Communication Currents

A current study finds that U.S. financial service organizations altered their communication messages in response to the current recession. We analyzed print magazine advertisements for banks, credit cards, investment firms, and insurance providers and found that those financial organizations shifted away from emotional messages in favor of informational messages during the recession. The result of the analysis supports the argument that advertising serves the role of providing market information and that the nature of such information is determined by economic conditions.

History suggests that for-profit companies should alter their underlying communication strategies to accommodate changes in the overall economic environment. The companies must reassure their target audiences and stakeholders and must keep them informed of and engaged in their performance during an economic crisis. Providing such reassurance and high quality information can be accomplished by restructuring message strategies for communicating timely, accurate, and responsible messages.

We asked the question: Did U.S. financial services organizations such as bank, investment, insurance and credit card companies, often blamed for the current economic recession, change their communication approaches during the recession? We answered this question by analyzing the content of 1,195 financial services advertisements appearing in four national magazines (e.g., Time, Newsweek, Businessweek, and Money) during five years (2005-2009). The five years were chosen in an attempt to view the possible changes in financial advertising strategies during the recession. Economically speaking, the years 2005 and 2006 can be considered the prelude to the recession.  In 2007, feelings of unease and a crisis of confidence within the U.S. financial markets began to become more widespread.  In 2008 and 2009, the overall U.S. economy plunged in a sharp recession with devastating consequences.

Our analysis showed over the five years, there was a 19 percent decline in the number of yearly financial services advertisements appearing in national magazines (mainly due to budget cuts), falling from 262 advertisements in 2006 to 211 in 2009. This finding matches some current financial reports. For example, according to Advertising Age, in 2008 the top ten banks and credit-card companies cut 11 percent of their advertising spending with a 25 percent reduction in the fourth quarter, and a 39 percent reduction in the month of December alone compared to the same periods in 2007.

But, in spite of the decline tendency of the number of advertisements, there has been a change in communication strategies used. As the economy worsened, advertisers turned more frequently to using informational communication strategies. Before 2008, a majority of the financial advertisements relied on emotional appeals. However, within the time of the crisis (2008-2009), informational appeals have been far more frequently used than emotional ones. Interestingly, not all financial services organizations in this analysis adjusted their advertising in the same way or at the same pace. For example, bank, investment, and insurance companies were more likely to count on informational messages during the crisis (about 60-65 percent of their advertisements) than before the period (only about 40-45 percent).

On the other hand, credit card companies were much slower than the others to change their communication strategies using informational appeals, while their emotional approaches remained dominant in the five-year period (about 66 percent of their advertisements were emotional-based in the period of 2005 to 2008 and the percentage had been down to 53 percent in 2009). It could be inferred that market structures affect a financial services provider in different ways, affecting their use of unique communication strategies such that they do not necessarily follow the pattern set by other financial providers. During the five year period, credit card companies continued to focus on either the image of the card users, the social aspects of the card, or the fun of having the card.  

Our analysis suggests that the current recession might direct financial services organizations to reconsider their use of communication. In other words, the organizations should become more concerned with providing consumers with more appropriate financial information to protect consumers from financial confusion, uncertainty and harm by using more rational, functional, and utilitarian appeals than ambiguous and emotional ones.  

This study also provides some insight into further consumer-related issues. As a growing number of U.S. consumers are currently entangled with excess debt, insufficient savings, poor retirement planning, and suboptimal investment behavior, research and policy actions point to emerging support for advertising to make the market for financial products more efficient and safer.  Indeed, financial products have become more dangerous in part because financial advertising may be a way to obfuscate rather than to inform and persuade. Terms hidden in the fine print (e.g., obscure information about financial risks, charges, and expenses in the advertising disclosures) or obscured with incomprehensible language (e.g., relying too heavily on selective performance figures) may lead ordinary consumers to make suboptimal economic decisions.

Consumers often make financial choices that are not necessarily good for them. Errors in choices arise from certain financial biases, emotion, incomplete information, and limited understanding. Consumers are often skeptical of advertising whose claims are difficult and complex to understand. They rather prefer advertising that assists them in their economic decision-making. Consumers are accountable for responsibly using financial products and those who get in over their heads must find a way to manage fiscal responsibilities.  Financial services organizations should provide their consumers with information about the consequences of inappropriate financial management.

Specifically, during the current recession, there would be a reason for communication managers to present their financial advertising in concrete, specific language that would enhance a consumer’s ability to make the best financial decisions about any financial products based on rational considerations. Thus, this study suggests that by adjusting the quantity and quality of informational content and persuasive tactics employed in an advertisement, financial organizations should continue to communicate their financial facts in a more clear manner during the recession. 

Overall, communication managers need to change their communication strategies in accord with changing economic conditions. Different market segments may need to change in different ways. All changes ultimately should lead to providing more accurate and understandable financial information about services and increasing support, so that consumers make the right financial choices at the right time. Communication managers may gain strategic insight on how to manage an economic crisis and communicate most effectively with target consumers by implementing these suggestions.