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Jan 04, 2001
How To

eFinance 2001 Outlook & Internet Marketing Trends Report

SUMMARY: No summary available.
The year 2000 will be remembered as a tumultuous one for Internet companies. While eFinance companies have fared better than some of their Web-based peers, the rapid decline in valuations has knocked several products out of the market and has brought about a swift reevaluation of marketing strategies. Despite the shakeout, competition remains fierce, especially amongst banks, brokerages, retirement plan providers and mutual fund offerings targeting the consumer.

The major financial institutions--banks that only two years ago seemed to be out of play--have come back in force over the last year, taking on smaller providers on the Internet. With the debut of Merrill Lynch Direct ( at the close of 1999, the largest full-service brokerage finally entered the market. Relying almost exclusively on brand equity to drive Web traffic, the company has integrated a variety of services and information onto its site in a bid to become a full-fledged portal. Other big institutions, such as Citigroup (, pose a competitive threat to pure Internet companies like PayPal (, offering similar payment services integrated within a full suite of complementary products.

While the big players remain slow movers relative to their nimble competitors, they have become more responsive as their systems have matured. With strong, established brands and seemingly endless resources, the larger institutions are likely to provide the strongest marketing push in the coming year. These banks will use their proprietary networks to bundle financial services under one brand name – leveraging their customer relationships to offer simple solutions at a single point of access. With more and more services integrated into their Web operations, the science of cross-selling will take on monumental importance for the big players while the smaller companies focus on differentiation, targeted marketing and business development.

Establishing Uniqueness: Targeted Marketing & Differentiation

Over the last several years, many companies lost sight of cost management in the pursuit of long-term revenue growth on the Web. Yet as the focus has shifted back towards short-term earnings, smaller eFinance companies are moving away from a focus on standardized name or brand recognition and are looking to establish uniqueness in a target customer’s mind – especially with respect to the dominant, established service and information providers. They are carving out a very specific market, and spending with the intention of dominating that space. In this market, as a matter of survival, the smaller companies will need to trumpet the value of their independence-–convincing their customers to pick and choose from available product offerings.

With less and less to spend on broad-based campaigns, and more competition from the major institutions’ portal strategies, the branding efforts of start-up companies are geared towards smaller, well-defined audiences. Integrated marketing firms such as Frankfurt Balkind (, who services financial companies ranging from established Bank of Tokyo-Mitsubishi subsidiary Union Bank of California ( to B-to-B start-ups like CapitalIQ (, see a clear movement to more cost-conscious, targeted marketing. According to Philip Kurian, Director of Strategy, in the past, Internet companies were focused on “creating the aura of success--using the brand to paint legitimacy and credibility”. He points out, “This may work in a market with one-to-two players, but when the market reaches twelve or more players, it becomes a place where temporary advantage is erased.” Companies are now honing in on key customers that they need to convert to be profitable-- using technology and targeted communications to reach their audience.

Creative branding firms such as New York-based SiegelGale (, working with clients ranging from American Express ( to Digital Insight (, note an emphasis on positioning and brand architecture work. Eric Pinckert, a Senior Vice President in the company’s Los Angeles office, notes that the fractioning market has created a need for “differentiation and decommoditization to create a real difference in perceived value,” especially among the younger players.

While the smaller participants work to differentiate, the major banks are taking the market from the other end. “There has been a big uptick in brand architecture work as larger financial institutions reconcile their acquisitions,” notes Pinckert. After a wave of consolidation, the big banks are “stepping back as the market cools--trying to understand how they fit together and create value that is greater than the constituent parts“. This work, the consolidation of offerings and the creation of a hierarchy and structure to navigate a multitude of products, fits within their larger rebranding efforts, which emphasizes fast multi-channel access to a wide range of financial services.

While we may not see as many unknown companies advertising on television and in the major papers in the coming year, Frankfurt Balkind’s Kurian expects aggressive marketing campaigns from truly integrated financial institutions. These banks will position themselves as financial supermarkets, both online and off, offering a full range of services to their clients and consumers. As for the tone of these ads, Pinckert explains, “The emphasis is going to be on advice and investment perspective, rather than technology and the ‘fun of investing.’”

Complementary and Complimentary Products: Business Development & Strategic Partnerships

As the larger institutions focus on integrating their various product offerings, younger eFinance companies are likely to focus their energies on third-party distribution or co-branding arrangements. According to John Parker, Chief Executive Officer of Sectorbase (, a research platform for institutional investors, “Marketing directly to a narrow set of prospective customers is expensive. So business development efforts everywhere are refocusing on that hoary old ‘80s marketing term ‘synergy’.”

As he concludes, “Where 1999 and 2000 were about getting the brand displayed everywhere, 2001 looks to be about identifying other companies whose products and services best complement your offering, those who share a common target customer profile and have existing reach into that market. Picking the right strategic partners is more important going into 2001 than it has ever been before.”

While for content companies like Sectorbase, strategic partners include other larger vendors of research solutions for institutions, as well as the banks themselves, consumer-oriented eFinance companies are likely to continue to push their wares through portals like Yahoo! Finance. Additionally, these companies may partner with established Internet players such as E*Trade, who must bring together content and services from across the marketplace to compete with the larger institutions.

With the major financial institutions recapturing the attention, partnerships and co-branding arrangements offer the greatest marketing bang for the small eFinance company-–especially content players. Big institutional portals, such as, a single-source destination for research, data and news recently launched by eight leading investment banks, are likely to create a stir of activity amongst news and information providers.

With the efforts of banks such as Citibank’s MyCiti initiative, and the longstanding Internet leaders, mainly Yahoo! Finance and AOL’s Personal Finance channel, the end customer is increasing being controlled by a small number of players and media outlets. As Parker explains, “Every institution wants to own the relationship with their customers, and to the extent that you can help them do that you will have a competitive advantage.”

The power brokers at these portals and financial institutions have shown a willingness to look externally to locate the content and complimentary services necessary to complete their solution. This effort requires sharp, targeted messages and strong relationships. The development of a “buzz” and general awareness is also important. Referring to information providers in particular but applicable to most small eFinance companies, Parker explains that companies pursuing a strategic distribution strategy “have to fight to get the end users to request it, to create the demand-pull for their product in the market.”

Know Thy Customer: Customer Relationship Management

As Jupiter analyst James Van Dyke pointed out in a recent report, the untargeted marketing efforts of eFinance companies worked better when online consumers were more homogeneous. Yet with increasing diversity both in customer base and service offerings, he argues, “Financial sites must make an unprecedented use of targeting and personalization techniques to address the needs of individual customers.” As more and more services are offered on these sites, he warns, “they must avoid drowning high-value audiences in a sea of content, products and marketing messages”. Additionally, efforts must specifically identify and target profitable customers.

While the slick branding campaigns of eFinance companies suggest a market saturated by younger, tech-savvy individuals, Jupiter research points towards an adoption among a much broader population. The gender, age and income gaps in online finance users are steadily shrinking. A study by Accenture (formerly Andersen Consulting) and Online Insight focused on e-commerce in general noted that the most frequent buyers are between 35 and 44 years of age. While the study segmented users into six categories based on buying habits, eCRM and market research companies like Cyber Dialogue ( have been able to further segment users and track their online activity, providing the basis for targeted customer acquisition campaigns and highlighting opportunities for the cross selling of various financial services.

The engine of cross selling, customer relationship management (CRM) software, has seen a boom over the last two years. While the majority of major financial institutions have implemented some CRM technology into their operations, these efforts have been met with limited success. With the recent mergers on Wall Street, and the relaxed regulatory climate that allows for more diversified service offerings, 2001 is likely to bring about a wave of new strategies – especially as they relate to financial portals online.

As the customers of eFinance companies have become more sophisticated, with easier access to information on pricing, rates and terms, financial institutions have been pressured to implement expensive CRM software across their organizations. Combining vastly improved market segmentation and research with the ability to integrate and mine data from branches, ATMs, Web sites and other channels, is likely to drive marketing at the big banks. The ability of CRM software to track the revenue impact of targeted campaigns is likely to produce additional accountability in marketing departments.

DeeVee Devarakonda, Chief Marketing Officer of Quaero (, a CRM services provider that helps financial institutions derive value from the software, suggests that while the goal of the software implementation is to find, keep and profit from customers, “not too many are fitting that model, although they are moving in the right direction.” She suggests that common problems are an incomplete view of customer data, poor integration, or the inability to transform the information into insight.

We are likely to see a strong push to create value from these CRM systems in the coming year. On the Web, this will translate into targeted marketing and information based on information provided by the consumer. Additionally, it will require new and creative methods to entice potential and existing customers to provide additional information on their financial habits. While some banks, such as First Union ( have demonstrated success in this area, many are lagging behind the competition. The ability of these institutions to utilize the latest CRM technology to cross sell their products will be essential in creating revenues from the perceived value of a one-stop-shop for financial services.


As more and more financial institutions look to reduce costs by moving their customers online and consolidating services, and small players look to build a niche market, we are likely to continue to see innovative strategies from both the big banks and the smaller Internet players.

The larger financial institutions are expected to continue to play catch up, offering services that directly compete with the Internet pure plays. They will capitalize on their existing brand equity and offer a full range of services online, using technology like CRM to foster profitable relationships with new and existing customers. We are likely to see a big marketing push by these companies as they rebrand themselves for the Web.

For the smaller Internet companies, differentiation is key to survival. With products across the financial services industry rapidly becoming commoditized, the ability to communicate a company’s unique value proposition to a tightly-defined group of partners and end users will be the focus of marketing efforts.

EDITOR'S NOTE: Scott Slatin, a freelance writer and consultant to e-finance companies, contributed to this article. Contact Slatin at
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