with much higher marketing budgets. Other key insights found from this modeling exercise included: One of the bank�s markets was significantly impacted by Hurricane Katrina. Surprisingly, this impact was positive rather than negative due to the inflow of FEMA and insurance claims following this event. Overall, this event had about a 1 percent net positive impact on total bank balances. The bank regularly measured customer satisfaction at the branch level. We included customer satisfaction metrics in our model and found it to be a very important driver of the bank�s overall performance. During the year in question, this bank expanded into 4 new local markets via acquisition. Our model findings revealed that marketing spending was very effective in these markets and was a key catalyst to the bank�s +13% revenue growth for this year. This bank had a wide portfolio of products, from insurance, investments to loans, checking and savings products. Some of these products were name-branded and were highly advertised. Our model findings revealed that these �branded� products were significantly more marketing driven and these products likewise represented a key catalyst to the bank�s overall 13 percent growth for the year. The bank could increase revenues 2.9% through more efficient spending without incremental total investment. Our model optimization found that the bank could further increase revenues by an additional +9 percent through a significant +50 percent increase in total marketing spending and through more efficient spending across more efficient regions, products and marketing mix elements, as determined through the model. Because the bank was found to be significantly under-invested in marketing, such an increase not only was found to generate significant growth, but also would be a profitable move, financially.

4. 4 Decomposing total marketing impact

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15. 15 Contact Michael Wolfe, President Bottom-Line Analytics LLC 404.841.1620 MJW@bottomlineanalytics.com www.bottomlineanalytics.com