Bbva Compass Case Analysis

BBVA Compass

PROBLEM STATEMENT

1. Major Problems

• How to do all of the following with a significantly reduced budget (basically they must do more with less)
• Ensure that marketing dollars are being used effectively over various offline and online channels.
• Build brand awareness and trust

• Must increase awareness to 56% in 2011

• Support various lines of business credit
• Bring in new customers
• Improve satisfaction and customer retention

SWOT ANALYSIS

1. Strengths

• 15TH largest bank in the United States, very dominant in sunbelt region
• $755 Billion in assets owned by parent company worldwide
• Already a household name with Mexican immigrants
• Official bank for NBA & WNBA
• Official Sponsor for Big East Conference (college basketball) increases brand awareness
• Agreement with ESPN to cover the above BBVA Bowl games

1. Weaknesses

• The top ten largest banks control 46.4% of market share
• The financial crisis has reduced revenue in retail banking considerably
• 32% online brand awareness, meanwhile, nearest competitor is at 78%
• Competitors are very powerful established brands with significantly higher budgets for advertising

1. Opportunities

• Significant population growth to take place in sunbelt region
• Small enough to offer customized solutions while big enough to offer break through innovations
• Currently BBVA only allocates 5% of their budget to internet growth so there is room for improvement
• So far BBVA has not been able to adequately track return on offline advertising, which leaves open opportunity to find out if it is actually working.
• So far BBVA is spending about 100$ per every new online account which is pretty good seeing as how they can spend up to 200

1. Threats

• Regulatory changes are estimated to reduce fees in the banking industry from 6-15 billion 

• Competitors are very powerful and well established
• Competitors spend much more money in advertising
• Brand loyalty is a powerful thing in banking

ALTERNATIVE IDENTIFICATION 

1. Allocate larger portion of budget towards online marketing channels as opposed to offline

• Strengths of current approach

• 5%  of new checking accounts online
• 80% through branches
• 15% through telephone and direct mail
• Retention of customers is higher among those that open their accounts in the branch
• Allocate 5% of budget to internet growth but only 5% of account sales come from internet so it appears that this is enough

• Weaknesses of current approach

• Can Track online activity therefore better idea of ROI – not so for offline advertising therefore no way to know that offline advertising is not bringing in a substantially lower percentage off account sales then the money provided by the budget
• Very small amount allocated to online advertising
• Online brand recognition is 32% when the nearest competitor is at 78%, this shows that something is seriously lacking in this department
• Half of the online budget was allocated for acquiring new checking account customers; these are acquisition costs and not strictly increasing brand awareness costs.

• Strengths of allocating larger portion of budget towards online marketing channels

• ROI can be tracked therefore they can test a higher percentage of budget allocation vs. the return on new accounts.
• Provide online 24/7 help so you can increase the retention of online customers so they can also get the personalized feel that they get in the branch offices.
• Social Media is essentially free. Word of mouth on social media is one of the most powerful advertising tools. So long as companies can get their message out there, it will be tweeted, retweeted and so fourth and increase brand awareness substantially.

• Weaknesses of allocating larger portion of budget towards online marketing channels

• ROI may not be as high as it was previously in which case BBVA will be able to see this as it is recorded and plan accordingly
• Must categorize add networks based on performance & reach
• Must watch carefully so that investment in duplicates can be removed

1. Broaden Target Market to 17-54

• Target market is currently 25-54 year olds with household income of $75K

• Strengths of current approach

• This group has more money and therefore they can do much more business with the bank in the form of investing
• They are a lower risk group when it comes to loss

• Weaknesses of current approach

• Customers with lower balances in their accounts pay higher fees and this has been profitable for the bank thus far
• If BBVA wants to be in the top 10 they have to target all age groups or they will not be able to compete properly with their much bigger competitors
• Both Chase and BOA offer college and high school accounts for students and millennials are the largest generation since the baby boomers

• Benefits of increasing Target Market

• Millennials are the largest generation since the baby boomers
• If BBVA can get these people while they are young they have a much better chance of retaining their loyalty in the future
• If BBVA does not get into this market soon these people will be picked up by Chase or BOA and BBVA will have a more difficult time trying to recruit them in the future
• Due to their low income the younger high school and college aged young adults would be more receptive to getting a $100 bonus when they open a checking account
• The cost of recruitment would be generally lower
• This is a huge substantial part of the market and therefore will be a great help in BBVA ranking in the top 10

• Weaknesses of increasing Target Market

• Risk of loss with younger people who have less money is higher
• These people might not fit into the average $800 per checking account over five years and therefore might not justify acquisition cost.

1. Remove some budget allocation from strongest markets and apply to weaker ones

• BBVA currently allocates most of their budget to their strongest markets and this may not be as profitable if BBVA wants to increase brand awareness.
• In these markets brand awareness is already high. This budget needs to be moved and more properly allocated to areas where brand awareness is not as high.
• Although a good part of the budget should be kept in these areas for customer retention, a good amount of it can be moved elsewhere so that it can actually increase brand awareness.

RECOMMENDATIONS

My recommendation is that BBVA consider partially implementing all three alternatives above. The shifting demographics of the target market meant that many more customers were spending greater time online and since online marketing served the purpose of increasing brand awareness and attracting new customers at the least cost, it would result in overall better return on investment for BBVA Compass. Additionally, social media will serve as another tool to advertise without much effect on the budget. Additionally, increasing the target market will bring in more people and allow them to better compete with BOA & Chase while restructuring their budget to be more effective in areas where the markets are not as strong appears to be a long overdue step.