Top of mind means growth

Mind share metrics correlate to market share gains for banks

By Paul Bartholomew

The old adage “out of sight, out of mind” is as true in business banking as it is in other areas of life. To compete in today’s hyper-competitive business banking markets in Australia, banks and other financial services providers need to not only retain and acquire business customers with compelling propositions, but also be visible in the markets, reinforcing and extending those customer relationships.

East & Partners’ analytics over many years have conclusively displayed that what we term “mind share” (also known as first name recall) is a leading indicator of market share growth and loss – second only to customer satisfaction. While customer satisfaction and advocacy are the key predictive metrics, mind share plays a vital role in “supporting” relationships between banks and their business customers.

Mind share reveals the extent to which an incumbent service provider has successfully embedded itself within its customer base. In theory, customers should think of their own bank first. But it is not unusual for a bank to have greater share of mind among businesses than it has actual share of relationships, supporting a pipeline of potential new business to be converted.

Conversely, mind share that is significantly below a bank’s market share needs to be addressed before it translates into customer attrition.

In all of our research programs, customers are asked “who springs to mind first” when they think of a transaction-banking provider, lender, trade financier, foreign-exchange provider, and so on. Interviewees are unprompted and respond with whichever bank is top of their mind at that particular moment. There are, undoubtedly, many factors underpinning responses: a business customer may simply think of their incumbent provider first; they may have recently received a pitch from a rival provider; a bank’s advertising or marketing campaign may have caught their eye; or a business associate may have recommended a certain provider. Extrapolating to what extent each of these factors contributes to the share of a customer’s “mind” is difficult, but worth further examination.

Marketing must be targeted

What is indisputable, however, is that businesses are increasingly aware of banks’ advertising and marketing campaigns. East’s monthly Business Banking Sentiment Index asks businesses whether they registered any bank advertising specifically targeting business customers over the past month, and, if so, from which providers.

When we first asked this question in June 2006, 32.4 per cent of businesses said that they hadn’t noticed any. In the most recent May 2007 index, less than 1 per cent of businesses said that they had not seen any advertising in the previous month.

Much of business customers’ heightened awareness over the past 12 months has been directed towards advertising by Westpac, the National Australia Bank and ANZ. Importantly, this awareness is spread across businesses of all sizes and geographical locations. Further, businesses like to see visibility and activity on the part of their providers in wider markets, as it reinforces the choice they made to do business with a particular provider.

But it is important that the visibility and activity connects with the nature of the relationship between a customer and their provider. For example, a trade-finance customer feels a sense of reinforcement when they see their trade provider demonstrating trade expertise in wider markets and maintaining a high profile in trade. They may not care or acknowledge the relationship in the same way if they see their trade financier advertising mortgages; indeed, we know that they don’t.

Other analysis conducted by East reveals that there can often be a “noise” factor involved in advertising and marketing awareness. A classic example of this is business customers’ inability to name which banks had won awards for best business bank in 2006 (this was not helped by the fact that there are several such awards). This is notwithstanding the large marketing campaigns launched by the various winners off the backs of these awards.

East has carried out significant re-analysis of mind share and market share metrics across key product groups in each of our core six-monthly research programs. In most cases, these reveal a clear correlation over time between a provider’s mind share performance in any given product area and its market share gains or losses. On a product-by-product basis, it is possible to trace the correlation between mind share movement and market share movement. A valuable exercise is to map sales and marketing efforts, both general business banking and specific product and service campaigns, against East’s mind share metrics in the relevant product areas. This helps providers to understand where they are achieving the greatest returns for the growing millions of marketing dollars being spent by banks each year.

Paul Bartholomew is a senior consultant with banking research firm East & Partners.