ROI, Return On Investment, is probably one of the most well known business terms. Simply put, ROI is about measuring the efficiency of an investment. We use ROI every single day, in every decision we make. We compare the expected benefits with the expected cost. One major problem that many people, businesses, and banks have when calculating their ROI is confusing actual cash and gain.
So what is the difference? Cash is not necessarily a “lasting” return. It is something that we will turn around and continue investing and sometimes we will grow it and sometimes we will lose it. Having it in your pocket makes you feel justified about decisions, but doesn’t always indicate having made a good decision. However, gain is lasting. It’s something that will allow for continual growth.
Occasionally we think that to keep up with or be ahead of competitors we have to dump money into some of our investments that in the end don’t give lasting returns. Other times we go totalitarian and only invest enough to get basic returns. Careful evaluation of investments and the implementation of different techniques is necessary to dial in on your maximum ROI.
In your investment evaluation you might ask questions like...
- How much am I spending compared to the value returned (your current ROI)?
- Is the returned value the kind of value I want? The frequency I want? The quality I want?
- Will the investment continue generating the desired value over time?
- If I spend more or less how will the value output change? Would this change in spending change the investment to value output ratio?
- How hard is my money working in this investment? Could it work harder if spent it somewhere else?
Two of the most common investments that community banks are making today are in marketing and their employees. To help you during your investment evaluation in both of these categories we included a few specific things that we believe will help you improve your ROI.
Marketing
- Pay per click marketing is good but pay per performance marketing is better
- When outsourcing your marketing to a professional firm spending your online marketing budget on pay per click (PPC) is a good way to make sure your money is spent on people who interact with your ads. However, you can improve your return by switching to a pay per performance marketing agreement. This means you pay only for the marketing that drives results in your business.
- Direct mail is not dead
- As long as you have a high quality send list, direct mail is still one of the best ways to have specifically targeted people see your offerings.
- Nether is email
- Use email! It is a highly cost effective way to market your material, again as long as you have a high quality and qualified list of recipients.
- Gather and use analytics (have a data plan)
- Shockingly only 1 in 4 community banks have a defined data collection plan, according to The Financial Brand. The simple leveraging of data that is already held by community banks could greatly increase marketing ROI because it will allow you to know exactly who to target at what time and on what platform. Knowledge is power, so use the data to up the power (and return) of your marketing.
Employees
Employees are one of your most important investments your community bank can make. Much like customers, it is more cost effective to keep employees than it is to find new ones. Invest in your employees. Keep them happy and keep them educated. In fact, these two things often go hand in hand. When an employee feels that they are properly trained and equipped to handle difficult situations they are happy in their work. Start thinking about training as a continual process rather than a six or twelve week program. And consider putting more money into better quality training. The more you train, the more return you will get out of your employees. This also leads to happier customers which is (obviously) another important way to improve ROI. In fact, the customer experience through their banking journey is incredibly significant, and will be discussed in our next post. So stay tuned!
In the last several years increasing ROI has been a struggle for community banks across the country. Fortunately, there are many quick and simple solutions to improving. So, don’t let marketing your banking or keeping your employees hinder your returns.