Assessing the Effectiveness of Advertising Costs in the Banking Sector

Abstract

In recent years, clients of Russian banks have learned to take into account changes in the financial market quickly. When the key rate changes, they change their strategy — the demand for annual deposits decreases, and the flow of funds for short-term deposits increases. It doesn't contradict the interests of the banking sector. At a high level of the refinancing rate on the interbank market, the credit institution is interested in increasing the money supply on deposits. Attracting customers is carried out by banks using a variety of marketing tools, the main of which remains advertising. None of the tools for the bank is free of charge and a traditional economic problem arises: to put in the budget minimal costs for advertising and get a large the effect. It is obvious that in such a formulation the problem is unsolvable. Therefore, currently the theory offers only a single approach to assessing the effectiveness of advertising costs, which the authors call «traditional». Its disadvantage refers to the fact that the generated effect is difficult to divide into impact components, since not only advertising affects the flow of new customers and the share of loyal ones. The approach proposed by the authors makes it possible to assert that the use of an econometric method in management analysis in addition to the traditional method of assessing the effectiveness forms an evidence base for justifying advertising costs by banks. The article reflects the results of the study using the example of JSC «Raiffeisenbank». The advantage of the proposed method is the availability of information: the study is based only on open data published on the website of the Bank of Russia. This will allow Russian commercial banks to assess cost effectiveness after advertising campaigns and during their planning as well as compare the level of effectiveness with competitors.