Branding Banks For Shareholder Value 4.0 Why Brand Banks


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The fourth in a series of papers tracing the path from customer perceotions to shareholder value in banking. This one deals with the value of a brand to banks.

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Branding Banks For Shareholder Value 4.0 Why Brand Banks

  1. 1. Branding Banks for shareholder value Discussion Draft Section 3.0 Branding banks for shareholder value Section 4.0 Why brand banks? 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 Branding banks is hard 5.0 TBA Measuring customer perceptions 6.0 TBA Measuring customer value 7.0 TBA Gaps analysis 8.0 TBA Bank structure and brand control 9.0 TBA Process level brand control 10.0 TBA The brand story 11.0 TBA Communicating bank brands 12.0 TBA Valuing bank brands 13.0 TBA The future of banking 14.0 TBA Competitive bank branding strategies 15.0 TBA Anyone following this series of papers may notice that this contents page changes about a bit. This is because I keep thinking of new bits I have to cover. 1 © Geoffrey Johns 21 April 2010
  2. 2. Branding Banks for shareholder value Discussion Draft Section 3.0 Introduction This is the fourth in series of discussion drafts in which I attempt to trace the path from customer perceptions to shareholder value. The first covers shareholder value as a goal of the system and the analysis framework I use. The second is about knowing customers through segmenting on key characteristics. The third deals with how customer perceptions of banks are developed. This section deals with what sorts of advantages a bank can hope to get through good management of its brand. We shall see in the next section that branding banks is at the extreme end of difficulty among the spectrum of all brands. Indeed it is pertinent to ask, why invest heavily in branding at all? And, are there banks that don‟t bother too much to do so? This isn‟t a good time to be writing about branding banks. Their brands mostly look tawdry at best. Every day the British media carries stories about the rapaciousness of bankers. As the next section will show, it is very difficult to brand banks at the best of times. Right now in many places around the world the best image that banks can hope for is that of a necessary evil. Nevertheless if a bank can achieve a positive brand it is a major competitive benefit as this section will show. In a later Section, I shall show how to go about measuring the value of brand. A major theme of this series of papers is illustrated in the exhibit below. Branding Branding banks is next banks is vital to impossible Surmounting the impossibilities creates sustainable competitive advatage 2 © Geoffrey Johns 21 April 2010
  3. 3. Branding Banks for shareholder value Discussion Draft Section 3.0 My thesis is that, because branding banks is both so important and so difficult, finding ways to achieve it is an organisational competence that yields sustainable competitive advantage. To do this the brand must be embedded in management structures and processes and also in deeply held corporate values. The pattern of decisions that create a brand need a lot of infrastructural „glue‟ to keep them coordinated. The role of brand In terms of the Gaps diagram I introduced in Section 1, brands cover a lot of ground. One of the first points I want to make is that the communication of the value proposition to the market is a part of branding. In banking, marketing communications have a supporting role that works only when attuned to customer experience. Shareholder value Gap 7 Executing the solution Gap 6 G Gap 5 5 Creating the solution Communicating the product service offering Gap 3 Gap 8 Design of product service offering range 4 Gap Gap 2 Comprehension of customer beliefs, needs, values and behaviour Gap 1 Selecting / specifying the market Banks brands, we have seen are founded to a large extent on the experience of customers. This experience is not easily challenged by what a bank may wish their customers to believe, as I discussed in Section 3. 3 © Geoffrey Johns 21 April 2010
  4. 4. Branding Banks for shareholder value Discussion Draft Section 3.0 Marketing communications Media comment Trusted advice Contradiction Own Confirmation filtered experience sought reinterpreted Information The view of brand that I have expressed is the modification of customer‟s expectations in a way that shapes how they experience their interactions with a bank. BRAND Customer expectations The objective Customer quality of the perception of experience the experience The matrix shown below shows the potential outcomes of this modification. It sets the customer‟s cumulative experience of the brand against their experience of a particular event. Each can be classed as either adverse or favourable experiences. 4 © Geoffrey Johns 21 April 2010
  5. 5. Branding Banks for shareholder value Discussion Draft Section 3.0 Brand experience Adverse Favourable Adverse Reinforcement Containment Event experience Favourable Opportunity Reinforcement Adverse reinforcement and favourable reinforcement are much the same but with opposite effect. This is a compounding effect and has the characteristic nonlinearity that we saw much of in Section 3. There is a momentum to both improvement and deterioration that makes management watchfulness essential both to take advantage of opportunities and to mitigate threats. m tu en om m le Brand experience ab o ur v Fa Ad ve rse m o me ntum Event experience 5 © Geoffrey Johns 21 April 2010
  6. 6. Branding Banks for shareholder value Discussion Draft Section 3.0 In Containment (an adverse event in the context of favourable brand perceptions) the bank is asking the customer to suspend judgement or, better still, treat the event as a „one off‟ in isolation. Complaints are good in this situation. A complaint is a hint that the customers really does want to support the brand and makes things better. Adverse brand, adverse event customers are more likely to walk without warning. The important thing is for the bank to recognise where discontent is building. As we saw in Section 3 dams can be breached suddenly and without warning. Watching the commitment measure, as I discussed in that section is vital. In particular, note any shift in the measure of ambivalence in The Conversion Model™i. In addition to this branch exit interviews and their online equivalent are a good source of data of about event versus brand experience. A favourable experience against adverse brand is an opportunity What is needed here is to get the customer to extrapolate their perception of this event more broadly. In banking, a key role of brands, I believe, is to generalise individual experiences. We want the customer to think “I know my branch is good, perhaps all this bank‟s branches are good” or “they‟ve always managed my mortgage well probably they can do as well with my investments”. Sometimes this can be scripted into bank interactions with customersii. In a case where the bank knows a particular aspect of service has been improved it is as well to design conversations intended to generalise the perception into the process. But also this is where marketing communications can play a role that is otherwise difficult to achieve. When a customer is surprised by a favourable event they tend to be open other messages that support the associated brand. We create perception patterns that are useful to us in that they don‟t alert us unless we need to be alerted. When we do get a surprise then we are open to the idea that we may need to change our pattern of thought. At this point an advertising message, which may, for example, be direct mail, stands less danger of being screened out. This then is what a brand can do to modify perceptions of experience and eventually behaviour. How then is this achieved? Croxford et al, cited in Section 1 of this series of papers equates brand with „trust‟iii. Enabling trust, I agree, is an important way in which a finance sector brand exerts influence over perceptions. But I don‟t think that is the 6 © Geoffrey Johns 21 April 2010
  7. 7. Branding Banks for shareholder value Discussion Draft Section 3.0 only way. We need to go to another level of detail to understand how brands act. This understanding will help us move towards an attempt at the valuation of brands. A definition of brand (for those looking for one) I don‟t seem to have a burning need for an operational definition of „brand‟ to move my analysis forward. However, you, the reader, might expect one, so here goes. For the time being in this series of papers, until something better comes along, I‟m taking my lead in this from John Grant. His book „The Brand innovation manifestoiv‟ is by some way the most interesting and intelligent books on the subject I have found in my researches. It is the closest I have seen to a „how to do it‟ manual. He says: “A brand is a cluster of strategic cultural ideas” To which I should not resist adding ... “that inculcates and modifies our expectations of the way the world works”. While I shall use John Grant’s definition of brand throughout this series of papers I am not wholly comfortable, in the context of my own experience, with all that he says. I shall deal with this more fully in Section 12 where I discuss brand communication. For now though, it seems to me that Grant’s emphasis is on brand as set of associations that emanates largely from perceptions from without the organisation. In this he opposes what he makes sound like mechanistic dictates of brand identity and essence from within the organisation. I think his main reason for this is that such dictates frustrate the creativity that can be drawn from the brand’s environmentv. I am very sympathetic towards that viewvi but I am uncertain that it can be given free rein in a bank. My reason is that it is very difficult for a bank to stay „on message‟ in its branding. Certainly this is true compared to other industries. In the 7 © Geoffrey Johns 21 April 2010
  8. 8. Branding Banks for shareholder value Discussion Draft Section 3.0 next paper in this series I shall discuss the array of special problems that face banks in branding. For now I wish to make the distinctions I illustrate below. In this illustration I suggest we make a clear distinction between the organisationally conceived brand identity and essence that we wish to convey to the market (s) and the means of creating brand awareness. This in turn should exist completely independently of the means and media with which we direct messages to the marketvii. The story Is The telling Is The occasion not not The time and place, The elements of the The words, images, the sequencing and story about the brand ideas and the vehicles for the that we want associations that words, images and customers to own convey the story ideas When a bank‟s top management get together with the marketing people and sometimes the ad agency or consultants to think through a story for the brand the result tend to be predictable. Either (and most likely) the consensus develops round something more bland than margarine or there is a solution so off the wall that people can hardly look each other in the eye in the morning. A large part of the purpose of this series of papers is to offer a pathway to something more relevant. For now, I shall just say that the bank must be clear about the story it wants to tell but may need to incorporate into that story the ideas that arise from the telling of it. Some branding questions I like I had better immediately confess that I‟ve had the exhibit below in various forms around for so long and used it so many times that I no longer know who I should credit with it, certainly more than one personviii. David Ogilvy is one of my heroes so I suppose there is a lot of his thinking in it. They still seem to me good questions to ask and they affect much of the thinking I shall use throughout this series of papers. 8 © Geoffrey Johns 21 April 2010
  9. 9. Branding Banks for shareholder value Discussion Draft Section 3.0 Positioning Image Values Touch points What personality do How we are perceived we want to display What values Do we What evidence do by target groups in relative to those Of possess that ensure people see that meaningful our rivals that Makes that the personality is reveals we truly own differentiation to our our brand image genuine and not Just a the values? rivals? special to our flag of convenience. customers? What is special about Why are we perceived What values underpin How are the values us? this way? our personality? demonstrated? How well does the Do we really mean it? experience, The touch Beyond functionality What does the product Do we care beyond points, the how else is the do? Who is it for? tomorrows profit? interactions and product seen? Why? interventions match the values? A taxonomy of bank brand effects The diagram I used in Section 1, the first in this series of papers, based on that of Croxford et al (op. cit.), refers to brand. In this brand is equated to „trust‟. Perhaps had I to choose a one word definition of brand that would suffice. Trust is a big part of the bank brand story. But it is far from the whole story. In this section, devoted to understanding better the importance of brand to banks I want to dissect more precisely:  how brands can create shareholder value; and  what perceptions they act on to do so? The exhibit below shows what the brand acts on. It is more than just the perception the customer has of the bank itself. 9 © Geoffrey Johns 21 April 2010
  10. 10. Branding Banks for shareholder value Discussion Draft Section 3.0 Brand experience acts on perceptions of the... Provider Product / Category Customer Event organisation service Effect on the How the customer‟s Effect on How the Effect on the customer perception of the perception of customer sees organisation as interprets the industry product or themselves both a whole or the event in the (including the service in the as a customer division in focus context of chains customer‟s context of it‟s and more deeply in particular and patterns of definition of the rivals as a person events industry The arena of brand impact in detail The effect on the category Provider Product / Category Customer Event organisation service The category is important in for banking. More so than for many other sectors of the economy. It is hard for a bank brand to transcend the category. Customers have well formed and deeply held perceptions of what a bank is. Moreover, there is a widespread belief that „all banks are the same‟. In the recent financial crisisix banks were all tarred with the same brush and this was not entirely unjustifiedx. Finally, when it becomes apparent that governments will not allow banks to fail, they cannot even differentiate through prudence. 10 © Geoffrey Johns 21 April 2010
  11. 11. Branding Banks for shareholder value Discussion Draft Section 3.0 We must think about the importance of the category in people‟s minds. How do they set the boundaries of the category? What does the landscape of the category look like to them? Perhaps landscape is not the most useful metaphor. My once colleague Liz Hantonxi likened the category of financial services to a lagoon. It is not just a case of fishes of various sizes, shapes and colours. There are creatures that don‟t look like fishes at all. Sometimes perceptions of a brand can change the shape and balance of perceptions of the category. One specific example of a single brand enhancing a category through marketing communication is the Commonwealth bank of Australia in the late Seventies and early Eighties of the last century. The Commonwealth Bank has tended to rely more on advertising than its rivals having a significantly larger customer base over which to spread the cost. A series of campaigns were designed to emphasise the human side of being a bank manager. One series showed real managers entering into community life, using humorous mini stories. Another showed manager saying „yes‟ to loan applications. I never had the opportunity to research those adverts but the consensus feel about them was, I was told, that they had raised the perception of all bank managers including those of rivals. This was perhaps a natural consequence at that time of banks emerging into a deregulated environment. But from the viewpoint of the Commonwealth Bank‟s relative brand standard more than one purpose was served. At that time the Commonwealth Bank was owned by the Commonwealth Government. These adverts did something to place the Commonwealth Bank alongside its private sector as a bank competing with them. Also the Commonwealth bank may, as a public service had been perceived as more bureaucratic, which the adverts did something to alleviate. In addition because of its various roles the bank was more likely than its rivals to have customers that were relatively new to bankingxii. It was able to create in the minds of these customers a different idea of what a banking relationship meant. In banking perhaps more than other industries, marketing communication can say something about the category. It is in fact difficult to prevent it from doing so. This can be good or bad for the bank making the communication but it should never be unconsidered. Sometimes, as in the above example, a bank can change perceptions of the category to its relative advantage. 11 © Geoffrey Johns 21 April 2010
  12. 12. Branding Banks for shareholder value Discussion Draft Section 3.0 Effect on the provider organisation itself Provider Product / Category Customer Event organisation service Clearly the main target for branding, for banks, is the organisation itself. In other industries, such as detergents, branding is more natural at the product levelxiii. Banks can rarely escape a single brand imagexiv. There is a general need to shape a good organisational brand for reasons I discuss elsewhere in this paper but here I want to draw out two points that I believe especially relate to banks. Individual brands matter more when sector boundaries blur One the many severe difficulties confronting bank branding is that bank brands are beset by other high street brands on one side and by brands with online banking capabilities on the other. Once banks had an exclusive claim over nearly all of what they did- certainly in people‟s minds. This is less and less true. It is more important now for a bank‟s brand to set boundaries and defences. Within the finance sector also things are less clear cut than once there were. Wealth management, in particular has drawn banks and life assurers into each other‟s orbits. As the category is more often in turmoil strong brands are essential. This is especially true of organisations that span categories. Meanwhile, what so recently was seen as an inevitable link between investment banking and retail banking is questioned. The sheer size of banks is itself pondered as we ponder the implications of „too big to fail‟. The role of brands in society is becoming more important The world is becoming faster moving and mental models of the world are rapidly changing. In one way brands are like holdalls that we can put a bundle of thoughts in until we need to take them out and rearrange them. It is one of the ways we keep on 12 © Geoffrey Johns 21 April 2010
  13. 13. Branding Banks for shareholder value Discussion Draft Section 3.0 top of things. But there are only so many we can carry. Keeping our brands close to the grasp of our audience matters a lot. John Grant saysxv: „I would guess there are usually fewer than 20 “anchor” brands for any one person.‟ I have tried counting and it‟s hard to get to twenty, if you ask me. The place of bank brands within these “anchor” brands is hard to assess. But from the limited evidence I havexvi they have an uphill journey ahead of them to make themselves one of the landmark brands even for their own customers. The effect on the product or service Provider Product / Category Customer Event organisation service A product or service can emerge from the organisation as a stronger brand, distinct from the organisation. Consider the hierarchy illustrated in the exhibit below. At the base is the organisation brand. On this brand rests the service and distribution system as the platform on which products are supported. Finally, at the apex is „the offer‟ - a priced solution to the customer‟s need. One problem with a marketing communication of an offer is that that an offer really does have to be put into the competitive market place. This usually involves either yielding price or feature advantages to the customer or unusually convoluted product specifications. The more a bank‟s marketing communications focus on the apex of the pyramid the more commoditised the product is likely to be. But brand is often bland with no differentiation. 13 © Geoffrey Johns 21 April 2010
  14. 14. Branding Banks for shareholder value Discussion Draft Section 3.0 Off er Pro duc t Se r vi ce Bra nd This is a subject much debated among bank marketers. Every product manager regards it as their duty to sequester as much of the marketing communications budget as they can for their product. Distribution managers, however titled, want adverts to show happy and helpful branch staff and so on. There is always, in my experience more competition within banks than there is between banks. The brand usually suffers. In order to elevate brands to the realm of measurable outcomes we have to get better at assessing results in dollar terms. This series of papers is intended to contribute towards that goal. At the apex of the pyramid there is the chance of dollar denominated, demonstrable, short term results. At the base there are good feelings. Vital though the branding of the organisation is management attention is easily distracted from it. It will be argued that the brand can be developed through offer advertising. In the section on brand communications I shall try to find some examples. However the overall, and most general outcome, is to say, for example, “this bank that offers mortgages which are this, this and that”. Among British banks there is a strong tendency at present to relate offer communications to calendar events such as those defined by the tax year or the academic year. In Appendix 1, I illustrate, from a walk down the high street with a camera, how these appear. If they work at all I doubt if they work for branding. 14 © Geoffrey Johns 21 April 2010
  15. 15. Branding Banks for shareholder value Discussion Draft Section 3.0 The effect of the customer‟s self perception Provider Product / Category Customer Event organisation service The interpretation of experience also affects how customers see themselves in relation to their bank and how they think others see them. One of the most powerful questions that can be asked in research is: What sort of person deals with this bank? Take, for example, the attitude to finances clusters I described in Section 2 (or better ones if you are able to discern them). Print up photos and cards that are representative of each cluster and ask people that you have pre-assigned to each cluster (but not told which or that there are clusters at all) to assign each to the bank they are most likely to have their key banking relationship with. In reality it‟s hard for bank to focus on attracting any special customer type. But there are examples of this happening. I have put some of these into Appendix 2 to this paper. The effect on how the event itself is perceived Provider Product / Category Customer Event organisation service I have said that brands act on the interpretation of events and are themselves to a large extent determined by the interpretation of events. It was not until the early Eighties that most banks were able to derive good management information by product xvii. Information systems were built largely around product but were not designed to yield any management information at all. The tread since then has been to be to manage more by customer profitability. The emerging trend is likely to be to manage at the relationship intervention level – that is to say at the event level. I shall discuss this in more detail in a later paper in this series. 15 © Geoffrey Johns 21 April 2010
  16. 16. Branding Banks for shareholder value Discussion Draft Section 3.0 For now I want to introduce this illustration of the interaction of event and brand into an enhanced version of the overall pattern of the systemic links between perceptions and behaviour that I introduced in Section 3xviii. BRAND Customer expectations The objective Customer quality of the perception of experience the experience Beliefs Reframing feedback Attitudes (Reusable decisions) Contextualisation feedback Needs Expectations Choices Realignment feedback Interpretation Experience (feedback) Outcomes Expectations affect both outcomes, as they might be objectively measured, and the interpretations of outcomes. Outcomes are affected because they are partially 16 © Geoffrey Johns 21 April 2010
  17. 17. Branding Banks for shareholder value Discussion Draft Section 3.0 influenced by the pre-conceived notions that the participants in an interaction bring with them. So both the objective outcome and the perception of the outcome can be favourably or unfavourably influenced. The ways brands create valuable perceptions Having outlined what areas of perception the brand acts on, I want to turn to the precise effects themselves. What can a brand do for bank exactly? The brand itself, through its intrinsic nature, enhances the Enhance customer‟s perception of the outcomes. The brand imparts differentiation to products / Differentiate services that may themselves be commodities. Perception of the brand is a Brand experience Assure defence against the downsides acts to... of the purchase decision. The brand locates the purchase decision or Contextualise commitment within the realm of the buyers life. The brands brings the decision Tangibilise into the concrete world of touch, sense and feelings. 17 © Geoffrey Johns 21 April 2010
  18. 18. Branding Banks for shareholder value Discussion Draft Section 3.0 Enhance Some part of the price of the product or service is attributable to brand alone. This Enhance happens with, say, Mulberry handbags. The brand alone justifies a price three or four times what would need to be charged for a functionally equivalent product. Can this Differentiate happen in banking? To some extent it can. A while ago the Asian regional office of an international bank was concerned that their Australian operation failed to match the Assure success of their Beijing Office in marketing their top of the range credit card. In Australia of course there is strong competition for the business of the affluent. One Contextualise more credit card offers little attraction to wealthy customers. However, I believe that in a society where new patterns are being formed and old paths challenged symbols are Tangibilise more important. Some symbols such as a Rolex watch or a Mont Blanc pen can be relatively easily acquired: a banking relationship less easily. I remember a number of business people who prefer to have their bank‟s head Office branch on their cheques. They clearly believe this says something about them. So what sort of things can enhance a brand? Partially it depends on which customer segment you have in mind. Partially it depends on relative positioning. In banking all participants would like to occupy the same high ground. To relinquish this ground in an attempt to differentiate is often seen as risky. Brand enhancement of the banking experience is perhaps most explicit in the affluent market. David Maude, in „Global private banking and wealth management‟xix shows image and reputation ranking at fourth of twelve reasons for choosing a wealth manager based on a study by IBM consulting. Differentiate Enhance Bank‟s sometimes get the wrong idea about differentiation. It may take a team of Differentiate MScs in applied maths and ICT engineers to build a product but that does not guarantee differentiation. Another bank will have a team every bit as good. Banking Assure products get copied quickly. Moreover a lot of new ideas come to banks from outsiders. These can be, for example, management consultants, card schemes or ICT suppliers. Diebold, for example, is a leader in ATM innovation. There is a general trend Contextualise 18 Tangibilise © Geoffrey Johns 21 April 2010
  19. 19. Branding Banks for shareholder value Discussion Draft Section 3.0 towards banks finding it harder to make opaque to outsiders their sources of competitive advantage in either process or product innovation. Much of the value of a bank resides in products that are near commodities. A brand that differentiates is very important. It becomes even more important when you consider the life-time value of a customer to a bank in the light of the almost trivial decision that starts a banking relationship. I once interviewed people who open many accounts as part of their involvement with sports or social clubs. “I just walk down the high street and go into the first bank or building society I see” reflects a fairly common view. In a way this is not good news for bank marketers. But looked at from a different perspective it shows the potential power of brand. A quite small brand advantage can swing a lot of value when buying decisions are taken so lightly. Assure I have said that trust not the whole story but it is a big story. This is where we must Enhance come to grips with it. It has always seemed to me that trust matters but trust in what exactly? I think it is many things. Some failings are big but unthinkably rare, some are Differentiate small but can be anticipated with unfortunate regularity. One of the reasons why assurance matters so much is because of what we see in Kano analysis xx. Much of what banks do is expected to run smoothly. When there are failures against people‟s Assure reasonable expectations they cause considerable disaffection. My take is that assurance is about potential failure and the customer‟s belief that failures will be rare and quickly Contextualise fixed. Tangibilise I have indentified seven failures that customers wish to be assured against:  Financial failure;  Fraud failure;  Policy failure;  Process failure;  Signing up failure;  Relationship failure;  Innovation failure. 19 © Geoffrey Johns 21 April 2010
  20. 20. Branding Banks for shareholder value Discussion Draft Section 3.0 Financial failure, the bank itself failing I would have a couple of years ago thought unthinkable. But now banks have failed. Wachovia one of the best banks in the world not so long ago has gone. By and large customers haven‟t lost a lot of money. Governments decided that a lot of banks really were „too big to fail‟. But a coming close to failure isn‟t too comfortable for its customers. We really do want assurance that this won‟t happen to us. Fraud failure is relatively rare but a nagging worry of which bank customers are very aware. Identity theft continues to be a bogeyman, perhaps out of proportion to its incidencexxi. Greater concerns emerge where for example; call centres are outsourced beyond the direct control of the bank itself. Time poor people are sensitive to things like fraud relating their banking arrangements. There is a big difference in people‟s minds between a bank that will resolve these issues painlessly and quickly and one that resists, doing the absolute minimum it is legally required to do. As evidence, the ANZ bank claims to have had major success with this television commercial. ANZ Fraud Squad Policy failures result from deliberate actions by banks to arbitrarily (from the customer‟s perspective) change policies. People want their bank‟s reaction to be predictable but often banks fail to be. An arbitrary credit decision, for example a sudden cessation of investment residential property lending can confuse and annoy customers. Consistency is important to customers. Process failures are the small niggling irritations that try customers‟ patience with their banks. The main problem is that people just haven‟t the time or energy to deal with unexpected problems. There is a distinction here that can matter a lot. How easily does a bank fix a problem that it creates? How quickly does a bank create a problem 20 © Geoffrey Johns 21 April 2010
  21. 21. Branding Banks for shareholder value Discussion Draft Section 3.0 that I created because I made a mistake? The latter can be one of those „delighting‟ factors that I discuss in Section 3 where I cover Kano Analysis. Signing up failure results from the reality of being a customer not living up to the expectations of being a prospect. Signing up for a banking product is has outcomes that are:  not easy to observe in advance;  not easy to trial; and  Sometimes hard to reverse. Banks do not have easy equivalents to money back guarantees. The customer is taking xxii a risk and needs assurance that can only really come from a brand. Relationship failure is the frustration of some important customer needs of their bank. Of these some of the most important are:  responsiveness;  flexibility; and  consistency. In a later section I shall discuss some of the imagery that a bank brand should put in customers‟ minds. In this I shall discuss the above attributes in more detail. Innovation failure is caused by a bank lagging behind its rivals. People generally expect that there bank will keep up with any initiative of its rivals. For example it will support online banking and allow people much the same functions as their competitors do. Part of what a brand does is to offer some measure of assurance that this is indeed the case. I have framed each of these elements of assurance as a negative. The exhibit below shows them as Kano Analysisxxiii dis-satisfiers. These are things that are expected by customers but 21 © Geoffrey Johns 21 April 2010
  22. 22. Branding Banks for shareholder value Discussion Draft Section 3.0 not delivered by the bank. There is of course another side to the coin and two (at least) of the elements can be ‘delighters’ when done well. Financial failure Fraud failure Worst Policy failures Kano analysis Process expected failures dis-satisfiers Signing up failure Least bad Relationship failure Kano analysis potential delighters Innovation failure Contextualise By contextualisation I mean the incorporation of the brand into the world view of the Enhance customer. The brand becomes a ticked box for a set of semi automated actions, decisions and responses. In a way it becomes a habit; favouring the brand seem a Differentiate natural part of life. There is a certain stickiness in thinking about change. Assure One of the ways of looking at this that casts light on what I mean by contextualise is this. Banking is beset by brands both from the high street and from the online world. Contextualise Could either of these become more naturally a part of people‟s lives – a part of the way they do things? A brand is a storehouse, a convenient repository of guidelines and Tangibilise policies about how we face the world and the decisions we make in it. And habits are so hard to break, But now think of this. We shall see that banks are yielding territory to online and high street rivals. Each of these contextualises the relationship with their brands in an 22 © Geoffrey Johns 21 April 2010
  23. 23. Branding Banks for shareholder value Discussion Draft Section 3.0 altogether different way to banks. Losing a customer to a different context altogether is harder to recover from than losing a customer to a rival that operates in a similar context, You are in effect teaching customers a new context that is not bank. What is bank, actually? Well, say, sitting down at your bureau to write out a cheque in your best italic scripting and businesslike recording all the details on the stub. Gone, isn‟t it? It‟s worth taking a bit of time to think about replaces it. However, that must wait for a later paper in this series. Tangibilise I see this as making the brand real to the senses. It is the look, feel, touch, smell, hear Enhance of branding. As such it intensifies the other effects. It seems to me important for an abstract brand such as banking. The harder it is to make tangible the more important it Differentiate is to try to do so. Banks carry with them a lot of imagery; think of all those branches. Buildings last a long time so the image they convey is unlikely to be the brand image Assure you want to put in people‟ minds today. Of course this isn‟t easy for banks. The product is abstract. Moreover the service element is not as a firmly linked to this abstraction. A hairdresser, for example, provides a service that has touch, taste (if you Contextualise take up the offer of a coffee) smell, reflected visions. Services as such can be very tangible. It‟s just that banking isn‟t one of them. Can nothing be done? Please consider Tangibilise the following tale of two logos. And I‟m not saying here that logos or marketing communications are necessarily a key part of tangibilisation. I just want to observe here that there are better ways if we take the trouble. The following example might help. A tale of two logos The NatWest logo 23 © Geoffrey Johns 21 April 2010
  24. 24. Branding Banks for shareholder value Discussion Draft Section 3.0 The three arrows depict the banks that came together to create NatWest. The National Bank, from which we get the „Nat‟; the Westminster Bank, from which we get the „West‟ and the District Bank from which we get the „Bank‟xxiv. Apart from any symbolism which at best can be going round in circles, the logo doesn‟t seem to say much. It is the logo a firm has because firm‟s have logos don‟t they? It probably counts as misfortune that the NatWest logo looks quite a lot like the HSBC one – another abstract shape in the same colour. By contrast, please consider the logo of the Commonwealth Bank of Australia. The Commonwealth Bank logo When launched in 1991 in support of the banks privatisation, the logo almost instantly achieved very high levels of recognition. It represents the Southern Cross, which of course features on the Australian National flag and has its origins in the flag flown by the Miners at the Eureka Stockadexxv. Someone at the Commonwealth bank had the brilliant idea of putting the logo on the sightscreen behind the batsman at test cricket matches, ensuring that it was onscreen for nearly all the televised play. It was also through this associated with Australia‟s successful cricket team, note, the only team sport played at a high level across the country. Cricket, important to the soul of the country as being the 24 © Geoffrey Johns 21 April 2010
  25. 25. Branding Banks for shareholder value Discussion Draft Section 3.0 sport in which their greatest sporting hero beat the pomes and for which the Commonwealth Bank sponsors the Australian Cricket academy seem by people as indicating the bank‟s „nurturing‟ role. For some people the logo is affectionately known as the SAO biscuit dipped in Vegemite – two more Australian iconsxxvi. Finally, the old Commonwealth Bank logo looked down from space on a map of Australia. This one looks up at the stars. So there we have a logo dripping with icons and cultural associations. Was it all planned? Does anyone immediately think of these things I have described when they see it? I doubt it. But I will argue that if a bank has a clear idea of what it stands for and a consistent approach to telling that story then it has a better chance of a bit of luck going its way. Let me say again, please don‟t attribute to me any view that at logo or indeed and advertising campaign can work magic on a bank brand. They can‟t. What I am saying (and shall elaborate in the next section) is that branding banks is so hard you have to use every tool at your disposal, fully and in a coordinated way. In this case, in my view, the Commonwealth Bank has succeeded (for whatever reason) and NatWest has failed. What could we have done differently, NatWest will ask? I don‟t know. For banks, at least, the essence of a brand must come from deep within the values of the organisation. The positive effects of bank branding operating in concert Think of the five elements that I have described as ingredients in a magical potion. You have to get the mix exactly right. Enhancement can create value proactively. Assurance is more defensive. Differentiation is somewhere between the two. To contextualise and make tangible enhances the effect of the other three. 25 © Geoffrey Johns 21 April 2010
  26. 26. Branding Banks for shareholder value Discussion Draft Section 3.0 Enhance Active intensify Tangibilise Differentiate Contextualise Passive Assure embrace Value adding Support Are there conflicts in brand effects? Assurance is the most traditional stance of bank brands. That is why banks liked to have such imposing buildings. Hitherto, at least, a part of this assurance has been derived from the category and the regulatory and institutional framework that supports it. The more a bank departs from the category in the direction of differentiation and enhancement the more it needs to convey assurance more actively. There is not necessarily a conflict but there is a need to integrative creativity. Consider the two television advertisements linked in the YouTube reference below. And let me emphasise here, I have researched neither of these adverts xxvii so I‟m going to let you make your minds up to see if you agree with me on this. Commonwealth Bank „What the hell were they thinking‟ National Australia Bank – „Climb every mountain‟ 26 © Geoffrey Johns 21 April 2010
  27. 27. Branding Banks for shareholder value Discussion Draft Section 3.0 At this point in time the Commonwealth bank, in personal banking, had been on a roll for some time and was seeking to build on that, I suspect. It probably felt it had given itself some elbow room. The advert pulls a clever switch in perception and shows that the Commonwealth Bank at least wishes to portray itself as down to earth and, well, people you can trust, people with commonsense. Mind you the advert does get all the attention grabbing stuff in up front. Then it plays to the mindset of the audience that believes there is more to Australia than the traditional hackneyed symbols. National Australia Bank had fallen from the lofty status it had painstakingly built in the period following deregulation of the Australian Banking Industry. By the end of the Nineties it had become, in most people‟s eye, Australia‟s premier bank. The Noughties, however have been less kind. At the time of this advert the National Bank probably felt it had got the worse behind it and it was time to get back on the front foot. However, The National Australia bank advert seems less clear about what it wants to say other than it is trying to be a bit different. It may have left the past too far behind. The professional yeti impersonator, imported from the UK was eye catching but it said nothing to me about clear differentiation combined with trust. The problem may have been it was trying too hard to differentiate its present self from its past self. You will note that there are no Yetis in Australiaxxviii. So then, of the two adverts which one best differentiates while maintaining the link to assurance? It‟s your choice of course, but I‟m going for the Commonwealth Bank one every time. The playing field for the benefits of bank branding The matrix below is my framework for analysing the benefits for branding banks. I call it the playing field in the heading because I think at some point branding banks can‟t be a spectator sport. Doubtless there are readers who have an interest in banks that does not extend to their brands and those with an interest in brands who are not much interested in banks. They are welcome to skip ahead. However, for those who are in 27 © Geoffrey Johns 21 April 2010
  28. 28. Branding Banks for shareholder value Discussion Draft Section 3.0 the world of branding banks I suggest now is the time to sharpen your pencils and think your way through this matrix. This matrix leads into the creation of stories. Your story has to be, well, yours, doesn‟t it? There are worse places to start than here. The whole purpose of this is to get beyond an unexplored notion of brand as a reputation or as trust or as a promise. How does a bank brand create value? Step 1 Do these matrix axes work for you? You can change them. Add more categories on either and / or change my definitions to what works best for you. (You may however, want to start off working with my matrix and come back to revise it if it doesn‟t work the way you would like in practice. Step 2 Specify the benefit in each cell of the matrix that your bank creates. I think this is one of the things in which the thinking and the doing is more important than the outcome. But unless banks get down to the detail of the benefit they expect to get from successful branding it simply isn‟t going to happen. Category Organisation Product / service Customer Event Enhance Differentiate Assure Contextualise Tangibilise 28 © Geoffrey Johns 21 April 2010
  29. 29. Branding Banks for shareholder value Discussion Draft Section 3.0 This then is my version. Category Organisation Product / service Customer Event Enhances Adds to the value Of itself improves Is intrinsic to the Builds my self experience of the Enhance category of the value proposition image interaction importance organisation Defines the Makes me feel Feels better than Transcends Defeats Differentiate boundaries of the different from the comparable category commoditisation category herd interventions The values of the Closure with Demystifies the organisation Will deliver on the I won’t look or feel Assure confidence in category stand behind the promise foolish outcomes product Shows the place Logically fits the The event is part of of the category in Fits in with my I fit in with my Contextualise product / service a recognised the world lifestyle chosen group range pattern landscape Brings into the Builds Makes abstraction Makes my self- Even on the ‘phone Tangibilise world of physical organisational concrete and image visible to the event is 3 senses symbology touchable others dimenasional In a later Section of this series, this diagram, mine or yours if you have a better one, will be our starting point in building a brand story. Deciding not to brand banks What is the logical thinking of a bank that doesn‟t brand? Can it all be left to inertia? Using the overview exhibit I introduced in Section 1, let us introduce the idea of a cost to branding. Remember I have defined branding much more broadly than what is achieved by advertising alone. 29 © Geoffrey Johns 21 April 2010
  30. 30. Branding Banks for shareholder value Discussion Draft Section 3.0 Perception of Customer price perceptions Perception of Bank Business unit specification efficiency performance fit to needs Shareholder value Perceptions Bank Corporate of service financial centre experience structure performance - Mix of Perceptions businesses of brand + Investment The illustration above adds the element of cost. The branding is expensive not least in management time and energy throughout the bank. Bank efficiency (revenue to cost) falls while perceptions of brand (hopefully) rise. We must never lose sight of what I lustrate below. Investment in Returns from brand $ brand investment $ Measurable Unmeasurable Certain Uncertain Now Future / sometime Contribute to Stripped from budgets with budgets owned by uncertain someone ownership 30 © Geoffrey Johns 21 April 2010
  31. 31. Branding Banks for shareholder value Discussion Draft Section 3.0 I had always to remember that for the cost of an advertising campaign, for example, I could have equipped everyone in my division with a laptop computer. And we need to ask the question which act would have done more for branding. That is to say what brand image would be created by bank officers visiting clients with their laptops under their arms? Bear in mind this was the Nineties and laptops were less ubiquitous than today. So it seems fair to say that it is a great temptation to a bank not to get too involved in branding. Most do, of course, because... well you do don‟t you? But it is by no means certain that you really have to. If we believe in brands and marketing more broadly we have to be very clear in how we demonstrate the return to shareholders. Conclusion In this section I have asked, what value is to be gained by branding banks? For now, I won‟t put a dollar value on branding or even suggest a methodology for doing that. I do plan, however, to attempt that in a future paper in this series. We shall see, in the next section, that there are cogent reasons for saying branding banks is at the extreme end of difficulty in brand management. Moreover, it will be made apparent that some banks hardly try. Is the game worth the candle? There are those who say that a bank has a brand, good or bad, just get on with it. If you have a reputation to lose then you have a brand to protect. That is a minimalist approach. In some world views perhaps that is all there is. Just try not to make mistakes, try not to lose reputation. My view, on the contrary, is that Branding is an institutional competence that is vital to success. It is sustainable as is difficult to replicate. I know of no bank product that cannot be imitated by a rival in less than two years. Service process improvement and ICT systems rarely take more than a couple of years. What leads to sustainable advantage in banking is management control and coordination. These cannot be achieved by rearranging the boxes on the organisation chart. (Although a bad organisation structure can certainly cripple a brand, as we shall see). This is partially because the organisation framework must be fuelled by the blood circulation through well designed processes. And the culture of the organisation is vital. I have twice come up against banks with strong risk control cultures running through them. Speaking as someone who implemented Basel I at a bank, I am no detractor of risk management. 31 © Geoffrey Johns 21 April 2010
  32. 32. Branding Banks for shareholder value Discussion Draft Section 3.0 Banks don‟t survive without it. BUT the risk management culture must be counterbalanced and complemented by and integrated with a brand culture. In the next Section of this series of papers I shall demonstrate exactly how difficult it is. I believe that it is only by understanding what we want our brand to do (as I have attempted to offer some guidance towards in this section) and understanding the obstacles in the path to achieving that (as I shall do in the next) that we can begin the journey to outpacing our rivals in bank branding. The angels are in the detail. 32 © Geoffrey Johns 21 April 2010
  33. 33. Branding Banks for shareholder value Discussion Draft Section 3.0 Appendix 1 Offer marketing triggered by the calendar Yesterday as I write 18 April 2010 all banks on my route are using their windows to plug ISAs, a British savings account with a government tax break. This campaign is not getting a lot of support from media comment, see below. „The banks came in for a good bashing from the three Chancellors on Monday night. And yesterday brought yet more evidence of how richly deserved the public abuse seems. The Consumer Focus report on cash Isas makes depressing reading. It is very hard to defend the banks against the charge that they shamelessly exploit ignorance and inertia to give millions of their customers a very bad deal. The banks make good use of “bait and switch” tactics with other savings products, enticing customers in with high teaser rates then reducing them once the fish is hooked. With cash ISAs the behaviour appears especially egregious‟ David Wighton: Business Editor‟s commentary, The Times March 31, 2010 But form the posters, you get no impression that the banks were in any sense trying very hard. Tired imagery supporting a rate based offer. Not hint of branding but more important not a hint of any support to wider branding that might be occurring in these banks. It is just „going through the motions‟ advertising. 33 © Geoffrey Johns 21 April 2010
  34. 34. Branding Banks for shareholder value Discussion Draft Section 3.0 34 © Geoffrey Johns 21 April 2010
  35. 35. Branding Banks for shareholder value Discussion Draft Section 3.0 35 © Geoffrey Johns 21 April 2010
  36. 36. Branding Banks for shareholder value Discussion Draft Section 3.0 Appendix 2 Some examples of a brand attracting specific types of customers My general attitude is that mostly banks have to work with the very mixed customer base they inherit. Most banks I know are the result of s an historic culmination of mergers and takeovers. From the perspective of many the customer base just happened. I must concede, however that there are notable exceptions. Here are some of them. National Australia Bank – Australia – late 1990s National Australia Bank emerged from the era of bank regulation a bit like the underdog determined to be top. Westpac (or the Bank of New South Wales as it then was) was the leader to be overtaken. Nobby Clark, its CEO seemed to me to be one of life‟s learners. National Australia bank has a smaller but perhaps more select client base than its rival. Several high net worth individuals tell me of having been drawn from branch queues into a private room for service. And the National was strong in the most profitable sector of the business market. My favourite interview quote on that subject (around 1999): “Oh no, mate, I don‟t bank with the National, if they wanted to bank me I‟d know I‟d really made it!” Rabobank – Australia – around 2000 36 © Geoffrey Johns 21 April 2010
  37. 37. Branding Banks for shareholder value Discussion Draft Section 3.0 Rabobank entered the Australian market decisively with the acquisition of the Primary Industry Bank of Australia. It positioned itself as the expert in banking for farmers who farmed as a business rather than as a lifestyle. It has consistently outperformed other all other banks in the rural sector in customer perceptions. Macquarie Bank – Australia – 1990s onwards “When you look closely you always find Macquarie behind everything” So said a man in one of my in-depth interviews and I think he is not alone in that view. Macquarie puts a lot of effort into risk management and enters new territory using the strategy that they call adjacency. That is they only venture a new products into markets that they know and new markets with products that they know. Markets Existing Potentiaal Existing Products Potential Without too much overt branding, Macquarie seems to have established a presence in the mindset of people who are affluent and streetwise without necessarily having a high level of financial sophistication. There is a “stick with Macquarie and you can‟t go wrong” attitude. It helps a bit of course that Macquarie is known as the millionaire factory because of the number of staff it has enriched. 37 © Geoffrey Johns 21 April 2010
  38. 38. Branding Banks for shareholder value Discussion Draft Section 3.0 Islamic banking I shall confess immediately to not knowing as much about Islamic banking as i should or should like to. However, it is a salient example of a bank brand that appeats to a highly specific group of people . The first Islamic bank did not appear until the mid-sixties and the consistent annual growth rate has been double digit. Shariah-compliant assets reached about $400 billion throughout the world in 2009, according to Standard & Poor‟s Ratings Services, and the potential market is $4 trillion xxix. It has been accepted as a „All HSBC provided solutions and third party solutions offered through the HSBC Private Bank carry the endorsement of the HSBC Amanah Shariah Board, ensuring adherence to Shariah law.‟ Bendigo Bank Bendigo Bank is a small but successful Australian bank. Over the last few years it has made rapid inroads into the business banking market. Superficially it is easy to think Bendigo would have difficulty in developing competence in this area. However Bendigo has attracted businesses that are amenable to its community banking approach and, I suspect, prefer to have their banking centred on the branch, a model larger banks have mostly moved away from but which is still valued by a significant group of customers. 38 © Geoffrey Johns 21 April 2010
  39. 39. Branding Banks for shareholder value Discussion Draft Section 3.0 100 80 60 40 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Sep-02 Dec-02 Mar-03 Sep-03 Dec-03 Mar-04 Sep-04 Dec-04 Mar-05 Sep-05 Dec-05 Mar-06 Sep-06 Dec-06 Mar-07 Sep-07 Dec-07 Mar-08 Sep-08 Dec-08 Mar-09 BEN BOQ BWA SGB SUN 'Big 4'* All financial institutions The exhibit shows Bendigo as the bank with most satisfied business customer between 2002 and 2009. This is calculated as the percentage of customers scoring the bank 4 or 5 on a scale of 1 to 5 where 5 means the strongly satisfiedxxx. 39 © Geoffrey Johns 21 April 2010
  40. 40. Branding Banks for shareholder value Discussion Draft Section 3.0 Notes and references for Section 4 i See Section 2 for a detailed discussion of Conversion Model™ segmentation. ii Brand disciple is so hard to achieve in banks that a little “do you want fries with that?” is often part of the solution. iii In many of the books and articles I have read, brand left undefined as that thing that wins customers, enables higher prices etc.. iv John Grant „Brand Innovation manifesto, 2006, John Wiley and sons ISBN-13:978-0- 470-02751-6. v This is an ongoing feature of my relationships with advertising agencies. The Account director has to balance the client‟s desire for a focused brand reflecting desired corporate identity with his or her creative team‟s desire to create something special. I have to admit here that this problem is more urgent with banks than with, say, Apple. The best account director I have known at reconciling these contesting worldviews is James Roberts, now Managing Director of Red Hammer in Sydney. Let this footnote be a record of my thanks. vi I think I begin to see an unexpected (by me, anyway) feedback loop in this. The reception of the brand story not being ever quite what we expect reshapes the brand 40 © Geoffrey Johns 21 April 2010
  41. 41. Branding Banks for shareholder value Discussion Draft Section 3.0 story itself. The telling of the story Brand essence Brand image Communicated An unexpected feedback loop received (The story) The interpretation of the story vii Interestingly, it becomes apparent that this is an opportunity to introduce the QFD tool that I discussed in Section 1 to make the multifaceted link from the story to the telling. However, this mechanistic approach would be so removed from John Grant‟s intent that I shall refrain from it. viii If I have inadvertently breached anyone‟s copyright with this diagram, I am more than happy to remove it. ix Coming to a head in August 2008. x I should perhaps add the rider that the media was often at the very least sloppy in failing to distinguish between retail and investment banks. xi Liz Hanton was Market Research Manager for Commonwealth Bank business banking around 1996 – 1999 and a major help to me in formulating my views of the marketplace. 41 © Geoffrey Johns 21 April 2010
  42. 42. Branding Banks for shareholder value Discussion Draft Section 3.0 xii At that time the Commonwealth Bank was preferred by many migrants because its deposits were government guaranteed. Also as the main bank for the distribution of welfare payments it tended to bank a greater proportion of lower socio-economic groups. xiii I shall cover the difficulties the banks have in sub-branding i a later paper in this series. xiv Unless another bank is acquired, when its brand is, ideally retained, when permitted by the regulatory authorities. xv Op. Cit. xvi Which I shall present in a future paper in this series. xvii I assume that the Australian banks, with which I am most familiar, did not lag the rest of the world by too much in this respect. Around 1990, having discovered the importance of home mortgages to customer NPV, I worked my way through Westpac; Retail Banking Division looking for the person responsible for the product. The role turned out to be located several tiers down the hierarchy and the only information about the product I could get was 5 overheads slides prepared by an undergraduate as part of their work experience summer vacation. xviii It was Charles Handy, I think, who said you learn more from writing than you do from reading. I expect that on a number of occasions I shall „enhance‟ elements of these papers as I write them and will not have the opportunity to revise earlier versions until I have got to the end and can recycle back to the beginning for my second drafts. xix „Global Private banking and wealth management‟, David Maude, 2006, John Wiley & Sons ISBN 13: 978-0-470-85421-1 – Another of my „must read‟ books. xx I discussed the implications of Kano analysis in some detail in Section 3. 42 © Geoffrey Johns 21 April 2010
  43. 43. Branding Banks for shareholder value Discussion Draft Section 3.0 xxi Just count all the shredders appearing in people‟s homes. xxii Before a banker tells me, I do know the bank is taking a risk too. Once of my mentors in the practicalities of banking, Alan Price, then Chief Manager, Commercial Banking at Westpac, was once aggressively asked in an interview:“ Your customers don‟t trust you like they used to, do they?” He leaned forward looking the interviewer in the eye and replied: “We don‟t trust our customers like we used to, either.” xxiii See Section 3 for more detail. xxiv An old District Bank joke, sorry. xxv The rebellion by gold prospectors at the Eureka Stockade in Ballarat, Victoria, Australia on 4 December 1854 was prompted by grievances over heavily priced mining items, the expense of a Miner's Licence, taxation (via the licence) without representation and the actions of the government and its agents (the police and military) Wiki xxvi Salvation Army Order cream crackers for the needy, vegemite a plant extract spread inedible to any but Australians and featured in the Men at Work song „I come from a land down under‟. xxvii As I shall discuss in a subsequent section, you should never trust a banker‟s judgement on bank advertising. We have a completely different view to the brand audience, for example banking matters a lot more to us than it does to them. Always research advertisements, especially ones as expensive and more importantly committing as these two. xxviii Whatever you might think about the Wallabies front row. xxix Munawar Iqbal and Philip MolyneuxThirty Years of Islamic Banking: History, Performance and Prospects, Palgrave Macmillan, London, UK, 2005 and wiki 43 © Geoffrey Johns 21 April 2010
  44. 44. Branding Banks for shareholder value Discussion Draft Section 3.0 xxx The graph is one of a set published by TNS Australia monthly from data collected in their Business Finance Monitor 44 © Geoffrey Johns 21 April 2010