The problem in this case is that BBVA has a limited marketing budget and they need to decide how to allocate it. That budget will be less than or equal to the budget for the previous year, 2010. The main decision that needs to be made is how to split this budget between offline and online advertising. Within online advertising, BBVA must decide which portion of the budget to allocate to paid searches and which portion to display ads. If we were responsible for solving the problem, we would keep the ratio the same between online and offline advertising. Currently online advertising is 21% of the marketing budget but is only responsible for 5% of new customers. BVAA has believed in the past that this was worth investing in for future growth. We are also of the opinion that future growth will come through the online channel and that we should continue to invest in this. We also think that it is possible that customers may see the online advertising but decide to open the account in a branch because of online security concerns or a desire to visit a branch. We do not have metrics to gauge this but our suggestion would be to implement a tracking system where the bank records where customers heard about BVAA for all new accounts. This would allow us to better track the effectiveness going forward. Another reason that we do not believe in reducing the online advertising budget is that the customer lifetime value is positive $619 ($634 for paid search and $604 for display advertising) for new customers acquired online. A comparative analysis is attached in annexure as Table 1. Within online advertising, BBVA uses two methods to acquire customers online: paid search and display advertising. They currently allocate the online advertising by using 55% of the budget for display ads and 45% for paid search ads, and they accompany these with a promotional offer. With the first method, BBVA buys keywords from search engines such as ‘free checking account’ and ‘BBVA Compass’. The goal of this is that when people search for these, that BBVA will be one of the top search results. The other method that BBVA uses is called display advertising. This involves buying advertising space on websites that prospective customers are likely to visit. The customer then clicks on the ad and is directed to the BBVA website. A detailed analysis is attached in annexure as Table 2.
The click through rate for the paid search is higher than for display advertising (4.9% vs. 0.05%) meaning that a larger percentage of people who view the search results click through and visit BVAA’s site than customers who view the display advertising and visit BVAA’s site. However, the percentage of people who click through and complete an application is higher for the customers that visited the site through display advertising than through search (5.2% vs. 1.5%). Overall click through rate is 0.19% and the percentage of customers that then complete an application is 2.3%. One way to improve this process would be more targeted search words or more targeted display advertising. Perhaps they could refine the search terms and display advertising to be more region specific since they felt that one of the main reasons that customers did not open an account after visiting the site was that the bank locations did not meet their needs. We would change the current ration between display advertising and paid search to allocate slightly more to paid search. As aforementioned display advertising has a higher rate of customers who apply after clicking through, paid search has a higher click through rate, higher customer lifetime value and lower cost per customer acquired. This leads us to believe that it is slightly more efficient. However, we feel that these two options reach different customers. The paid
search is for customers who are actively searching for a new checking account and the display advertising raises brand awareness and reaches potential future customers. Therefore,...
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