Finance firms underestimate online channel
10-03-2006
by Ciara O'Brien

Finance companies are underestimating the popularity of the internet among consumers looking for information on finance products.

That's according to a study conducted by PricewaterhouseCoopers, which revealed that more consumers are taking to the internet to shop around, conduct research and buy financial products -- but providers are slower to switch their focus online.

This trend is worrying, considering that the internet has now become the primary source of information for consumers on credit cards, loans, mortgages and insurance products.

Although 73 percent of chief marketing officers (CMOs) of financial providers believe that consumers go online to conduct research, they seem unwilling to put the cash behind it. Less than 10 percent of the overall media budget is allocated to search and display advertising, despite CMOs choosing them as the top two most cost effective advertising media.

This puts internet advertising above TV in terms of the best return on advertising. However, this does not translate into how financial providers are allocating their advertising budget; when it comes to launching new products, online advertising gets only 15 percent of the budget, while TV accounts for 57 percent.

In terms of overall media spend, online accounts for less than 10 percent, while the less cost-effective print media dominates the landscape at more than 50 percent.

PwC has attributed this reluctance to embrace new media to a lack of expertise and confidence among CMOs and in the more traditional media agencies that CMOs seek advice from, in addition to the inability to make comparisons on cost-effectiveness between traditional media and online.

However, there has been a shift in recent times, with CMOs increasing their budget allocation for search and internet display ads. Almost 60 percent have boosted their spending by in excess of 10 percent since they first used search and display

Ian Carrington, head of financial services at Google Europe, warned that consumer finance firms need to move faster and more fully to online methods if they are to meet their customers' demand and changing buying behaviour.

"The extent of the lag between consumer behaviour and marketing delivery is such that those firms who move first have a major opportunity to gain competitive advantage in a sector where such chances are rare and fleeting. The price to be paid for marketing executives sticking with old habits could be huge," Carrington pointed out.