An Approach to an Accountable Client-Communication Mix in the Banking Industry

MA-Thesis / Master von Markus Sasse

Introduction:

The recent decades have been characterised by the development from the industrial age towards a service economy. Knowledge and information have become the most essential production factors. When services and intangible assets are offered, information and soft factors are even more important elements of business communication. Any kind of worldwide communication between (anonymous) business partners has been enabled by the progress of information and telecommunication technology. The banking sector is one important part of a service economy. With regard to the globalisation the banking industry still faces radical changes. This paper is especially addressed to the business operations of WestLB AG (WestLB), a major German bank that primarily operates both national and international business-to-business (B2B) banking. WestLB operates in a partnership with the savings banks, which run the business-to-customer (B2C) banking of the mass market for private customers (esp. retail banking). In addition, WestLB’s subsidiaries Readybank and Weberbank attend to private clients, whereas Readybank runs bulk-lending business and Weberbank offers private wealth management to German customers.

In particular, this reading explores a number of relevant questions within the scope of well-managed marketing and its controlling. Latest organisational restructuring within the bank’s marketing organisation have encouraged a rethink of how to better manage marketing communications to the clients and where to spend its marketing investments. One important change means that one worldwide marketing budget has been applied to the entire bank. This is the second largest departmental cost budget after information technology to be controlled at WestLB. All these present circumstances are described in detail in a separate chapter including organisational questions, marketing teams, customer and product groups.

Motivation:

Due to the homogeneity of the offered finance products, it is especially difficult for banks to position and distinguish themselves from the competition. Consequently, marketing success of financial services products requires communication activities such as imaging, loyalty factor, persuasion, and so on. Traditionally, the marketing department is responsible for shaping such a competitive communication on products and image towards the company’s markets within an affluent society, where the customer can choose from different offers.

With regard to these efforts, a business and sales responsible tends to doubt the sense and benefit of all the expenditures associated with advertising and marketing. (He usually does not mind internal communication, while he places external marketing more in a „nice-to-have” category). His scepticism is based on a complex overall environment in which marketing is integrated. This makes it difficult to give clear answers on its effects on a company’s development. Therefore, it would be helpful to structure an approach to be able to better understand a company’s communication mix as well as if any marketing budget is usefully spent. Ideally, demonstrating a positive impact of marketing activities to business success would be welcome.

In business literature, these questions are currently discussed as „costs-to-serve” approaches. Also, an internal competition of different opinions on this question can often be observed among different stakeholders (mainly sales units, marketing department, controlling) in any company. In the particular context of centralised marketing activities at WestLB, the marketing department has to verify and justify the useful application of its activities and its budget allocation. At least once a year, it is invited to inform the responsible cost controlling department, the sales units as well as the company Board of Directors. This leads to the key question: Have WestLB’s marketing activities met their goals? And, consequently, have they supported economic success?

When discussing and researching the problem to measure marketing mix activities and derive rules from the results, one often gets the answer that it is practically not possible to do this precisely. Nonetheless, this paper still aims to examine if it is possible to prove the relation between marketing activities of the promotional mix and „business success”. Basically it points out what is feasible and where there are limits.

Problem Definition:

In particular, this paper deals with WestLB’s communication mix towards its clients. WestLB’s core business focuses on national or international B2B operations with a wide range of different customer types. Its operations concentrate on single products for „big customers”. Here, the provided financial products are often tailor-made to a certain set of customer requirements. This setting is very different from a B2C market, where one bank addresses its services on standardised products to a noteworthy mass of clients.

With regard to control a client-communication mix, the nature of sales object is another essential aspect. In contrast to consumer markets, it is more difficult to measure financial services. Given a banking product, any kind of data collection can easily lead into interpretation problems or even errors when intending to measure the effect or success of a communication mix. For example, how to properly define an exotic, heterogeneous mix of addressed client focus groups for a bank’s information? First of all, it becomes difficult to materialise any kind of „volatile” communication effect, as lots of communication channels are of influence. And even when it can be captured, it still remains difficult to isolate it with regard to a so-called defined chain of cause and effect.

An example like this illustrates the general problem of measurability and comparability of recorded market data. Related problems are e.g. which goals are useful to be measured or which benchmarks should be applied. As outlined above, the researcher faces a specific situation of WestLB as a financial service provider in a (partly) anonymous B2B-market. This is further discussed in the second chapter.

Table of Contents:

Text Sample:

Chapter 7., Case Studies of Marketing at WestLB AG:

This chapter analyses two actual cases, which have been carried out by Group Marketing in 2007. The first example, called „WestLB public” focuses on a certain target group of „public customers”. The second case copes with the regular evaluation of event marketing activities whose purpose it is to inform and retain customers.

Campaign „WestLB public”:

Campaign management consists of strategic, tactical, and operative planning as well as the implementation and the extraction of newly found knowledge about customers and their behaviour. In addition, campaign management is responsible for the cooperation with the service providers to profit from the campaign results in future. A complete campaign covers a set of different communication media. They have been well aligned to each other in an operative campaign planning. A „cross media” campaign sends a „continuous, cross-linked message” (form, content, time).

Introduction to Campaign „WestLB public”:

„WestLB public” was a teaser campaign especially created for institutions of the public authorities (municipalities, federal states, the Federal Government) and all affiliated to this (e.g. electricity power station, waterworks, universities). All these entities have in common, that they underlie special restrictions for financing, e.g. special credit types. In spite of these limits, these clients are interesting. As they benefit from governmental guarantees, they have low-risk character. Therefore, their refinancing is attractive, even if profit margins with these clients are low. The bank works with a variable costing and offers a portfolio of different products for public clients (as described in chapter 2.3). Among these, Public Private Partnership (PPP) is one structured finance product for public authorities, e.g. in the form of factoring or project finance (ref. to figure).

Definite subjects of this kind of partnerships are schools, partly privatisation of motorways and other facilities. „WestKC KommunalConsult”, a subsidiary of WestLB AG located in Germany, is actively promoting and consulting such projects (of the PPP business model). It has been very successful in countries like Canada or France.

Review of Campaign „Public Day”:

The main goal of the „Public day” campaign has been to strengthen the presence of WestLB on the public customer market. Deutsche Bank, LBBW (Landesbank Baden-Württemberg) and DKB (Deutsche Kreditbank, as a subsidiary of BayernLB, and NRW.Bank) are among the main competitors.

The campaign „WestLB public” has been executed in the first quarter of 2007 (March 2007). Group Marketing took advantage of different media channels, which included print adverts in daily press, Web marketing (search engine marketing, mailings, banners), and a press conference. The core activity was a congress meeting in Düsseldorf, especially designed for public authorities. Technically, the main target was to push the marketing-mix instruments for public customer activities for a limited period.

On congress day, one basic topic was the information exchange among public authorities and WestLB (with special regard to transfer useful information to the public customers about which financing opportunities they might be able to utilise and what is not feasible). WestLB intended to present the complete range of financial instruments addressing the public customer needs to find adequate solutions. In short, to convey, that WestLB understands the public customers’ finance requirements. Networking among the participants was another important goal.