Feeling quite poorly lately has resulted in my spending disproportionate amounts of my evening time watching TV rather than reading as I normally do.
Having spent almost a week watching prime time TV, I couldn’t help but being surprised at the number of bank loans TV ads aired in a 10 minute slot. Last time I checked there were those of at least 3 different banks. All three alike were focusing on promoting the terms of their latest service offerings.
It seems somehow unnatural for me that those should be effective and not only because of the high level of advertising clutter in that particular time slot.
If we assume that the goals of those advertising campaigns were to cross-sell loans to existing customers and lure new customers away from competitors, I am afraid none of them are very likely to be pulled off.
A bank loan is simply not a purchase you make on a whim. What is more, it is not a purchase you make unless you very much need it – no amount of TV advertising will cross-sell a bank loan to an existing customer who has no such need at the moment.
No amount of TV advertising will lure a customer away either, as a bank loan is a complex, high-involvement service purchase associated with high perceived risk and consequently high level of information search prior committing to it.
As such, brand awareness will constitute very little part of the decision-making process – i.e. it will simply not be a prerequisite for making the consideration set of the consumer as it is the case for purchases of FMCG goods. Rather, it will be the service terms of the offering and the extent to which the provider comes across as trustworthy that will matter most.
To make my point clear – it is highly unlikely that a sound-thinking individual who finds himself/herself in need of obtaining a bank loan will stop using their tried and tested service provider of several years simply because they saw on TV while they were having dinner that a competitor is offering lower rates on a particular financial product in a particular moment of time.
Obviously, not having seen any sort of analytical data measuring any of those campaigns’ effectiveness, I can’t be very accurate judge. It may be that the advertising campaigns in question have substantial ROI (return on investment) that justifies their perpetual usage.
Still, it seems counter-intuitive that this will be the case in an industry where:
- Fixed costs are high (Egan, 2008)
- Costs of customer acquisition are much higher than the costs of customer retention (Egan, 2008)
- It makes much more sense to “generate business from its existing customer base” than chase potential loan seekers in every direction (Reichheld, 2009)
Works Cited
Egan, J. (2008). Relationship Marketing: Exploring Relational Strategies in Marketing. Harlow: Pearson Education Limited.
Reichheld, F. F. (2009, May). Lead for Loyalty. Harvard Business Review, p.79.
MarketErrs 