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08 Jan
2015

Nastaran Heydari

Associate Consultant
 

This post originally appeared on The Financial Brand

 

Data-driven marketing is the future for the financial industry. To find success on the battlefield in the Algorithmic Age, marketing and IT will have to work more closely than ever before.

 

Ask any financial institution about the major challenges they face, and the word “silos” will creep its way into the conversation at some point. In banking, everyone tends to work on their own initiatives, in their own departments, and with their own goals. Seldom is there collaboration between teams, and sometimes, the competition between departments turns downright adversarial. And yet this has prevailed as the organizational system dominating the banking industry for the better part of a century.

 

It doesn’t work… at least not anymore (if it ever did).

 

The new digital landscape has completely redefined the approach organizations must take to marketing. Financial marketers hoping to find success in the future must leverage the mountains of data they generate — in every department.

 

We live in an “algorithm economy,” where only two factors really matter: the data sets you work with, and what you do them. Google knows this (in fact its algorithms are guarded almost as closely as the gold in Fort Knox). Amazon knows this (think: “Products Recommended for You”). NextFlix knows this. In fact, every company admired as a smart and savvy player in the digital arena knows this.

 

Reality Check: Marketers who have the best data sets (their input) and the best algorithms (their output) will win.

For all the blustery talk of “progress” and “innovation” in the banking space, the financial industry still has a long way to go. Banks and credit unions continue to struggle with data analysis at the most intuitive levels. Most have a difficult time trying to calculating benchmarks like wallet share and products per household. For instance, how many can enumerate those customers who have a checking account, and a home loan, and a credit card? Or try this: ask a bank how many unique customer relationships they have — they probably can’t tell you. They might be able to say how many checking customers they have, or how many home loans they’ve funded, or how many customers have credit cards, but their ability to make all these data sets play nice with one another is severely constrained. How many have all three products? It’s anyone’s guess…

 

Key Question: How can a financial institution be expected to formulate a “holistic view of the customer” or calculate “next best products — much less wrangle something as massive and abstract as “big data” — when they can barely tell you how many customers they have?

 

Financial institutions have more data streaming in from more directions than ever before, and it all needs to be collated. At the most basic level, data from different product lines (aka “departments”) needs to be integrated. This alone could prove a difficult challenge, since so many financial institutions run a hodgepodge of IT systems — a clunky amalgamation Frankensteined through years of acquisitions and various vendors bolting on their proprietary array of stand-alone tech solutions.

 

But financial marketers will need to push data integration a lot further than just at a departmental level, beyond product lines. There is data pouring in from every channel and touchpoint — branches, online, mobile, payments, social media — too much for marketing to handle on its own. It can, should and needs to be dissected.

 

Which is why financial institutions are going to have to completely rethink their internal organizational structure. If they are going to pull this off, they can’t keep marketing and IT separate from one another. Not only do financial institutions need to beef up with more data analysts, data scientists, data wizards, or whatever you want to call them. It also means marketing and IT need to be best friends. It should be nearly impossible to tell where marketing stops and where IT and data analytics begins.

 

Marketing teams and the data analysts in IT not only need to be on the same page, you should consider housing them all under the same roof… literally. Mix all the employees from those departments with those skill sets in a space they all share. For most modest-sized institutions, that would probably include roughly 6-30 people. To accomplish the organization’s business objectives, these three “departments” all need each other more than ever. They need to work together, as one.

 

Financial institutions need to foster collaboration. Unify them with a shared office experience, with cubicles and offices intermixed, where a marketing person sits next to an IT person who sits next to a data analyst. Encourage them “play nice” with each other. Have them hold meetings together. Give them shared goals. And create smaller cross-functional “attack squads” (or what you might have called “interdepartmental teams” back in the Old Days). Your chief data officer should be situated side by side with your chief marketing officer. Synergy and cohesion are the objective.

 

Winning in the Algorithmic Age

 

Data analytics is the new marketing battlefield, and the arms race is only going to intensify. Just think about the pace of change technology has affected in only one generation. We waited 50 years waiting for computers to get fast enough, powerful enough and big enough to catch up with our imagination. But now, in the last 10 years, we’ve seen an explosion of data — the Big Bang of the Algorithmic Age.

 

Banks and credit unions are behind the curve, and competitive pressure is guaranteed to amplify. The good news is that everything financial institutions need to perfect their own algorithmic models is sitting right in front of them. All the tools and elements are now in place for a major revolution in data-based marketing.

 

There are some who claim “direct marketing is dead.” That may be true… but only if you’re talking about blanketing ZIP codes with postcards. It’s inaccurate to say “direct marketing is dead”; it’s that the old MCIF models of yesteryear are dead. The major themes driving both marketing and UX discussions today — personalization and customization, even retargeting (i.e., dialing up sales on “hot leads”) — are not new. The same fundamentals underpinning successful strategies in the past still apply. Everything still centers around targeting and segmentation. The goal is to perfect your message for a specific niche audience. It’s just that the level of precision can be magnified with data.

 

Make no mistake: data-driven marketing is the future for the financial industry. And the interdependency between marketing and IT is greater than ever before.

 

Source: http://goo.gl/EcJfya

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