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Marketing Financial Services to Small Businesses - US - March 2012

SCOPE AND THEMES
What you need to know
Scope of this report
Data sources
Consumer study data
Advertising creative
Abbreviations
Terms
EXECUTIVE SUMMARY
Industry overview
Small businesses need partners
Technology is changing the selection criteria for financial services
Marketing of financial services is about more than a checking account
Ownership dictates some differences in small business
INSIGHTS AND OPPORTUNITIES
Key points
Integrate your view of the small business customer
Help your customers, help your bank
Small business values second
INSPIRE INSIGHTS
 INSPIRE TREND: “SUBSIDIZE MY DREAMS”
 INSPIRE TREND: “DECLINE OF DEFERENCE”
MARKET SIZE AND FORECAST
Key points
 SIZE OF THE SMALL BUSINESS SECTOR
Small business drives the U.S. economy
Figure 1: Employment size of employer and non-employer firms in U.S., 2008
Figure 2: Change in firms, by employee size in U.S., 2006-08
 SMALL BUSINESS BANKING REQUIREMENTS
Small business banking in the precarious U.S. economy
Lending is a critical component in small business banking
Figure 3: SBA approved small business loans, 2009, 2010 and 2011
Figure 4: SBA 7(a) top 15 lenders, by volume, through FY 2010
Small businesses need varied financing sources
Figure 5: Small business financing used, 2008-2011
COMPETITIVE CONTEXT
Key points
Analysis of marketing efforts to small businesses
Figure 6: Small business banking online, direct mail and print acquisition campaigns, January 2010-December 2011 and January 2008-December 2009
Mega banks, community banks and credit unions
Figure 7: Number of bank branches as of June 30, 2002-11
Figure 8: Small business loans as share of assets, 1994 and 2010
Figure 9: Small business loans at credit unions, at community banks, and at large banks: Commercial & industrial loans and commercial real estate loans, billions of dollars, 2010
Non-banks and small business
High tech, high touch
MARKETING CHANNELS
Key points
The channels of the future
‘Alternative channels’
Technology’s impact on financing
Relationships are the biggest win-win for financial institutions
Mobile banking is growing among small business users
Figure 10: Banking activities conducted on mobile phone in last year, mobile phone owners, by age, November 2011
MARKET DRIVERS
Key points
 U.S. ECONOMY IS STILL STRUGGLING
Unemployment in the U.S.
Figure 11: Unemployment rate, 2008-11
Cost of funds for banks
Figure 12: Average net interest margin, 2010-11
U.S. inflation rate
Figure 13: U.S. inflation rate, Consumer Price Index (CPI), 2010-11
GDP helps to gauge small business health
Figure 14: U.S. GDP, 2010-11
Charge-off and delinquency rates are on their way down
Figure 15: Charge-off rates of commercial R.E., C&I, and total loans at all banks Q1 & Q3, 2007-11
 LEGISLATION AFFECTING SMALL BUSINESS
Dodd-Frank Act
Reg Q
More on Dodd-Frank
Small Business Jobs Act of 2010
Legislation with a potential future impact
LEADING COMPANIES
Key points
Small business satisfaction shows improvement
Figure 16: U.S. Small business banking satisfaction, ratings and rank with differences, 2010-11
Figure 17: Small business banking satisfaction ratings over time, 2007-11
Chase
Citibank
Bank of America
Wells Fargo
M&I Bank/BMO Financial Group
U.S. Bank
Navy Federal Credit Union
INNOVATION AND INNOVATORS
Key points
FirstBank is number one in assisting its smallest small business customers
Citibank for iPad
U.S. Bank/Elavon
Look Up With US – Facebook networking campaign
Next Street Opportunity Fund
Remote deposit capture
Act local, be local
MARKETING STRATEGIES
Key points
Print advertising
Capital One Bank takes on local flavor to connect with customers
Figure 18: Capital One print ad, September and October 2011
FirstMerit Bank goes loud and local
Figure 19: FirstMerit Bank print ad, December 2010
Direct mail advertising
TD Bank small business products
Figure 20: TD Bank print ad, 2011
The Private Bank small firm mailing
Figure 21: The Private BANK direct mail ad, October 2011
OnPoint Credit Union Business Interest Checking product mailing
Figure 22: OnPoint Community Credit Union direct mail ad, December 2011
Customer Communication from M&I Bank
Figure 23: M&I Bank direct mail ad, January 2010
Online and email advertising
Chase promotes RDC with a free check scanner
Figure 24: Chase Free Check Scanner, 2011/2012
Citywide Banks’ local relationships
Figure 25: The Citywide Banks online ad, May to June 2011
Television advertising
Figure 26: Capital One Bank, 2011
Figure 27: Lindell Bank, 2011
Figure 28: OnPoint Credit Union, 2011
Figure 29: 121 Credit Union, 2011
Figure 30: AmeriMerchant, 2011
WHO ARE SMALL BUSINESS OWNERS?
Key points
Figure 31: Business owners, home-based vs. other locations, by gender and age, December 2011
Figure 32: Business owners, home-based vs. other locations, by number of employees, December 2011
Figure 33: Business owners, home-based vs. other locations, by annual revenues, December 2011
Sole proprieters most likely to operate in professional services
Figure 34: Type of business owned, by gender and age, December 2011
Figure 35: Type of business owned, by number of employees, December 2011
Figure 36: Type of business owned, by annual revenues, December 2011
SMALL BUSINESS OWNERS AND BANKING
Key points
Under-use of business accounts among sole proprietorships
Figure 37: Incidence of business account ownership, by number of employees, December 2011
Figure 38: Incidence of business account ownership, by annual revenues, December 2011
Types of products owned by small businesses
Figure 39: Type of products at primary bank, by number of employees, December 2011
Figure 40: Type of products at primary bank, by number of employees, December 2011
Figure 41: Type of products at primary bank, by annual revenues, December 2011
HOW SMALL BUSINESS OWNERS PAY FOR THINGS
Key points
Four fifths use checking accounts
Figure 42: Payment method typically used for rent and utilities, by gender and age, December 2011
Figure 43: Payment method typically used for rent and utilities, by number of employees, December 2011
Figure 44: Payment method typically used for rent and utilities, by annual revenues, December 2011
Figure 45: Payment method used for day to day supplies, by gender and age, December 2011
Figure 46: Payment method used for day to day supplies, by number of employees, December 2011
Figure 47: Payment method used for day to day supplies, by annual revenues, December 2011
Many businesses still rely on personal credit cards for major purchases
Figure 48: Payment method used for major purchases, by gender and age, December 2011
Figure 49: Payment method used for major purchases, by number of employees, December 2011
Figure 50: Payment method used for major purchases, by annual revenues, December 2011
Credit cards dominant for online business purchases
Figure 51: Payment method used for online purchases, by gender and age, December 2011
Figure 52: Payment method used for online purchases, by number of employees, December 2011
Figure 53: Payment method used for online purchases, by annual revenues, December 2011
WHAT RESPONDENTS THINK ABOUT THEIR BUSINESSES AND THE ECONOMY
Key points
‘Business as usual’ for the majority
Figure 54: Cash flow situation over last year, by gender and age, December 2011
Figure 55: Cash flow situation over last year, by number of employees, December 2011
Figure 56: Cash flow situation over last year, by annual revenues, December 2011
Businesses are seeking to reduce debt
Figure 57: Financial issues in the past year, by gender and age, December 2011
Figure 58: Financial issues in the past year, by number of employees, December 2011
Figure 59: Financial issues in the past year, by annual revenues, December 2011
HOW GROWTH AND CASH FLOW NEEDS ARE FUNDED
Key points
Only a minority of businesses say they are reliant on credit
Figure 60: Methods for funding growth/cash flow needs, by gender and age, December 2011
Figure 61: Methods for funding growth/cash flow needs, by number of employees, December 2011
Figure 62: Methods for funding growth/cash flow needs, by annual revenues, December 2011
FEMALE SMALL BUSINESS OWNERS – A CLOSER LOOK
Key points
Special considerations for women-owned small business
Figure 63: Funding of business growth, by gender, December 2011
Figure 64: Perception of business cash flow over past year, by gender, December 2011
Figure 65: Importance of aspects of business financial management, by gender, December 2011
Female respondents are optimistic about funding their small business
Figure 66: Importance of aspects of business finance, by gender and no. of employees, December 2011
APPENDIX: TRADE ASSOCIATIONS

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