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Branding Banks For Shareholder Value 5.0 Why Cant Banks Brand
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Branding Banks For Shareholder Value 5.0 Why Cant Banks Brand

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The fifth section of Branding banks for shareholder value. This describes the difficulties banks face if they are to brand succesfully

The fifth section of Branding banks for shareholder value. This describes the difficulties banks face if they are to brand succesfully

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    Branding Banks For Shareholder Value 5.0 Why Cant Banks Brand Branding Banks For Shareholder Value 5.0 Why Cant Banks Brand Document Transcript

    • Branding Banks for shareholder value Discussion Draft Section 5.0 Branding banks for shareholder value Section 5.0 Why can‟t banks brand? 1 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Delivered and planned series of papers Discussion Draft Release Date Order.Version Creating shareholder value - an outline 1.0 Mar-10 Knowing customers 2.0 Mar-10 How customer perceptions develop 3.0 Apr-10 Why brand banks? 4.0 Apr-10 Why can't banks brand? 5.0 May-10 Measuring customer perceptions 6.0 June-10 Measuring customer value 7.0 TBA Gaps diagnosis 8.0 TBA Bank structure and brand control 9.0 TBA Process level brand control 10.0 TBA Building the brand story 11.0 TBA Communicating bank brands 12.0 TBA Valuing bank brands 13.0 TBA Brands and the future of banking 14.0 TBA Competitive bank branding strategies 15.0 TBA 2 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Introduction In this section, I pursue four lines of thought:  Branding banks is at the extreme end of difficulty along the spectrum of all brands.  The standard tools and mindset we use in thinking about brands have to be rethought for the banking sector.  Because brands are so valuable to banks (as I argue in the previous section) and because achieving a good brand is so difficult the ability to be able to do so is a significant source of sustainable competitive advantage.  A first step to surmounting the challenges is to have a profound understanding of them and their causes. Banks which try to manage their brands as if they were Coca Cola are not going to win. Branding Branding banks is next banks is vital to impossible Surmounting the impossibilities creates sustainable competitive advatage I support these assertions with three arguments:  banking by its nature makes banks unusually difficult to brand;  bank brand messages are unusually difficult to convey; and 3 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0  banks‟ brands must be exceptionally resilient to change both cyclical and structural. But first, what evidence is there that banks are indeed bad a branding? Is it really true that banks are bad at branding? Each year Superbrands commissions a survey of Britain‟s top brands, performed by The Centre for Brand Analysisi. Stephen Cheliotis, Chief Executive of The Centre for Brand Analysis has kindly given me permission to use some of the findings of the 2010 survey in this book. In Appendix 1, I reproduce part of that data. I shall discuss some implications in more detail later in this paper. For now though I wish to observe that in the top hundred UK consumer brands there is no bank at all. Lloyds TSBii and Barclays are the highest ranked in the listing at 105th and 107th respectively. Later, in this section I note the potential reach of British bank brands into the economy and the community. In the light of this reach it seems that the relatively poor perception of them in the market is some confirmation of the assertion made in this situation. Despite all their potential power the branding of banks is poor. Listed below are some of the leading brands in the eyes of the British as measured by Superbrands. I shall refer to some of them in this paper as I make a case that bank brands have features that make them quite distinct. Brand Rank Index Microsoft 1 100.0 Rolex 2 99.9 Google 3 93.4 British Airways 4 90.3 BBC 5 86.8 Mercedes Benz 6 86.2 Coca-cola 7 83.2 4 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Lego 8 82.9 Apple 9 81.4 Lloyds TSB 105 48.6 Source: Superbrands 2009 The nature of banking There are some things about the nature banking that collectively make banks unique in terms of branding. I outline in the following paragraphs the implications of:  banks as service businesses;  business to business marketing as a special case in branding as well acting in tandem with business to consumer marketing; and  the abstract, hard to portray, nature of banking. Banks are service businesses Several authoritive books on branding I have consulted to write this book have separate chapters for service industries and Business to Business brands. This includes, for example „Kellogg on Branding‟ iiiwhich carries the name of what is arguably the premier marketing school in the world. There is a clear indication that brands within these categories are seen to be somehow different in nature to the sort of products that we are used to calling brands. In the exhibit below, I illustrate a key feature of services. Perceptions of the brand are much influenced by a series of interactions which are commonly called „touch points‟. I refer again to the diagram I used in Section 3, „How customer perceptions develop‟. At each touch point the customers is checking his or her experience against the messages they receive from the environment and most importantly their own past experience. While these modify their interpretation of the immediate experience in the way I discuss in Section 4 they cannot override it. It is more likely to be they who are re-evaluated. 5 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 A second feature of the service brand is that it is difficult to evaluate except by trial. You can‟t, as it were, „look at it in the window‟. This is not so important for a service such as a haircut, inexpensive and one-off, but for an ongoing relationship such as banking it matters more. This is especially true when the value of the relationship occurs relatively infrequently. For example, some people like to have a good ongoing relationship with their bank for rare occasions when they want to borrow. A third, a very important feature, is that people are involved and so consistency of service is difficult to achieve. Where the outcome depends on collaboration between the service provider and the client this becomes even harder to manage. A fourth is that services can‟t be stored as inventory. There is no buffer between supply and demand. This means that the forces of oscillation present within banks are magnified. Cost reductions are often resisted up to a point and then are resolved by often large scale, staff lay-offs with adverse implications for service. 6 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 A fifth is that service activities need to be carried out in proximity to the customer. In the case of banks this involves branches and, in most cases, regional control. Let me offer the following conversation I recorded between myself and the General Manager for Westpac in Queensland around 1990. Me (then in corporate centre strategic planning): “Bill, I should very much like to visit Brisbane to understand the unique features of the Queensland market”. General manager Queensland: “You‟re very welcome, we‟ll certainly show you how we do things better in Queensland”. Those two sentences, and the obvious misunderstanding they convey, tell much about the nature of branch banking. Some autonomy is necessary, even desirable. But it does very little for geographic brand consistency. Of course this is even more so for multi- country bank brands where there really are regional market differences to be taken into account. Rating the service element in brands I have tried to look at the brands highest rated by Superbrands in terms of how exposed they are to the service element in their offerings. Here are my criteria for making these assessments. A 10 means that the customer experience of benefiting from the product or service is highly dependent on employees who:  are skilled;  operate with some discretion in managing customer relationships;  are not easy to supervise or measure in performance;  have to deal with a wide variety of issues;  who are largely responsible for delivering the client benefit.  who have to collaborate with the customer to create the solution. 7 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 I think a 10 might be scored by a hospital or school. I‟ve lowered the bar a bit in my ratings so my examples don‟t cluster too much at the lower end of the scale. As with all my ratings of this kind you are invited to make your own assessments and see if you come to the same conclusion. Brand My rating Microsoft 3 Rolex 2 Google 2 British Airways 7 BBC 2 Mercedes Benz 2 Coca-cola 1 Lego 1 Lloyds 8 My conclusion is that along the scale of dependency on service elements banks are well towards the high endiv. A large element of B2B Looking at the exhibit I used in Section 2.0 of this series it is clear that a bank is likely to have a large business component. It is reasonable to think of perhaps half of shareholder value being attributed to the non-household sector. 8 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Bank Professional Retail Corporate Institutional markets Personal SME Mass Affluent market Books on branding, including „Kellogg on branding‟ cited above often have a separate chapter on business to business brands. In a similar way to service brands they are seen as being distinct. They are different to consumer brands in several regards:  their major buying decisions are more likely to be taken by a group rather than an individual;  their major buying decisions often involve a technical specialist) in the case of banking, the accountant or chief financial officer;  there tend to be a precise specification for the supplies and a more formal purchasing process;  many buying decisions come down to cost and monetary benefit. There is probably more emotion attached to the decision than people think but there is a strong tendency for this to be true.  There is often more pressure on the buyer to make a formal assessment of the purchase prior to the decision to buy. For all these reasons, brand effects are more likely than in personal markets to be overridden by the actual experience. That is to say, perceptions of the experience are less likely to be modified by brand effects. 9 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 It is not only true that banks have a large part of their business based on this distinct arena of branding. It is also the case that they have to manage both consumer and business brands. As we shall see in Section 7 on structure and control this is not a simple issue for banks. For example, business customers, often relationship managed face to face, still have to use branches and often do so more than we thinkv. As I did with services I essay a comparison between Superbrands leading brands in terms of the demands of business to business branding placed upon them. My criteria for scoring a 10 (the largest commitment to business to business) are as follows. The business component must to only involve sales to business but this must involve a business model quite distinct from that brands consumer model. There must be a need to reconcile and integrate these different models within the same organisational framework. Brand My rating Microsoft 7 Rolex 1 Google 3 British Airways 4 BBC 1 Mercedes Benz 1 Coca-cola 1 Lego 1 Lloyds 8 My conclusion is that by comparison to more successful brands banks tend to have a larger burden placed upon them in responding to business branding needs. (Again you can make your own rating and draw your own conclusion if you wish.) Managing risk, at the heart of banking, is abstract What banks do to add value within the economy is partially to offer a service to make payments and transfers. But more importantly at the heart of banking is the 10 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 management of risk. The banking equivalent of the engineering department in a large manufacturing company is the risk management department. The main risk that a typical commercial bank manages is not in the heady world of hedging and derivatives. It is to manage the lending long (mainly home mortgages) against the short term deposit taking (large at call). This management permeates the organisation. It results from thousands of decisions firmly grounded in prudent standards and on the banks culture. It isn‟t something customers can see, touch and taste. In fact when customers do see it, it often seems cold and hard as in the regulation required caveat in the advert below. A new Apple product was described recently as „lickable‟. Somehow you just don‟t want to lick a residential mortgage agreement. Try this: Microsoft being productive Rolex feeling rich Google being connected 11 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 British Airways getting there BBC being in the know Mercedes Benz riding in style Coca-cola icily refreshed Lego playing, building, creating Apple in tune with the world Lloyds TSB queuing for something you don't understand Yes, I know, unfair – but maybe just a tiny ring of truth. In Section 4, „Why brand banks?‟ I talked about brands in terms of how they:  contextualise a product or service in that they create a space where it fitted in with people‟s everyday lives; and  make the product or service tangible in the sense that people could relate to as closely and immediately as they could to a ripe peach. Services that are abstract in nature make this so much harder. So to summarise thus far: Brand identity is hard to define Banks are service Much bank value lies in B2B. This Banking itself (especially businesses hard to define involves more pragmatic risk management) is in traditional brand terms. So much depends on purchasing decisions with different abstract and cold – difficult criteria and controls for people to form a customer by customer experience. relationship with Bank brands are surrounded by inertia 12 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Banks are subject to:  the weight of history;  having roles seen as akin to public utilities;  the fact that by contrast to many brands their customer relationships are ongoing. Long history, long memories, long relationships A while ago I was put in charge of commercial marketing strategy at an Australian bank. It turned out that a computer programmer had reset all the customer acquisition dates to the first of January that year. So I went to the banks oldest business banking branch and started to look through files. There were customer relationships that went back beyond memory, over a hundred years (think Ned Kelly here) vi. Think also of the NPV of the relationship at the time of acquisition! And there are not a few personal customers that have had an account with a bank all their lives with perhaps a family relationship that goes back generations. Go to, say, Bradford and look at a group of imposing bank branches constructed on the bank of a burgeoning wool trade over a hundred years ago. 13 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 The Victorian grandeur of the banks lasted long after the wool trade ceased to exist. It may seem too obvious to say but bank brands have been part of the fabric of communities for a very long time. It takes a lot of branding effort to push them more than an inch or two. The NatWest branch I show above was clearly designed to say:  We are safe  We are civic leaders  We are part of the industrial revolution. Whether or nor that is the image a bank may want to communicate today is irrelevant. My point is that changing the buildings is not an option really. Bank branches come in all styles. Like this one many came along with a bygone merger or acquisition. Bank brands reach far back in time. Banks seem much like public utilities Banks have some characteristics of being public utilities in that they provide a service in payments and transfers that is almost a necessity for most people. In fact many banks have been in public ownership. They are a necessary part of the fabric of society. This leads to people having perceptions of them that are very much illustrated by the dis- satisfiers in Kano Analysisvii. Things are expected to work smoothly banks get little recognition when they do and enrage their customers when they don‟t. This is one of the reasons why banking is such a football for politicians and the media. They are an entitlement because they are essential. Leading on from this is the fact that it is hard for a bank‟s brand to transcend that of the category. People have such a fixed idea, developed almost form childhood of what a bank is that this dominates. Their concept of bank nearly always precedes in their minds the brand of any individual bank. Actually this does reinforce inertia, making it harder for a non-bank to enter the market. Inevitably though it makes the task of branding harder. 14 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Customers have an ongoing relationship with their bank A key feature of banks is that their relationships with their clients are ongoing. The actual moments of contact may only be once in every few years in the case of a residential mortgage only relationship or almost every day in the case of an online transaction account relationship for a small business. Each time you buy a Coke in preference to a Pepsi you are deciding to reinforce that preference in your mind. Each time you tune into BBC Radi0 2 rather than, say, Capital Radio you are reinforcing your preference for the BBC. With a bank it is different. Each visit to a branch or log in online is in some way because you are captured by the relationship. Interactions with a bank are not chosen each time. If they are unsatisfactory from the customer‟s viewpoint their annoyance is likely to be greater. Customer inertia creates much value for shareholders but it comes at a price. Bank brands are weighed down by inertia Expectations based on long Banks can look much like public Customers have ongoing histories are difficult to utilities relationships with their overcome or for individual banks that are easy to take brands to transcend for granted Banks exist in a complex and diverse marketplace Bank brands reach far into the marketplace In the chart below, I show my rough estimate of the reach some of the brands ranked highly in the Superbrands survey. I took Lloyds TSB as my bank in this list as first, it 15 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 came highest of the banks in the Superbrands survey (notwithstanding that it is nearly a hundred places below the 9th firm in the rankings) and secondly, putting aside the problems it caused itself by its rescue acquisition of HBOS, it is a well balanced and, in the long run, successful bank. I also included Tesco on my list of leading brands. It wasn‟t, by contrast to the others, in the Superbrands top ten but I thought it fair to include a heavyweight retail brand. I made the estimate by rating each brand against eight criteria. I used a scale of 1 – 10 where 1 = virtually no brand presence and 10 = as much presence as I could imagine. Note they are only my estimates. You could try it yourself and see if you come up with anything significantly different. Brand reach estimate 70 Estimate (see text) 60 50 40 30 20 10 0 Selected brands 16 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Business Outdoor Broadcast In home Online Customers Staff and Media Total premises signage / advertising /Direct presence talking their talking / Point of / print mail online about the families about branches Sale / advertising brand talking the ATMs about brand the brand Microsoft 1 2 6 1 8 7 1 7 33 Google 1 1 4 1 9 7 1 7 31 British Airways 3 2 8 3 2 6 4 7 35 BBC 1 2 9 10 7 9 2 7 47 Mercedes Benz 4 2 2 2 1 2 1 1 15 Coca-cola 1 7 4 1 1 7 2 1 24 Lego 2 2 2 2 1 5 1 1 16 Apple 4 1 3 1 7 3 1 7 27 Tesco 9 2 6 3 3 8 9 7 47 Lloyds BG 9 7 6 7 6 7 9 7 58 By business premises / branches, I mean high street presence – everyday visibility and interaction. This is important in terms of the daily integration of a brand into our routines and habits. Navigant Consulting research indicates a strong correlation between the number of branches a bank has and its share of current accounts. Branches it appears are still the bastions of retail banking. Tesco of course has stores in much the same was a banks have branches and they are comparable in terms of frequency of visits and by numbers of customers visiting. The other brands on my list fall well short of this, however. By outdoor signage, point of sale advertising and ATMs I mean those constant, almost subliminal nudges through which brands remind us of their presence – often unobtrusively but constantly. For banks this is primarily ATMs, less so in the UK than in Australia where I never seem to be more than a few yards from one. For point of sale signage and advertising, Coca Cola is strong but most brands on our list don‟t come close. In Broadcast advertising / print I refer to the most traditional forms of marketing communication. I don‟t have expenditure figures but I should say that banking is a leading sector in both broadcast and print. I want to note here that by contrast to many leading brands banks tend to have more authority to take such expenditure decisions in their domestic markets. Looking again at the top brands according to Superbrands: 17 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Highest level of marketing decision making located in the UK Microsoft N Rolex N Google N British Airways Y BBC Y Mercedes Benz N Coca-cola N Lego N Lloyds Y By In home I mean everything that comes through your door. I am including television and radio in this so this is where the BBC gets a boost. Online is everything paid for by a brand you see on your computer screen plus all the dealings you do with your bank online. It‟s your computer screen as your window on the world. Customers talking about the bank means what is called word of mouth. In includes what intermediaries have to say too. For the business market, accountants are almost certainly the strongest influence. The power of word of mouth is difficult to evaluate. Staff and their families talking about the bank whether it‟s good or band. A quick calculation suggests that in Australia and the UK there are getting on for 1 bank employee for every 100 people. Compared to other brands I‟d say that was pretty pervasive. Media talking about the bank comes in four ways:  commentators on bank products such as you find in the Money pages of the Sunday Times;  commentators talking about banks in the context of the their role in society (We usually refer to this as „bank bashing‟; 18 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0  commentators on the role of banks in the economy;  commentators talking about banks in terms of their value as an investments such as in the pages of the Investors Chronicle. So it seems to me incontrovertible that banks have a long reach into the community and the marketplace. There are four conclusions I draw from this:  through sheer presence they should have strong awareness and the opportunity to create strong brands (after all the constant nudging „I am here‟ to build and maintain awareness is an important use of brands);  no doubt the coordination and integration of messages presents complex problems;  a good reach but a poor brand can do more harm than good; people are continually jogged to reinforce the wrong message; but  there must be other reasons that the reach of banks fails to be turned into more valuable brands. Large and diverse client base Putting aside the business customer base of banks and just looking at the personal market, it is impressive in its diversity. It is generally hard for banks to focus easily on specific groups of customers. There is of course private banking and in Section 4, I noted some exceptions. Mostly though, a typical retail bank will have a customer base that is highly diverse in these key dimensions that I introduced in Section 2. 19 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Attitude to finances Affluence e ag st fe Li The result is that branding messages have to work for all segments along the dimensions shown above. Many products, many markets By comparison to many successful brands in other industries banks cover a big territory in the product market spectrum. In the exhibits below I compare a typical large bank with some other brands that ranked high is the Superbrands survey. Please note I am not suggesting that this is these are the product market matrices actually used by these brands. They are simply my interpretation based on what seems to me much the same scale of cell segment as I show below for a bank. Typical large bank (Lloyds TSB being ranked 105th by Superbrands) The highest bank brand rated by Superbrands in the consumer survey was Lloyd TSB at 105th. I imagine it has a product market pattern something like this. Note that by risk management I mean for personal markets largely insurance products whereas for business / institutional markets they are more likely to be things such as hedging. 20 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Institutional Mass Affluent SME Corporate and financial personal personal markets Loans Deposits Risk Mgt Investments Transactions Microsoft (Ranked 1st by Superbrands) Personal Business Productivity software Entertainment sofrware Consumer electronics British Airways (Ranked 4th by Superbrands) Personal Business Long haul Short haul 21 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Coca Cola (Ranked 6th by Superbrands) Personal Soft drinks For me, therefore it seems that banks have a significantly larger product market framework than other, apparently stronger brands. Bank brand identity is a broader umbrella and tends consequently to be weaker. The value of customers is difficult to assess At the time of acquisition a bank never knows if a customer is going to be valuable. This is partially because the customer‟s imposition on bank operational costs is unpredictable. Also in the case of customers that incur a cost of risk to the bank. These costs are unpredictable and can change over time. Customers consistently say, in interviews, however, „I give a lot of business to the bank. I deserve to be better treated.‟ If the bank isn‟t sure how valuable the customer is what chance does the customer have? So any cost incurred in managing relationships, including branding, is doubly opaque both from the bank‟s assessment of the improved value of relationships and from the customer‟s perception of it. Climbing for the most desirable brand real estate neuters differentiation 22 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 A clear differentiating message for a bank is good to have. Early in my consulting career in accordance with the fashion of the day I was much involved in facilitating workshops in which business teams have laboured over the „word-smithing‟ of a mission statement. Everyone had to have one. Many teams found is a dispiriting exercise because after a few hours spent haggling over the words, they finished up with a motherhood mission, bland and obvious. That‟s the trouble with trying to construct a mission. All roads tend to lead to „trusted by delighted customers‟ or something close that. Differentiation is elusive. It‟s the same with branding. Every bank wants to say that they are risk free and treat every customer as an individual and so on. The trouble is this branding pinnacle of Everest is very crowded. In summary therefore: The brand’s market place is diverse and complex Banks brands must be relevant to banks find it hard to Bank brands must be diverse customer bases where differentiate clear brands relevant in many product customer value is hard to measure because they all want to markets claim the middle ground And so to summarise this part of Section5 in full: 23 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Brand identity is hard to define The brand’s market Bank are Bank brands are place is diverse intrinsically hard to weighed down by and complex brand inertia Bank brands must be relevant in many product Banks are service markets businesses hard to define in traditional brand terms. So much depends on customer by customer Expectations based on long experience. histories are difficult to overcome or for individual brands to transcend Banks brands must be relevant to diverse customer bases where Much bank value lies in B2B. This customer value is hard to measure involves more pragmatic Banks can look much like public purchasing decisions with different utilities and are saddled with those criteria and controls expectations banks find it hard to differentiate clear brands because they all want to Banking itself (especially claim the middle ground risk management) is abstract and cold – difficult Customers have ongoing for people to form a relationships with their relationship with banks that are easy to take for granted In the paragraphs above I have tried to draw out the features that make banks both different to other organisations and more difficult to brand. I want to turn now to the problems associated with transmitting the brand, however undefined, to its intended audience. Transmission and reception of the brand Transmission and reception of the brand is really just another instance of the special nature of banking. We shall see that banks differ from other industries in several important respects. Most importantly, by contrast to the picture shown in the exhibit below, the transmission is blurred because it has many sources and many audiences. What is more they do not communicate on a straight one to one basis. If only communication was as simple as the shown in the exhibit below! 24 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Simple brand communication 001 Actually, my reality looks more like this: Brand Brand identity awareness transmission reception Multiple sources 25 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 The exhibit below give a view of what a bank‟s organisation structure might look like roughly speaking. Obviously this is a simplification. Board CEO Business unit line heads Staff function heads HO PB HO BB HO IB HO WM HO IS HO Int B CFO CRO CIO CHRO CMO Abbreviations Regional Head HO Mortgages HO Online banking CEO = Chief Executive Officer HO = Head of HO Investor Relations PB = Personal Banking BB = Business Banking IB = Institutional Banking WM = Wealth Management IS = Insurance Services Branch manager Int B = International Banking FO = Financial Officer RO = Risk Officer IO = Information Officer HRO Human Resources officer MO = Marketing Officer Front line customer service Let‟s take a look at how they might communicate with the outside world. I‟ve taken away the organisation reporting lines because, the CEO aside, hardly anyone outside the organisation has a clear idea of who‟s who inside. Then I‟ve just tried to give a flavour of the range of communication the insiders have. It‟s very simplified because the reality is so complex that it can‟t be pictured. Do other brands have a similar problem? It is true that they have to talk to ratings agencies and stock analysts. But usually they have less complicated stories to tell as their businesses are more transparent. Of the Superbrands‟ list of top brands, Microsoft and Apple do have complex relationships with their affiliates of one kind and another. The BBC is enmeshed in the politics and culture of the country as, in a different way, is British Airways. By and large, however, I‟d say that Lloyds Banking Group, as a bank example, has much the harder task. Also in my experience of banks, however 26 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 disciplined and „on message‟ they try to be there are inevitably many people who speak for the bank in one way and another. Institutions and Everyone out there Business leaders, analysts governments Software developers. SME community Board Hardware providers Staff, unions CEO Business unit line heads Staff function heads Personal customers The brand audiences HO PB HO BB HO IB HO WM HO IS HO Int B CFO CRO CIO CHRO CMO The financial press Regional community Ratings agencies Regional Head HO Mortgages HO Online banking HO Investor Relations Mortgage customers, Institutions, stock intermediaries analysts Local community Branch manager Other nations The world online audiences Customers, friends, family Front line customer service They talk to each other too. But perhaps they do so more sporadically than you would think and in a much less coordinated way. But they do talk and influence each other. Sometimes compound messages are transmitted that are very different to what the CEO might hope for. 27 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Brand Brand identity awareness transmission reception The way in which a group view is formed is rarely satisfactory. About the time of deregulation most banks that I know of had a well defined corporate culture. A large number of people in senior management roles had worked for the bank since they left school (rarely university). Managers had mostly got their first step up the management ladder merely by being male. Being at any level of management made people feel part of the management team of their bank. Then things changed as banks became more complex. Specialists were introduced at senior levels in staff functions. So there would be, say, a chartered accountant as CFO, an information specialist as CIO, an advertising account manager as CMO and so on. All of them made improvements in some ways. Accounts for example came to decision makers faster, more accurately and better presented. But then other things didn‟t work so well. People coming into the bank from outside had no real feel for the culture of a bank. Indeed, in their efforts to make rapid and decisive change they often saw the culture as the enemy to be defeated. And then, sitting mostly at the top of the organisation, they had no real feel for the complex people entwined with technology processes that makes a bank work. Finally, they had difficulty coming to grips with the engine room of a bank – risk management. It isn‟t something grafted on the side that 28 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 you can ignore if it doesn‟t seem to have anything to do with you. It is the heart. It is the bank itself. Now of course that has changed and banks did get better at bringing in experts from outside. But, and this is my point, don‟t ever imagine, necessarily, that someone very senior talking on behalf of a bank necessarily has any clue at all what‟s going on inside it. Also bear in mind the banking lacks the linear control processes found in other industries. Manufacturing Banking Design Engineer Sales Manager Product Manager Risk Manager Marketing Manager Factory Engineer Production Sales Sales Who reports to who is not a trivial issue. I shall return to this point in Section 9.0 „Bank structure and brand control‟. Multiple audiences Aside from the fact that banks have an often inconsistent transmission of brand they also have a diverse and complex audience for their messages. I try to illustrate this in the exhibit below. 29 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Credit ratings Instituti onal agencies Institutions Corpora Suppliers of te Stock analysts capital Medium Mortgage brokers Independent intermediaries Financial Planners Small Insurance brokers business Customers Personal Affiliates M a ss m arket Brand audiences Management Card schemes Staff Affluen t Joint ventures Operational Unions ICT Suppliers Employment Asset advisors Consumer / trade Management Regulators Consultants Bank Supervisors Ad agencies Consumer groups Commentators Media Politicians Core stakeholders The first part of the brand audience is the core stakeholders. The best definition of stakeholder that I know is: Someone who stands to personally lose as a direct result of the organisation declining or ceasing to exist. Several other types of people can regard themselves as stakeholder but to my mind the primary stakeholders are the three shown in the exhibit below. Their fortunes are operationally integrated. By this I am not merely saying that is just and fair that they 30 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 should be given equal primacy as stakeholders. It is more of a case that each cannot exist without the other within the context of this bank system. Customers Staff Shareholders Referring back to Section 1, this integration of interests is the endogenous goal of Fiordelisi and Molyneaux‟s definition of the goal of the system which I accept as the starting point for this book. Endogenous drivers Controllable at business unit level Optimise Endogenous customer goal Final Goal satisfaction Improve the relationship Shareholder between Optimise bank Value creation shareholders efficiency and other stakeholders Controllable at corporate level Optimise bank’s Adapted from Shareholder Value financial in Banking, Franco Fiordelisi, structure Philip Molyneux 2006 Optimise the mix of business activities 31 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Suppliers of capital These include both equity holders and their agents and the holders of securitised debt. The audience here includes:  „Buy-side‟ analysts;  „Sell side‟ analysts;  Ratings agencies and  Institutions. The message they (aside from ratings agencies) want to hear is about dividend growth. Ratings agencies are not concerned about dividend growth. Their attention is restricted largely to interest cover. What they all value is transparency, openness and candour. They want, especially a Board they can trust, a CEO and his team who can deliver. Customers Much of this book is devoted to customers‟ brand perceptions so there is little to add here. The key messages that customers want to hear are about consistency, reliability, flexibility and a bank that keeps up to date in products services and delivery systems. Independent intermediaries These can be:  Mortgage brokers  Insurance brokers  Financial planners / advisors  Commercial loan brokers (especially in lease finance) 32 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0  Accountants, who occasionally offer some of the above services), in any event, are one of the most respected sources of financial advice in the SME and affluent personal sectors. These can be important implications for brand when banks essentially give up to them the relationship management function. What intermediaries are looking for in a bank brand is assurance of: reliability and consistency in processing and continuity of policy. I have researched the intermediary market from time to time. Intermediaries like to work with a limited panel of end providers who respond quickly and with predictability to the deals they put forward. They dislike arbitrary and unexpected changing of the rules. Staff Increasingly the number of people who see themselves as part of the bank‟s management team has contracted. Along with this the needs of each group have diverged. Corporate suite management Generally this group does have much common ground with shareholders, tied as they are by the reward system. But for that very reason they can be more risk propane as seems to have happened with HBOS and RBS. Management The wider management group seek messages of growth and of learning and advancement opportunities. Operational staff 33 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Operational staff covers more different types of workers than it used to, including  Branch staff;  Call centre staff;  Back office processing staff;  IT operational and development staff;  Specialist function staff, accounting, marketing, legal and so on. Issues that they want to hear communicated include: fairness, growth opportunity, continuity, predictability and stability. Unions Broadly unions have a commonality of interests with staff. Consistency and predictability are the message a bank tries to send. These strengthen the bank‟s bargaining power in disputes. Suppliers Of course banks buy everything from paperclips upwards. But some suppliers have very important roles. Mostly these are management consultants of all kinds and the suppliers of information technology in the broadest sense. These are especially important although there are others that a bank would desire to have a long term relationship with. The latter include lawyers, actuaries and property consultants for example. In having a long term relationship the bank naturally cares what they think and hence how they see he brand. But with the suppliers of information technology and consultancy services there is a more profound branding effect at work. Once upon a time banks created all their own systems. Well to be exact many large banks did. In the United States there are even now more than 6,000 banksviii many very small. These have always been reliant on external suppliers of software. I well 34 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 remember, however, buying software for Australian banks and discovering that what was on the market could not handle the volumes of branches or customers that Australian banks had. Most systems, therefore, were developed in-house. I‟m sure that must be the case for many countries with different banking systems to the US, certainly most other English speaking countries and European countries that I know of. By systems I mean the complex human – machine interfaces that make a bank go. When these systems were developed by banks in-house there were some important outcomes. First, I should say here that these systems were in general remarkably good. This is mostly in the sense that no one remarks on them: they just work. Among all the critics of banks, you don‟t hear much about how smoothly ATMs, point of sale and credit cards were introduced. Nor the fact that it is very rare for a payment to go anywhere other than where it was intended to go. All taken for granted, you see. It is very much an aspect of Kano Analysis which I have already discussed. But, having doffed my cap to the information systems developer and operators of banks, I need now to make an important point. When bank systems were almost wholly built in house not a lot of the required organisational competence escaped. Three interrelated things changed that. They were:  Networked micro-computers;  Enterprise Resource Management software, such as SAP and Oracle;  The legitimisation of outsourcing. The end result of this is significant. Not so long ago, perhaps a decade or two, nobody outside a bank knew much really about the detail of its systems. Now there are some large global players who know a lot. And what they don‟t know they can find out, because the world is awash with freelancers. This has important implications. Proprietary competence is now lost to organisations independent of banks. This means that into the little „Lego‟ assemblies that could be used to reconstruct the world banking industry a significant wild card has been introduced. This in turn means that should someone want to cobble together a new bank brand as, say, a joint venture between a retail chain and a telecommunications company the computer software and hardware is not hard to come by. I imagine that this trend continues. 35 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Affiliates At one time the Midland Bank (now part of HSBC) was the largest bank in the world in terms of its network of correspondent relationships. I suspect that affiliations of this kind are going to increase in significance in the near future. In general bank brands do not export well. International affiliations are going to become important in a more global economy. The other major affiliation that banks have is with card schemes. All three major card schemes are now independent of bank ownership and able to create their own destinies. The Superbrands survey elsewhere referred to in this section suggests that it may be easier for card schemes to brand than banks. A key issue for financial institutions of all kinds is the strategic decisions about which networks to commit to. This means being able to pick the networks that will gain hegemony. By networks I do not just mean plastic cards (or whatever electronic form they develop into) but cards are going to be a big part of it. For one thing they have significant organisational skill in managing affiliation. Regulators Regulators can regulate:  Employment;  Consumer protection;  Money laundering;  Risk supervision. They include  government employees;  politicians; and, indirectly,  pressure groups. 36 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 You may imagine that regulators are immune to brand effects. I argue that they are not. Regulators have to make decisions about where to focus their attention. Usually they have much power to investigate and demand information. But there is discretion where and when to use this power and to what extent. I would argue that the recent failure of the UK Financial Services Authority to investigate HBOS and RBS was, in part at least a brand effects working both on the supervisory authority and its political masters. Commentators As I said earlier in this section, there are at least four types of commentators on banks:  on bank products;  talking about banks in the context of the their role in society;  on the role of banks in the economy;  talking about bank shares as an investment. When bank bashing time comes around they can often hunt in a packix. Looking again at the exhibit below, i want to return to the customer influence process. 37 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Marketing communications Media comment Trusted advice Contradiction Own Confirmation filtered experience sought reinterpreted Information When perceptions, based primarily on individual experience are in the process of change the first influence is most likely to be advice sought from trusted friends, family members and professional advisers. This can be confirmed and contextualised by media comment, which thus has a strong effect. Marketing communications are ineffective (for banding at least) when unaligned. Around the early 1990‟s Westpac suffered from string adverse press comments on nearly all of the four subject areas outlined above. Ironically the division that suffered most in market performance as a result of this was its nascent wealth management arm, Westpac Financial Services. This division had pretty much nothing to do with the problems but because buying decisions in wealth management are taken cautiously and will little information available to the buyer who can choose from several funds, the merest hit of adverse media coverage results in a big loss of new business. Banks with adverse publicity simply do not make short-lists. At the time there was a lot more than a hint. My then colleague John Neal who was advising on cost cutting was only half joking when he said, „well you may as well sack the marketing departments because for the next couple of years nothing they do is going to work‟. Competitors 38 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Competitors too are an important brand audience. Banks thrive in an oligopoly. In the absence of collusion (and I have worked in senior roles in two different banks and never saw any evidence of it) oligopolies rely on:  a system of signalling that works not unlike bidding conventions in bridge, and  people in control who have a profound understanding of banking and likely cause and effect patterns.;  a tolerant political / regulatory environment;  sufficient power on the part of the key incumbents to shrug off competitive threats from substitute producers / services.; and  a well defined domestic market with barriers to entry. Brands actually have a role in all of these things but, obviously most importantly in the first. It is part of the signalling system. What a brand needs to say in this context is: „we‟ve got our market position sorted out. This is what we will defend to the death‟. Mixed messages In the table below I make a first cut attempt to analyse key messages by audience. My key point for now is that a „one size fits all‟ bank brand is a tough ask. cy s i on tation nce y y ity tati on poten wth il ty ucc es rtunit istenc nki ng pa ren Stabil entat onsib Prude gr o ti al orie n or ien s Op p o nd ba Cons Tr ans hor e re of th ori l resp th Profit Be yo Off-s Cultu Gr ow grow Soci a Share analysts Ratings agencies Customers Intermediaries Senior Mgt. Operational staff Unions Technology firms Affiliates Regulators Commentators Competitors 39 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 The brand jostle Here I want to discuss the actual process in which a bank brand image becomes created in people‟s heads. I see this as a kind of jostle in which people‟s brand perceptions are bounced off each other and have a tendency to merge. This does not happen fast but it happens slowly over time within a contest of much else happening besides. Of course this makes decisive intervention by the bank difficult. To offer an example: Credit ratings In stitutio nal agencies Institutions Corpo ra Suppliers of te Stock analysts capital Medium Mortgage brokers Independent intermediaries Financial Planners Small Insurance brokers business Customers Personal Affiliates Mas s m arke t Brand audiences Management Card schemes Staff A fflue n t Joint ventures Operational Unions ICT Suppliers Employment Asset advisors Consumer / trade Management Regulators Consultants Bank Supervisors Ad agenc ies Consumer groups Commentators Media Ad exec Politicians An advertising executive, say, from the bank‟s agency is a personal bank customer and also a director of a small business. He is married to a journalist who is recorded as an affluent customer and who has a meeting to discuss a mortgage with a broker who deals with the bank. 40 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Credit ratings In stitutio nal agencies Institutions Corpo ra Suppliers of te Stock analysts capital Medium Mortgage brokers Independent intermediaries Financial Planners broker Small Insurance brokers business Customers Personal Affiliates Mas s m arke t Brand audiences Management Card schemes Staff A fflue n t Joint ventures Operational Unions ICT Suppliers Employment Asset advisors Consumer / trade Management Regulators Consultants Bank Supervisors Ad agenc ies Consumer groups Ad exec Commentators Media Politicians Analyst I could of course on an on, but I‟m sure you get the picture. My point is that the brand of a bank is more than usually created in people‟s mind by a process of jostle. There are no easy to identify defining moments, although it is true that the energy of the jostle ebbs and flows. It happens over a long period of time. It isn‟t easy to know how to intervene in the process. I shall now recount what I believe to be one the stories where we can discern the jostle process at work. The NAB story National Australia Bank (NAB) emerged from a round of take-overs after the deregulation of Australian banking from 1979 to 1982 as the leaner, meaner number two bank snapping at the heels of Westpac Banking Corporation (WBC). By the early nineties Westpac was commissioning research into why financial analysts reported NAB much more favourably than WBC. Part of the reason was obvious, according to one calculation WBC had achieved shareholder expectation of return only once in the last ten 41 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 years whereas NAB had failed to achieve it just once. In my own, calculations made for the implementation of Basel I, National Australia Bank was in the top quartile of world banks, for which I had data, on Return on Risk Adjusted Assets the others in the group being American super regional banks which were significantly smaller than NAB. WBC was third quartile. National Australia bank had been sticking to the knitting. This cartoon, published at the time, gives an excellent summary of Australian banking as it was on the brink of deregulation. Partially as a result of fear of foreign bank entry and partly as a result of a belief that a business has to be first or second in its industry to thrive banks consolidated. Here we see the stately Westpac, recently rebranded from the Bank of New South Wales to suit the global role it aspired to, about to consume the Commercial Bank of Australia. Then there is the ANZ, a bit worse for wear as a result of sovereign debt defaults. What I really like though is the savage depiction of National Australia Bank as it lunges for the Commercial Banking Corporation. My guess is that at the time National Australia Bank was the best branch bank in the world. WBC had a more expansive strategy involving developing a somewhat beyond state-of-the–art computer system and an international strategy to become „Australia‟s world bank‟. Neither the strategy nor the computer system worked. By 1992 it was game over Westpac recorded an AUD1.6 billion loss in that year and came close to insolvency. NAB was the dominant bank in Australia. It wasn‟t just the financial performance and the strategy though. There was more. When the opinions of journalists, financial analysts and other industry observers were canvassed there was a 42 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 clear story. NAB executives, led for the first part of the story by the redoubtable Nobby Clarkx, were said to be down to earth, practical people you could hold a conversation with. The same could not be said of Westpac Executives. And by the way, Bill Mitchell got it right in his cartoon. The gentlemen of the Wales really were gentlemen, it‟s just that they didn‟t really get the hang of the post-regulatory world in the way that Nobby Clark and his team did. I think they won the brand „jostle‟. National Australia Bank people were consistently saying the right things to the right people across a broad spectrum. Too many people were hearing the wrong things about Westpac. And then something happened. Some cracks appeared in National Australia Bank‟s strongest competence, its credit risk control. It‟s investment in HomeSide Lending, a leading US mortgage originator and servicer was written down by about AUD 2 billion. Investors are in shock today, having seen the value of the country's third biggest company -- National Australia Bank -- drop by 15 per cent in just a few hours yesterday, before recovering just a couple of percent of that loss today. The cause of the slump was a surprise $3-billion write-down in the value of the bank's US subsidiary, Homeside Lending. ABC 4/9/2001 This was no doubt unfortunate but it didn‟t necessarily seem to indicate a system failure of credit control affecting the mainstream of the bank‟s activities. But things were to get worse. NATIONAL Australia Bank, which owns the Clydesdale, dismissed three senior executives and five traders yesterday in the continued fall-out from a humiliating foreign currency trading scandal. The bank has already lost its chairman and chief executive following a series of rogue trades which cost NAB around A$360m ((pounds) 150m). Frank Cicutto, its chief executive, resigned last month before Charles Allen, the chairman, quit days later. Herald Scotland 13 Mar 2004 43 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Just a few years earlier NAB could do no wrong. The ferocity of the response of buy and sell side analysts and the media took me aback. The Australian Prudential regulatory Authority was on the alert following accusations it has been asleep at the wheel when HIH, an insurance company, failed in 2001. It found over 50 failures of operational risk at NAB. It increased NAB‟s prudential capital requirement to 10% - a slap in the face that could be heard in Sydney. NAB appeared shell-shocked. Was this a brand issue? I believe so, at least in part. People who I spoke to who dealt with NAB had increasingly found them to be arrogant and out of touch. Much like Westpac had been twenty years before. Would NAB have been treated more kindly by the market and regulators had it maintained a better brand image in their eyes. No one can be sure but my impression is that the CEO and chairman may have survived. In brand terms NAB was a disaster waiting to happen, not among its customers perhaps but among all those other groups that can shape a bank‟s brand. In fact in the realm of trading losses the NAB Foreign currency options loss ranks only as the 30th largest as reported in the Wikipedia table here: http://en.wikipedia.org/wiki/List_of_trading_losses Societe Generale takes the prize with a loss of nearly USD 7 billion. Apart from the trader no one was fired. To summarise this part of my story the exhibit below captures the essence. 44 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Brand identity is hard to transform into the brand image the the bank intents There are multiple Poorly coordinated audiences. Each with messages from within the different needs. Each with bank leads to a blurred different interpretations of identity that is not the brand message. The necessarily one the CEO ‘jostle’ of interactions might want between them is part of the way the brand image is created. So my argument thus far is in summary: Bank can’t brand A banks brand A bank’s brand identity is hard identity is hard to transform into the brand to define sharply image the bank intends I now want to add the additional complication that banks are more exposed than other brands to change. The changes that affect banks are both cyclical and structural. 45 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Forces of change that impede banks branding Bank brands are affected by both cyclical and structural changes. Cyclical change Economic cycles Naturally banks behave differently in different parts of the business cycle. They tend to oscillate between being risk averse and risk propane depending on the prevailing economic climate. This is of course sensible management but it isn‟t so good for the brand. Part of this problem occurs at board level. It isn‟t hard for trust between the Board and top management to deteriorate and boards are much influenced by published data. Loss of market share and bad debt write-offs both can move boards to action making the oscillation more extreme than it would otherwise have been. However necessary changes in policy might be they are not good for brands that would like to incorporate an image of consistency and continuity. Banking industry crisis cycles It has to be confessed that banks are prone to mistakes big horrible mistakes. In a way these seem cyclical but the cycle, if it exists is hard to pin down. At the end of the 1970s we were in the throes of sovereign debt crises. Through the 80s and 90s we have the United States Savings and Loans ongoing problems. At the end of the 1990s it was property lending and as I write we are back to sovereign debt having passed through Subprime, High yield bond, leveraged loan defaults and write-offs. 46 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Is there any systemic reason for this? Many people would just shrug and reply, “greed”. It is hard to deny this of course. There are also of course many theories from various viewpoints. “Like unemployed teenage boys, these banks have shown a terrible knack for getting into trouble when left to their own devices” John Authors Financial Times 21 May 2101 To add my two pence worth some factors to consider are: There is a tendency of bankers to convince themselves that artificial regulatory constructs are in fact the real world. A good example of this is Basel I. When bankers discovered that they had to hold 4% of their risk adjusted assets as Tier 1 Capital and 4% as Tier 2 capital the ones I knew immediately began plans to reduce shareholders funds and issue subordinated debt. It took the best part of a year for the penny to drop that a although this was the most cost of capital reduction they could get away with in terms of regulation it made no real world sense, I remember a quant telling me that on his calculations the bank could be estimated go bust once every 67 years. This seemed to me a dangerously short span. Similarly there was a time when bankers actually argued that, because it was unregulated, market risk didn‟t exist. Because of this they believed that any trading profits required no capital support and hence had no cost of risk attributable them – a high return on capital indeed. Then there is the tendency to believe that banks can grow consistently faster than the economy. I know for a fact that the major Australian banks had at one time target market share growth rates that added up to something getting on for 200%. In situations like this where targets must be achieved risk suffers. Finally, there is the tendency to look on a bank and think of all that unexploited risk potential a within a bank and how it could be channelled into large bonuses. I have plenty of experience of the Institutional arm of banks looking upon the retail arm as a low risk resource to be plundered xi. 47 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 All these things to cause a problem require of course, poor bank supervision. In the recent crisis bank supervision in Canada, Australia and many Asian countries was equal to the task. In the US and UK the regulators were not. Crisis is the obvious enemy of branding. The lesson is unmistakeable; if you want a good brand manage risk well. Political cycles Superimposed in the business cycle is the political cycle. This is not just change in government, although that is important as governments can have very different views not only on the regulation of banks but on the role of banks in society. Of importance also is cyclical change in the mood of the electorate between statism and individuality. Economic Cycles Recession Expansion Individual Negative Very positive Political cycles Collective Very negative Positive Economic and political cycles interact sometimes exacerbated by the bank catastrophe cycle. The end result is a very unruly composite cycle indeed. 48 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Technological cycles There are important structural changes relating to technological advances which I shall come on to. But also there are cyclical ones. Banks always have limited resources for improvement to the systems that serve customers. Banks can never maintain sufficient resources (almost entirely people) to do all the projects needed. Gearing up quickly is difficult to coordinate. Usually there is a large maintenance workload and also there are imposed workloads. Examples of these include:  The „Millennium Bug‟ code rewrites;  Major changes to taxation such as the introduction of value added taxes; and  Basel II compliance systems. People say these are just one offs but they seem to hit with some regularity. And this means that banks are forever delaying improvements to customer service systems. Moreover the imposed demands hit all banks at much the same time. The upshot of all this is a technology cycle that improves service in jumps and starts. This has implications for both customer service and brand. Don‟t other types of brand have cyclical issues problems too? Below I make an assessment of how other brands fare as a result of the sort of cycles I have described. I have tried to ascribe a rating from 1 = negligible problems to 10 = the worst I can imagine. Microsoft 6 Product launch cycles Rolex 1 Google 1 British Airways 3 Aircraft purchase cycles 49 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 BBC 1 Mercedes Benz 2 New model launch cycles Coca-cola 1 Lego 1 Lloyds 8 Broadly, I‟d say that other than banks businesses themselves may go up and down with cycles but their brands don‟t. So this is how we might see cyclical changes in the scheme of things. Cyclical changes adversely affect banks ability to brand Customer and other brand audiences needs for Economic Bank crisis Technology Political consistency and cycles cycles cycles cycles certainty Structural trends that prevent banks branding Technological There is not much personal banking that cannot be done through online, phone and plastic. And, of course many bank customers prefer to deal this way. I haven‟t seen any reliable research data but everyone I talk to can‟t talk well enough of First Direct, direct for example. Here is a quotation from the archives of Westpac. I invite you to fill in the blank. 50 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Who authorised the “--------------“ in conjunction with our business? – It is quite unwarrantable these independent vagaries without my permission. When was it done? What is the £5 annual rent? What is the thing being used for? It will be used no more without a full written explanation. We have declined this invention in all the colonies thus far and I will not submit to its dangers being imposed on us by the least experienced of our superior officers – and where it is least needed. I think the officer who sanctioned it will have to pay for it himself. That was the annoyance of Shepherd Smithxii, General Manager of the Bank of New South Wales, recorded in the half Yearly Balance Book, 31, March 1883. He is talking about the telephone. Now here is my main point about this vignette. You will already have bracketed Shepherd Smith among the more Jurassic of dinosaurs, I expect. But in fact he is one of the most successful bankers who ever lived. Westpac Banking Corporation, which I recently calculated as top among banks in creating shareholder value, should put up a statue to him in front of the 60 Martin Place, the head office. The man who was best for then could not foresee in any way at all the world to come. The best banks today may not own the future of banking. So far we have been a bit premature is our reaction to technological advance in banking. In the late 70s we were drawing little diagrams showing bank terminals in the home xiii. In the 90s we closed down branches way too early. But now it seems things are moving fast. Continuity with the past is important to branding banks. But so is a suggesting a bridge to the future. This is a challenge that can‟t be avoided. Some of the changes that can be predicted include:  Increased realisation (finally) of economies of scale in banking;  Increased realisation of the also elusive economies of scope;  Making „segment of one‟ relationships possible even where no face to face exists making customer centric banking possible;  Detection of fraud patterns;  Increased opportunity for partnerships and joint ventures among financial institutions. 51 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Sequencing and scheduling improvement and integrating these with marketing is a strategic issue that will inevitably see winners and losers. Global change Global changes are also structural. There will be no reversal. A lot of what is happing in emerging economies is simply deciding to learn from developed economies and removing the impediments to growth. To quote Bill Emmott, one time Editor of the Economist: „Globalisation is simply the voluntary adoption of international capitalism‟ The single biggest fact I know about China is that it could have launched the industrial revolution around the 13th century (CE) and decided not to. The reason it seems was to preserve the existing way. No bank can do that, of course, although I expect some bankers want to. Why has HSBC grown at 20% per annum compound for over 25 years? Because it‟s been providing banking services in this environment (Hong Kong) rather than Britain. Sir John Bond, Chairman of HSBC 1998 – 2006.xiv This simple statement says everything that needs to be said about growth. Banks in oligopolistic domestic economies that are expected by share markets to grow beyond the pace of that economy must seek overseas revenues. But bank brands do not travel well. HSBC and Standard Chartered are rare exceptions. The international norm for retail banking is for a relatively small group of domestic banks to dominate. Bank brands don‟t travel well In September 1985, as part of the deregulation of Australian banking, the Hawke Labor government granted banking authorities to 16 of the world largest and most successful banks. At the time we all expected a real shake- up in the domestic Australian market. 52 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Although in fact only at most half a dozen authorities were expected to be granted. Of the 16 that were only 3 now have a foothold in the retail markets. The following exhibits are taken from a presentation I made in 2005 to give a sense of proportion to a group of people who wondered why some of the most powerful banks in the world held so little sway in the Australian market. It is hard to imagine a more hospitable market for overseas banks than Australia. First a comparison of the overall market capitalisation of the overseas banks with retail operations in Australia compared to local banks as they stood at that time. Next, here is a a comparison of the share of domestic Australian bank assets. Share of Australian bank resident assets 25.0% 20.0% 19% 18% (APRA Sept 2005 16% 16% 15% 15.0% 10.0% 6% 5.0% 3% 2% 2% 2% 1% 0.0% 53 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Finally, the share of the overseas banks‟ assets that were held in Australia. Share of global assets resident in Australia 4.0% 3.5% (Forbes and APRA) 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% HBOS ING HSBC Citibank Australian bank forays into overseas markets have rarely been successful either. National Australia bank sold its investment in Michigan National Bank, which it acquired in 1995 in 2000, without having made any inroads into the US market. Similarly its investment in UK Banksxv didn‟t progress far (although at the time of wring there is talk of a joint venture to make further acquisitions in the UK). I watch with interest the progress of Grupo Santander‟s acquisitions in the UK, including the Bradford and Bingley whose Bradford branch appears, incongruously to me, in the picture below. 54 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Much depends on the outcome of reactions to the recent crisis. Will regulation stifle global banking? Or will more global regulation give it a spur. Which brands will shrug off the recent past? Will HSBC and Standard Chartered remain historic exceptions? I think this view is part of the answer. Dame Edith Penrose in „The theory of the growth of the firm‟ (1951) argued that divisionalisation enables economies of scale to prevail while diminishing diseconomies of scale. She identified management availability, seen as a scarce resource, as the true constraint on a firm‟s growth. I wish to argue that, simply by doing banking, bank‟s create a growing pool of management talent that sometimes has no outlet in the domestic economy. Moreover investor‟s impute growth expectations to share prices that are overly challenging in domestic markets. According to my analysis HSBC, through exposure to fast growing economies, was able to grow without major departures from traditional prudent banking. For this reason it was able to escape the riskier paths taken by its domestic rivals. Remoulding the category 55 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 I want to return now to the Superbrands data in Appendix 1. I classified the brands rated and ranked by Superbrands into these categories  Banks  Non-bank financial  Online with financial capability / potential  High Street with financial capability / potential  Trusted financial media. Superbrands applies an index based on rating the top brand, by its criteria, 100.0. I have summed the indices for firms by the above categories. The result are summarised in the exhibit below. Banks 700 600 500 400 Trusted financial 300 200 Non-bank financial media. 100 0 High Street with Online with financial financial capability / capability / potential potential On the basis of this data, if you accept it, there is a suggestion at least that the brands that banks to some extent compete against (or potentially could compete against in the future) in the high street and online are stronger. Now against that it must be said that their brands are not necessarily seen as bank brands. That is to say you may trust your telephone company to make your phone work well but would you necessarily trust your finances to an organisation that responded to a late payment of a bill by cutting your phone off. But then I would advance two lines of thought: 56 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0  The reputation of banks has never been lower; their defences against entry are weakened in a way that is unlikely to be repaired any time soon; and  Information technology is changing the game rapidly. Bank technology can be deployed by new entrants without a lot of difficulty. What is left to banks are:  market inertia  brand; and  competence in managing highly complex person – computer systems. The last point is very important. However, it is not an unassailable barrier to new entrants. These can chip away (as they are doing) in the relatively less protected and often valuable parts of bank‟s business. For banks the best defence to share up is brand. But how many banks really want to do this? As I write banks in the UK are waiting to see the outcome of the sale of nearly 1,000 Lloyds TSB and Royal Bank of Scotland branches as a result of European Commission decisions. Metro Bank is a likely new entrant to the market and Tesco is increasing its range of financial services. Virgin Money is also likely to increase its branch network. The interplay of cyclical and structural change It isn‟t just the addition of cyclical and structural change. The difficulty banks face in responding to cyclical issues seriously impede any progress towards branding that makes a bridge to a value creating future. The cycles mask the reality and make charting a course forward much harder. At the very least there must be a shared understanding at higher management levels of where both the bank and its sector are in the web of cycles and how they want to face the structural changes. 57 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Is not bothering to brand a realistic option? All banks have brands good, bad and indifferent. I suspect very few take a comprehensive approach to branding. There are two dominant cultures in banking: both are vital. The first is the risk management culture. The second is the bureaucratic distribution culture. It is worth taking a bit of time to understand each of these. The risk management culture It is the risk management culture of a bank most often, in my experience, dominates. A glance at Appendix 3, recovered from the darkest recesses, of my files tells you all you need to know about a bank‟s risk culture. I thought when I was given this many years ago that it was unique to the bank where I was working. It now seems to me there are versions of it in pretty much every bank. This thinking is engrained in people‟s minds. There first instinctive reaction is described on this single piece of paper. To a person who thinks like this marketing is not just the enemy. Marketing is irrelevant. It sits in its ivory tower making adverts. The bureaucratic distribution culture The bureaucratic distribution culture is the vast, sprawling everyday of banking. Imbued as it is with the risk culture it is bank centric, mistake avoiding, measure driven. There is nothing actually wrong with that. In a way it is inevitable in a successful bank. The problem is that it is here the sales culture, such as it is resides, not in marketing. The default position of banks is in effect a decision not to brand. The challenges presented to the twin cultures that got the bank this far are just too great. If branding a bank is to mean more than putting out the odd advert, then the head of marketing has to create a brand culture. The second half of this book will explain how. However, it has to be said that branding a bank is difficult at best. To decide to take a 58 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 superficial approach to it is certainly an option. To choose this option though may mean accepting a prolonged if almost imperceptible decline. Brand dimensions In writing this section, I have become more convinced that bank brands are different; indeed all brands seem to be in some ways unique. Here are five dimensions I have identified that allow brands to be categorised:  The importance of the outcome of using the product / service to the customer;  The commitment required of the customer in terms of money, energy, time to use the branded product or service to achieve the required outcome;  The dependence the customer has on the brand when the product might be difficult to understand or to trial and the purchase decision might be hard to reverse;  The risk to the customer of the brand when there might be risk of serious unforeseen consequences;  The engagement the customer has with the brand in terms of the extent to which the solution the brand offers is a source of pleasure to the customer. I believe that brands tend to have quite different profiles using these dimensions. I shall explore this further in subsequent papers in this series. An overview To reiterate my opening argument of this section:  Branding banks is at the extreme end of difficulty along the spectrum of all brands.  The standard tools and mindset we use in thinking about brands have to be rethought for the banking sector. 59 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0  Because brands are so valuable to banks (as I argue in the previous section) and because achieving a good brand is so difficult the ability to be able to do so is a significant source of sustainable competitive advantage.  A first step to surmounting the challenges is to have a profound understanding of them and their causes. Banks which try to manage their brands as if they were Coca Cola are not going to win. The following exhibits summarise my arguments in this section as systems dynamics diagrams. Brand identity is hard to define Brand identity is hard to define The brand’s market Bank are Bank brands are place is diverse intrinsically hard to weighed down by and complex brand inertia Bank brands must be relevant in many product Banks are service markets businesses hard to define in traditional brand terms. So much depends on customer by customer Expectations based on long experience. histories are difficult to overcome or for individual brands to transcend Banks brands must be relevant to diverse customer bases where Much bank value lies in B2B. This customer value is hard to measure involves more pragmatic Banks can look much like public purchasing decisions with different utilities and are saddled with those criteria and controls expectations banks find it hard to differentiate clear brands because they all want to Banking itself (especially claim the middle ground risk management) is abstract and cold – difficult Customers have ongoing for people to form a relationships with their relationship with banks that are easy to take for granted Brand identity is hard to communicate 60 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Brand identity is hard to transform into the brand image the the bank intents There are multiple Poorly coordinated audiences. Each with messages from within the different needs. Each with bank leads to a blurred different interpretations of identity that is not the brand message. The necessarily one the CEO ‘jostle’ of interactions might want between them is part of the way the brand image is created. The forces of cyclical change make consistent brand themes hard to sustain Cyclical changes adversely affect the ability of banks to adapt their brands over time brand Customer and other brand audiences needs for Economic Bank crisis Technology Political consistency and cycles cycles cycles cycles certainty In all this bank brands must adapt to the needs of the future 61 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Structural change means banks have to continually update their brands to meet new demands The industry boundaries Globalisation is transforming Technology is are being banking but banks individually find transforming redefined and its hard to be global banking reshaped My conclusion is that banks can‟t brand Banks can‟t brand Cyclical changes adversely Brand identity affect the ability of banks to Brand identity Structural change means banks is hard to adapt their brands over time is hard to have to continually update their define brand transform into brands to meet new demands the brand image the the bank intents If a bank is to brand successfully, and now of all times sees increased prize money at stake, all these challenges must be met and mitigated, if not overcome. Banks that truly attempt this will be few. Banks that succeed will be fewer. 62 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Appendix 1 Analysis of Superbrand‟s ranking of UK brands Brand Rank Index Banks Non- Online High Trusted bank with Street financial financial financial with media capability financial / capability potential / potential Microsoft 1 100.0 100.0 Rolex 2 99.9 Google 3 93.4 93.4 British Airways 4 90.3 BBC 5 86.8 86.8 Mercedes Benz 6 86.2 Coca-cola 7 83.2 Lego 8 82.9 Apple 9 81.4 81.4 Encyclopedia - Britannica 10 80.2 Marks & Spencer 13 78.3 78.3 Thomas Cook 26 70.2 70.2 John Lewis 35 64.6 64.6 Harrods 50 60.6 60.6 Post Office 66 55.9 55.9 Visa 91 50.9 50.9 Sainsbury's 92 50.5 50.5 BT 99 50.1 50.1 Mastercard 102 49.6 49.6 Lloyds TSB 105 48.6 48.6 Barclays 107 48.5 48.5 American Express 114 47.7 47.7 Tesco 116 47.5 47.5 Waitrose 119 46.8 46.8 The Times / Sunday Time 131 46.0 46.0 BUPA 138 45.6 45.6 Yahoo 140 45.3 45.3 Vodafone 151 43.9 43.9 Amazon 155 43.6 43.6 Financial Times 156 43.5 43.5 HSBC 157 43.5 43.5 Barclaycard 196 38.5 38.5 O2 204 38.4 38.4 ASDA 226 37.1 37.1 Natwest 231 36.4 36.4 Facebook 248 35.3 35.3 63 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Which? 256 34.8 34.8 Royal Bank of Scotland 278 33.2 33.2 Halifax 310 31.4 31.4 Nationwide 318 30.4 30.4 EBAY 322 30.1 30.1 The Economist 360 27.7 27.7 Paypal 368 27.1 27.1 Saga 380 26.4 26.4 Virgin Mobile 384 26.1 26.1 Abbey 389 25.9 25.9 The Cooperative 478 21.5 21.5 The Independent / Ind on Sunday 491 21.1 Prudential 493 20.9 20.9 Totals 267.5 283.6 614.7 533.0 265.2 Superbrand‟s Methodology The entire selection process is independently administered by The Centre for Brand Analysis (TCBA). The key stages of the selection process are as follows: - TCBA researchers compile a list of the UK‟s leading brands, drawing on a wide range of sources from sector reports to blogs. From the thousands of brands initially considered, a shortlist of just under 1,400 brands is created. - These brands are scored by the independent and voluntary Expert Council, which is assembled and chaired by TCBA‟s chief executive. The Council is refreshed each year. Bearing in mind the definition of a Superbrand, the council members individually award each brand a rating from 1-10. Council members are not allowed to score brands with which they have a direct association or are in competition to, nor do they score brands they are unfamiliar with. The lowest scoring brands (approximately 40 per cent) are eliminated after a council meeting to discuss the results and to ratify the scores. - The remaining brands are voted on by a nationally representative sample of more than 2,100 British consumers aged 18 and above. These individuals are accessed via a YouGov panel. - The number of consumer votes each brand received determines its position in the final rankings. Only the top 500 brands in this ranking are deemed to be Superbrands. When voting on the brands, both the expert council and the consumers consider the following definition of a Superbrand: “A Superbrand has established the finest reputation in its field. It offers customers significant emotional and/or tangible advantages over other brands, which (consciously or sub-consciously) customers want and recognise.” In addition, the experts and consumers are asked to judge brands against the following three factors: 64 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 - Quality. Does the brand represent quality products and services? - Reliability. Can the brand be trusted to deliver consistently against its promises and maintain product and service standards at all customer touch points? - Distinction. Is the brand not only well known in its sector but suitably differentiated from its competitors? Does it have a personality and values that make it unique within its marketplace? 2009/10 Superbrands Expert Council • Stephen Cheliotis (Chairman) – Chief Executive, The Centre for Brand Analysis • Nick Blunden – Managing Director, Profero London • Tim Britton – Chief Executive, UK, YouGov • Vicky Bullen – CEO, Coley Porter Bell • Hugh Burkitt – Chief Executive, Marketing Society • Colin Byrne – CEO, UK & Europe, Weber Shandwick • Jackie Cooper – Founding Partner, Jackie Cooper PR • Peter Cowie – Managing Partner, Oystercatchers • Leslie de Chernatony – Professor of Brand Marketing, Università della Svizzera italiana, Lugano and Aston Business School • Tim Duffy – Chairman & CEO UK, M&C Saatchi • Stephen Factor – Managing Director, Global Consumer Sector, TNS • Peter Fisk – Founder, The Genius Works & Author, Customer Genius • Avril Gallagher – Group Client Managing Director EMEA, Starcom MediaVest Group • Cheryl Giovanni – European President, Landor Associates • Martin Hennessey – Co-Founder, The Writer • Graham Hiscott – Deputy Business Editor, Daily Mirror • Mike Hughes – Director General, ISBA • Paul Kemp-Robertson – Editorial Director & Co-Founder, Contagious • Sophie Lewis – Group Planning Director, JWT • David Magliano – Director of Commercial & Marketing, England 2018 • John Mathers – Chief Operating Officer, Blue Marlin Brand Design • Crispin Reed – Managing Director, Brandhouse 65 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 • Raoul Shah – CEO, exposure • Prof. Robert Shaw – Honorary Professor, Cass Business School & Director, Value Based Marketing Forum • Mark Sweney – Media Correspondent, Guardian Newspaper • Alan Thompson – Founding Partner, The Haystack Group • Lucy Unger – Managing Partner EMEA, Fitch • Harry Wallop – Consumer Affairs Editor, The Daily Telegraph • Andrew Walmsley – Co-Founder, i-level • Mark Waugh – Deputy Managing Director, ZenithOptimedia 66 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Appendix 2 I have included this extract from an internal presentation I made in 2006 again based on the Superbrands survey really just to answer the issue of whether the poor showing of banks was a reflection of the crisis. It seems not to be – bank brands were just as weak in 2006. As an example we have taken a listing of Britain‟s most successful brands published a insert to the Times in July 2006. It represents the views of 650 survey respondents that are representative of the British population and a panel of marketing experts. Broadly the views of the two groups were fairly similar. I have colour coded the brands listed to indicate my view of the capability of each to extract some value from the finance sector. The coding is shown in the next slide. The original listing was for 500 brands. The overview slide covers the top 125 of these. The audience of this presentation is welcome to second guess me. 67 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Financial Institutions Sector participants Finance sector facilitators Sector participants Strong finance capabilty Often sector participants Medium finance capability Close to the sector’s borders Weak finance capability Probably not considering the sector but could Distant but in many cases could (say) co- No finance Capability brand a card 1 Microsoft 26 Dulux 51 Starbucks 76 Panasonic 101 L'Oreal 2 BBC 27 Kodak 52 Moet & Chandon 77 Canon 102 Hovis 3 British Airways 28 Beechams 53 Amazon.co.uk 78 Guiness 103 Pepsi 4 Mercedes Bez 29 Coca-Cola 54 Birds Eye 79 Johnson & Johnson 104 Debenhams 5 Porsche 30 Hoover 55 Haagen Dazs 80 The Times 105 Dettol 6 Marks & Spencer 31 Next 56 Persil 81 McVitie's 106 RAC 7 Google 32 Playstation 57 Visa 82 Argos 107 Vodaphone 8 Heinz 33 Fairy 58 Sellotape 83 Nike 108 P&O 9 Duracell 34 Lego 59 Chanel 84 Zanussi 109 Nintendo 10 Sony 35 Gillette 60 Ebay.co.uk 85 Jack Daniel's 110 Thomas Cook 11 Dyson 36 AA 61 Vicks 86 Mastercard 111 Nescafe 12 Nokia 37 Sky 62 Burger King 87 Mars 112 Tate & Lyle 13 Durex 38 Pizza Hut 63 Roiyal Doulton 88 Pentium 113 Ariel 14 Royal Mail 39 Elastoplast 64 Sainsbury's 89 Post Office 114 HP 15 BMW 40 British gas 65 KFC 90 Mr Kipling 115 Fisher price 16 Jaguar 41 Lemsip 66 Gap 91 Levi's 116 Wooworths 17 McDonald's 42 American Express 67 Kleenex 92 Asda 117 Xbox 18 Tesco 43 Ipod 68 Monopoly 93 Wedgwood 118 B&Q 19 Black & Decker 44 Colgate 69 Hotpoint 94 Sony Erikson 119 Dell 20 Nurofen 45 Walkers 70 Bang&Olufson 95 Anadin 120 Oxo 21 BT 46 Harrods 71 IBM 96 Tampax 121 Philips 22 Boots 47 Virgin Atlantic 72 Kenwood 97 Encyclopaedia Britanica 122 Waterstones 23 Harley Davidson 48 Ikea 73 Thorntons 98 Harry Potter 123 Hellman's 24 Bosch 49 Hilton 74 Andrex 99 Yellow pages 124 Dairy milk 25 Apple 50 Domestos 75 WH Smith 100 HP 125 Wilkison Sword 68 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Appendix 3 – This is how a bank‟s risk culture looks 69 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Notes and comments to Section 5 i TCBA was founded in 2007 by Stephen Cheliotis and Ben Hudson. Stephen Cheliotis is a Director and Chief Executive of The Centre for Brand Analysis. He is a leading commentator on branding and a frequent guest on CNN, the BBC and Sky. ii Now a part of Lloyds Banking Group iii Kellogg on Branding – 2005, Alice M Tybout and Tim Calkins, John Wiley & Sons , ISBN 13 978-0-471-69016-0. iv I have been experimenting with dimensions I can use to classify service brands. The exhibit below represents my current thinking on this. 70 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 Consultant surgeon Size of circle indicates importance of Total investment cost of acquiring the skill outcome IP lawyer Branch banker Hairdresser Percentage of total service cost that is skill based Low customer participation in outcome High customer participation in outcome v A study I did around 1999 showed that more than half of financial decions makers in firms under AUD 5 million turnover visited the branch at least once a week. vi The bank of new South Wales the main antecedent of Westpac Banking Corporation was founded in 1817, not much more than a generation after the first white settlement. vii See the more detailed discussion in Section 3 of this series. viii Around 1980 there were nearly 14,000. ix I once wanted a good news bank story published. The magazine staff writer I spoke told me the editor would fire him if he lodged a favourable bank story right then. 71 © Geoffrey Johns 03 June 2010
    • Branding Banks for shareholder value Discussion Draft Section 5.0 x Former National Australia Bank chief executive Nobby Clark lambasted the board at yesterday's annual general meeting for the bank's lack of leadership, poor corporate governance and disastrous investment decisions over the past four years. Mr Clark, who led the bank between 1985 and 1990, was one of the 1320 shareholders who piled into the Melbourne Concert Hall yesterday afternoon to vent their anger at the bank's dismal year. Sydney Morning herald February 1, 2005. xi I wonder, sometimes, if the bank catastrophe cycle might be a „predator and prey‟ cycle but have never found the means to pursue this line of thought. xii Shepherd Smith was appointed General Manager in 1864. Under his guidance the bank became the largest in the colonies in terms of deposits and advances and won repute for stability, leadership and independence. xiii I can‟t give a precise source for this but it was certainly shown in Lafferty publications in around 1979. xiv Quoted in The Future of Banking, Henry Engler and James Essinger Pearson Education 2000 ISBN o 273 65038 6 xv In 1987, NAB bought Clydesdale Bank (Scotland) 1987 and Northern Bank. In 1990, NAB bought Yorkshire Bank (England and Wales 72 © Geoffrey Johns 03 June 2010