BBVA Compass:

Marketing Resource Allocation

Ho Kim, Ph.D.
Assistant Professor of Marketing
Overview
• In December 2010, Frank Sottosanti, CMO of BBVA Compass, had to
decide how to allocate his marketing budget between offline and online
channels for the comping year.
• BBVA Compass, the fifteenth-largest bank in the U.S., had done traditional
advertising through TV, print, and other media for building brand
awareness and had also signed a multiyear sponsorship with the NBA and
with ESPN for college football. BBVA also spent almost 20% of its total
advertising budget in 2010 on search and display advertising.
• This case describes the advertising budget allocation of a regional bank
and how it uses offline and online channels to acquire new customers for
its checking accounts.
2
Agenda
• Role of offline and online advertising in customer acquisition
• Allocation of ad budget to online and offline advertising
• Sports sponsorship
• Steps in online acquisition process (Purchase funnel)
• Search and display advertising
• Allocation among search engines
• Allocation among display ad networks (skip)

3
Role of offline and online advertising in
customer acquisition
• See Exhibit 3a, 3b. What are some problems that face BBVA Compass?
• See Exhibit 2. What is the implication for BBVA Compass who has a
relatively small number of branches?

• The role of offline media

• To build brand awareness and trust among potential customers.
• BBVA Compass is a relatively new player in the U.S. market, and its brand awareness is
low compared to its customers. (Exhibit 3a, 3b).
• Brand awareness and customer trust are especially important for a bank, since no
customer is likely to sign up for an account without awareness of and trust in a bank.

4
Role of offline and online advertising in
customer acquisition
• The role of online media
• Online media complement the bank’s offline efforts in reaching a larger
audience with relatively low cost. BBVA has only 32% online brand awareness.
• Also, online media has the benefit of better accountability since it is generally
easier to track and measure the effectiveness of these channels.

5
Performance of Online and Offline Channels
• Online and Offline Channel Comparison
Online Channel forOffline
Checking
ChannelAccounts
Percent checking accounts Page 3 Page 3
acquired
No. of checking accounts Table C To be calculated from
Table C
Annual advertising budget Table C To be calculate from
Tables B and C
Cost per application (CPA) Table C To be calculate from
Table C
Fee income Page 3 Page 3
Annual retention rate Page 3 Page 3
Measurability and accountability High Low

6
Performance of Online and Offline Channels
• Online and Offline Channel Comparison
Online Channel forOffline
Checking
ChannelAccounts

Percent checking accounts 5% 80%

acquired
16 times (80%/5%) the number
No. of checking accounts 14,316 229,056 of online accounts (Table C)
(Jan. – Nov. 2010)
Annual advertising budget $1.222 million $4.888 million Four times the online budget
(Table B)
Cost per application (CPA) $81 $20

Fee income Higher Lower

($4.888 million *11/12)
Annual retention rate 55% 65% to acquire 229,056 accounts

Measurability and accountability High Low

7
 Performance of Online and Offline Channels
• Online and Offline Channel Comparison for Checking Accounts
Online Channel Offline Channel
Percent checking accounts acquired 5% 80%
No. of checking accounts (Jan. – Nov. 2010) 14,316 229,056
Annual advertising budget $1.222 million (21%) $4.888 million (79%)
Cost per application (CPA) $81 $20
Fee income Higher Lower
Annual retention rate 55% 65%
Measurability and accountability High Low

This table should raise an interesting question:

If the cost per application (CPA) for the offline channel ($20) is almost one-fourth the CPA of the online
channel, and offline customers also have higher retention rates (65% vs. 55%), does it make sense to
spend so much money online (They spend 21% of budget for online)?
8
Things to consider when deciding the offline-
online budget allocation
• Interaction between online and offline channels
• Is it possible that some customers become aware of BBVA Compass through
online channels but feel more comfortable opening an account by going to a
nearby branch?

• Conversely, is it possible that customers get information from a brand office

but choose to open an account online?

9
Things to consider when deciding the offline-
online budget allocation
a1
Online Ad $ New Online Accounts

b2 Direct effects: a1, a2

c1 c2 Indirect effects: b1, b2
b1 Interaction effects: c1, c2
a2 Effect of offline branch: d
Offline Ad $ New Offline Accounts

Branches

Does the CPA calculations in the previous table account for these complex
interactions between online and offline channels? NO! While CPA provides a good indicator of
where to allocate additional resources, it gives only a partial picture. 10
Things to consider when deciding the offline-
online budget allocation
• How would you defend disproportionately large online advertising budget?

• In addition to advertising, offline acquisition depends on the presence of bank

branches. The CPA of an offline channel does not account for the capital cost of
branches or the cost of branch employees.

• BBVA Compass has only 700 branches, which limits its geographical reach. Online
advertising can increase the bank’s potential reach and enhance its brand awareness
without significant capital investment.

• The online channel may be reaching different demographics (e.g., younger consumers),
which may be more valuable in the long run.
11
Sports Sponsorship
• BBVA Group in Spain signed multiyear sponsorship deals with the NBA
and ESPN (for college football).
http://www.nytimes.com/2010/09/13/sports/basketball/13nba.html

12
Sports Sponsorship
• BBVA Group in Spain signed multiyear sponsorship deals with the NBA
and ESPN (for college football).

13
Sports Sponsorship
• Does it make sense for BBVA to spend so much money on these sponsorships?

• Pros: Arguments in favor of the sponsorships

• The U.S. market has limited awareness of BBVA, and sports sponsorships are quick way to
build awareness.

• The sponsorships are consistent with the company’s philosophy of a commitment to

sports, which identifies the bank with values of passion, teamwork, and fair play (page 5).

• Sports sponsorships give BBVA an opportunity to leverage social media and engage young
consumers with the bank.

14
Sports Sponsorship
• Cons: Arguments against of the sponsorships

• In 2010, BBVA Compass’s entire advertising budget for its checking accounts was about $6
million. Wouldn’t the company be better off spending these additional resources on
traditional advertising?

• Does a bank fit well with a sports affiliation? While a pizza company like Papa John’s may fit
well with college football, it is unclear if the BBVA Compass Bowl generates positive
associations for the bank.
• And even Papa John’s did not find the college football sponsorship useful enough to renew this
relationship.

• Is there any evidence that the sponsorships enhance the brand or generate new business?

15
Online Acquisition Process
Ad $$
Display = ?
CPM
Search = ?
Impressions
Display = ?
CTR
Search = ?
Clicks
Display = ?
Search = ?
Start an App
Display = ?
Search = ?
Finish App
?%
Approved
?%
Active
?%
Remain
active 16
Online Acquisition Process

CPM CTR

CPM CTR 17
OnlineAd $$Acquisition Process
Display = $2.06
CPM Display = $4.57
Search = $44.75 CPC
Impressions Search = $1.09
Display = 0.045%
CTR
Search = 4.1%
Clicks
Typical CTRs for search ads are in the range of
10% (p. 5) Display = 13.3%
1% to 2%, so BBVA is doing well in targeting its
Search = 8.6% search ads. However, most online ads are also
Start an App
Display = 38.9% accompanied by promotional offers.
24%
Search = 17.5%
Finish App
80% (page 6) Display ads have higher conversion rate?
Approved
67% (page 6)
Active
55% (page 3)
Remain
18
active
OnlineAdsAcquisition Process
Display = $2.06
CPM Display = $4.57
Search = $44.75 CPC
Impressions Search = $1.09
Display = 0.045%
CTR
Search = 4.1%
Clicks
10% Display = 13.3%
Search = 8.6%
Start an App
Display = 38.9%
24%
Search = 17.5%
Finish App
80% (page 6) 24% combined rate of application completion:
This is significantly lower than expected and
Approved much lower than what Sottosanti seems to believe
67% (page 6) (page 5.) What may be reasons for low completion rate?

Active
55% (page 3)
Remain
19
active
OnlineAd $$Acquisition Process
Display = $2.06
CPM
Search = $44.75
Impressions By analyzing purchase funnel we can understand
Display = 0.045% where the bottlenecks are.
CTR
Search = 4.1%
Clicks
10% Display = 13.3%
Search = 8.6%
Start an App
Display = 38.9%
24%
Search = 17.5%
Finish App
80% Takeaway: Merely looking at CPA is not enough.
It is critical to understand the entire consumer
Approved decision-making process
67%
Active
55%
Remain
20
active
Search and Display Advertising
• Role of search and display advertising

Display ads may target people when they are not

actively looking to buy a product.

Search ads target customers when they are close to

making a purchase decision (active state).

This explains why CTRs for display ads are much smaller
than CTRs for search ads.

21
Search and Display Advertising
• If the CTR for display ads is less than the CTR for search ads (0.045%
vs. 4.1%), and the display ad CPA is higher than the search ad CPA
($88 vs. $73, Table C), then why spend any money on display ads at
all?

• Display ads serve three purposes:

• They build brands much like TV ads.
• Unlike search ads where you have only so many keywords to choose from, which limits
the amount of money you can spend on search, the inventory for display ads is virtually
limitless.
• Display ads can make search ads more effective (Exhibit 10).

22
Search and Display Advertising
• Display ads can make search ads more effective.

The increase in conversion rate

of paid search due to display ads
= 1.48/1.26 = 1.17 or 17%.

We should not attribute all the

conversions generated from search ads
in Table C to search alone. Some of the
credit should go to display ads.

23
Allocation Among Search Engines
From Exhibit 5

Search Engine Cost per Application % Search Budget % Completed

Applications
Google $77 56% 52%
Yahoo! $73 34% 34%
MSN $56 7% 9%
Unified Marketplace $48 3% 4%
SuperPages $4 ~0% 0.2%
Total $73 100% 100%

Optimal allocation among search engines: BBVA can improve its search engine marketing effectiveness
by allocating more to MSN, Unified Marketplace, and SuperPages and less to Google and Yahoo!.
BBVA should allocate more to MSN, UM and SuperPages until the marginal cost of acquiring another
customer in each search engine is approximately the same.
24
Key Takeaways
• It is generally easier to measure the effectiveness of online advertising
than offline advertising. Consequently, it may be tempting to allocate
more resources to online ads. However, offline ads serve the critical
tasks of building brand awareness and instilling trust in consumers.

• Online and offline ads can potentially have a strong interaction effect,
whereby offline advertising may encourage consumers to shop online,
and vice versa. Most companies have difficulty tracking consumers
across these two channels, which makes it harder to assess the true
effectiveness of the channels.

25
Key Takeaways
• The online channel provides concrete metrics such as CTR, CPC, and CPA.
However, even CPA does not provide a complete picture of the effectiveness
of the online channel.

• It is important to map a consumer funnel or purchase process to identify

potential bottlenecks and find ways to remove them.

• Search ads seem more effective than they really are because they target
consumers toward the end of the purchase funnel. Media (e.g., display, TV,
etc.) targeted at the top of the funnel deserve part of the credit attributed to
search advertising.
26
 Advertising, Display = $2.06 CPM, Search = $44.75 CPM

Impressions, Display = 0.045%, Search = 4.1%

Start Application, Display = 13.3%, Search = 8.6%

Complete application, Display = 38.9%, Search = 17.5%

Approved, Display = 80%, Search = 80%

Fund account in time, Display= 67%, Search 67%

Remain Active, Display= 55%, Search 55%

27