Goldman Sachs is sending much less mail to potential Marcus customers. A senior exec lays out the reason why.

Jin Lee

Goldman Sachs has slashed the number of direct mailings it sends out to attract new customers to its Marcus personal loans product.
The slowdown is a result of enacting a "test and learn" philosophy to marketing and choosing those strategies that offer the greatest reward, according to Omer Ismail, head of consumer digital finance in the Americas for Goldman’s Marcus division.
At Business Insider’s IGNITION: Transforming Finance event on Monday, Ismail said the bank will modulate its use of various marketing strategies based on the success it’s having.
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For a long time, direct mail has been a cornerstone of the credit card and consumer lending industry’s efforts to attract new customers. The strategy requires sending promotional materials — often glossy brochures or cardboard stock — in the mail to select groups of potential customers.

Goldman Sachs has followed a similar playbook to boost its consumer lending business. Last December, for example, the bank sent more than twice the amount of direct mail than any other lender, or 49 million pieces, according to Credit Suisse estimates and data from advertising tracker Mintel Comperemedia.

But by February, Goldman’s mailings had plunged to 14 million, according to the data. By April, the latest data available, it was still far below previous highs, at 16 million.

While it’s not clear why — Bloomberg reported in October that Goldman had slashed its 2019 lending goals for Marcus, the bank could be looking to save money, or it could be something else entirely. Omer Ismail, head of the Americas for Goldman’s consumer-finance unit, ascribed it to better success in other marketing channels. Ismail spoke on Monday at Business Insider’s IGNITION: Transforming Finance event.

"Direct mail happens to be an important marketing channel, we’ve used it and we continue to use it, but the truth is we have looked at a lot of different forms of digital marketing," he said. "We will modulate one or the other based on the success that we’re having."

He cited a recent campaign where the bank plastered three US train stations with advertising messages and did other outdoor advertising. Last year, it partnered with JoJo Fletcher, who gained fame on ABC’s "The Bachelorette," to pitch Marcus loans for home renovations.

It’s using a philosophy that Osmail referred to as "test and learn" to figure out what works best for driving customer growth.

One common problem with direct mail is that it can be expensive, pushing up the cost of customer acquisition and making it harder to turn a profit. Financial technology firms often cite such costs as one of the key limiting factors to their growth and Goldman execs including CEO David Solomon have talked about improving the bank’s efficiency.

The bank has already spent $1.1 billion on building and promoting the consumer finance operation.

Goldman has turned to partnerships as a way to gain a lot of customers at once, signing an agreement in 2017 with Intuit’s TurboTax software and announcing in March an agreement with Apple to launch a credit card. Harit Talwar, global head of Goldman’s consumer business, has said more announcements are in the works and that partnerships is one of three .

"The other thing that I’d say is when we think about marketing capabilities and growing our business and growing distribution, partnerships is a really important way of doing it," Ismail said. "You continue to see different ways of marketing, both where we are directly acquiring customers and where we are doing it through marquee partners like Intuit and Apple."

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