By Richard Goldman, CEO, Competiscan
2020 will go down in history as the time when a global pandemic created a seismic shift within most industry segments domestically as well as economies around the world, not to mention in our own personal lives.
As a market intelligence innovator that provides clients the ability to analyze direct & digital marketing activity, Chicago-based Competiscan constantly collects and mines data to identify trends, forecast growth and predict changes in the markets we serve. Data collected from key direct marketing verticals including financial services, telecom, investments, retail and insurance companies during 2020 give clues as to how industries will approach marketing in 2021.
To illustrate, insurance carriers and telco companies managed to get through the early stages of the novel coronavirus pandemic relatively unchanged from a direct marketing volume and spend perspective. They continued to market at pre-pandemic levels, and in some cases even increased direct mail acquisition activity. That’s because COVID-19 became the new “life event,” not unlike having a baby, sending a child to college, moving or facing a death in the family. Life events not only make us think; they cause us to reevaluate making major changes to how we live and work. The most successful marketers of 2020 were able to leverage the pandemic such that the more they made people think – and feel – the more likely prospects will respond. It’s no surprise that life insurance sales are on the rise as consumers get regularly bombarded with news about COVID-19 deaths, and that telecom, internet and wireless services –even home security systems—continue to explode because more people now work and school from home.
Unlike the insurance and telco industry, the financial services sector, which includes banks, credit card issuers and lenders, took a much more conservative approach to direct marketing spend in 2020. In fact, Competiscan noted a 53% decrease in mailings in these sectors in the third quarter of 2020 versus the third quarter of 2019. The credit card industry alone saw a decrease from 1.1 billion mailings in Q3 2019 to just 407 million in Q3 2020. The damage that COVID-19-induced quarantines and shutdowns caused in the form of increased unemployment and furloughs forced banks, lenders and issuers to re-examine their risk tolerances as well as their tone. Just like so many businesses, marketers had to shift and pivot. They have had to go back to the drawing board to rethink messaging. Often these messages have included more empathy and focused in on what customers need—right now. This hitting of the proverbial pause button directly led to the slowdown in direct mailing volumes.
Looking ahead to 2021, for those verticals that reduced direct marketing activity, we anticipate a gradual recovery. However, the financial services sector will likely demonstrate the most uneven and prolonged return. We project the industry will remain at 5% or greater below pre-pandemic volumes and will not fully recover at least until 2022.
Here are five additional noteworthy financial sector predictions for 2021 based on the data patterns we’ve observed over the last few quarters of 2020:
1. Economic policy will continue to impact marketing volumes in 2021. Historically, direct mail volumes for savings and money market accounts have trended in line with the movement of the average Federal Funds Rate. For example, following the Federal Reserve Spring 2020 rate cuts, deposits mail volume remained historically low into the Fall. With rates expected to remain low into 2022, Competiscan does not expect a full recovery of deposits mail volume in the near future.
2. Pre-screened marketing will dominate with FICO® scores in flux. With changes in purchasing behaviors as well as coronavirus legislation, many consumers were able to maintain (and even improve) their credit health through the onset of the pandemic. By Q3 2020 the average FICO® score of recipients of pre-screened credit card offers rose to 748 (up three points from the prior quarter). However, as payment and economic relief programs end, consumer credit scores are likely to decline. Financial services companies will be forced to re-evaluate their current risk targeting practices. As issuers and lenders look to target new audiences, we expect companies to continue to rely on pre-screened offers to identify their ideal prospects.
3. Cross-selling will continue to be a key strategy when it comes to customer retention. Many financial companies we track see the value in maximizing relations with their existing customers. Retaining an existing customer is less expensive for the company, and the customer realizes synergistic benefits like interest rate discounts or being able to access their checking and credit card accounts from the same mobile app. As a result, cross-sell and upgrade offers represented 28% of total acquisition direct mail marketing from five of the largest banks in the country in Q3 2020, up from 16% in Q3 2019. We expect to see more retention-focused mailings next year, especially offers for additional services to pre-existing customers.
4. The “digital journey” will remain a top priority. Digital banking has been thrust forward by the pandemic and is now serving as a primary channel of interaction for many customers and their financial accounts. This will be a continued area of investment and dedicated marketing focus in 2021. Driven by those at the forefront of innovation in this space, the roadmap ahead for digital banking has evolved past simply providing transactional and account management services. With Bank of America and their largely marketed virtual assistant, Erica, and Apple introducing Apple Cash Family, digital services have accelerated with new value-added tools. Spend monitoring, budget trackers, and essentially providing customers with their very own virtual financial manager is where the bar now stands.
5. Relevant credit card incentives to combat attrition. Many consumers have multiple cards in their wallet, but they don’t necessarily use all of them. The question for marketers is how to get their credit card at the front of the wallet. This has become an even bigger issue for retailer credit cards whose stores might be closed or travel credit card programs whose customers are not currently traveling. We weren’t surprised, therefore, to see one out of every three usage incentives targeted to existing retail and travel cardholders aimed at everyday spend or essential purchases between the months of April and September. In general, American Express was an early leader with an adapted marketing strategy which included limited-time spend offers but also thoughtful benefits such as a complimentary year of Calm and a two-month free trial of obé fitness. How successful their approach to maintain a steady presence in the mailboxes of consumers while adapting its products and marketing strategy will form a template for other marketers on how to market during future times of uncertainty.
Although probably not as extreme as 2020, 2021 does promise to be a roller coaster of sorts for direct & digital marketers as they navigate the recalibration of work and travel, and navigating the other ups and down of what will become the new post-pandemic normal.