Research

Branding for banks

Branding is a relatively new concept for the financial industry. They are slowly realizing that they need to manage their strategic assets, too.
Ultimately, a brand is the things people say about you when youre not there, says Jeff Bezos, CEO of Amazon.com. With so much brand jargon in business these days, it is hard to understand what a brand really means to a business. It is often associated with slogans, advertising campaigns, logos, and organizational names. But as Jeff Bezos illustrates, brand is much more emotional in nature since it is tied to ideas of reputation, trust, and quality of a firm. We follow the view that brand is what a person feels after repeated interactions with any aspect of products or services. Since the brand is so connected to what your firm stands for in the minds of your key constituents, it represents a promise that the firm makes with its clients to deliver a set of experiences. Brands like BMW, Sony, FedEx and Virgin are successful because they deliver time and time again on the promises they have made to their customers. For example, Virgin promises innovative service, value and fun, and delivers it through initiatives such as Premium Economy Class on its Virgin Atlantic Flights, Virgin Holidays, and Virgin Bride. These companies have recognized that their brands are a strategic asset to be carefully managed over the long term. The importance of brands in business If brands are a strategic asset, then how do they impact business? Strong brands affect business performance, as demonstrated by exhibit 1.

There are multiple competitive advantages associated with strong brands.

Not only do strong brands result in better investment performance, but they also decrease acquisition costs since customers are more likely to repeatedly purchase a product/service that they have come to trust and to whom they have demonstrated loyalty. The strengths of these relationships directly affect the bottom line: evidence shows that it is much more expensive to acquire a customer than to keep one. There are multiple competitive advantages associated with strong brands. First, clients are more willing to pay a premium price for strong brands. Second, a strong brand simplifies client choices. Once a client has purchased a brand, he/she will not need to go through the entire decision-making process again, but instead will rely on past experience to guide them. Strong brands will thus help to reinforce clients decision to choose a firm and to stay with them over time. The benefits of strong brands are not limited to external business performance; the organization benefits as well. People are naturally attracted to firms with strong brands, which translates to a better pool of talent applying for positions. Once employees join a firm, if they see evidence that the brand is managed well and is a priority within the com-

Exhibit 1: Strong brands make a difference

The brand-driven value chart portrays the growth in value based on three indices over a 13-year time period. The three indices were normalized to 100 for the first time period to set a baseline for the value growth. Index 1 represents the 50 most valuable brands in the S&P 500 in 2002, based on Business Weeks study on the worlds most valuable brands, such as Coca-Cola, Ford, and Microsoft Index 2 represents those brands in the S&P 500 that were not included in Index 1 Index 3 represents all brands in the S&P 500 over the given time period The value growth represents the investment performance of a USD 100 investment in each index over the given time period. For example, a USD 100 investment in Index 1 with the most valuable brands would have resulted in a USD 450 return in March 2000.
500 400 300 200 100 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Source: Prophet, Business Week

Value growth

Index 1: most valuable brands in S&P 500 Index 2: less valuable brands in S&P 500 Index 3: S&P 500 companies

From the chart, it is evident that the strongest brands have enjoyed significantly better business performance than less valued brands over time.

UBS News for Banks

IV/ 2003

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Exhibit 2: An act of balancing

Individual clients Retail Affluent Core Affluent High Net Worth Ultra High Net Worth Prefer long-term solutions customized to their situation and personal preferences Prefer personal relationship with advisor Business clients Small firms Corporate clients Institutional investors

Client types

Account) accounts, but also can take advantage of foreign exchange services and innovative products like equitylinked securities that were once solely the domain of business clients. Another difficulty that financial services firms face in brand management is the similarity of product offerings from firm to firm. Product innovations in financial services are short-lived since it is relatively easy to copy new product offerings. The result is that financial firms must find other aspects of their business, such as the client / advisor relationship, as a means to differentiate from the competition. The difficulty in differentiating based on product offering leads to the elevation of the client / advisor relationship to the most important driver of client loyalty. This trend creates another challenge for financial services firms since the most influential way of reaching the client is actually the most difficult to manage. As a result, financial services firms face the challenge of managing the process of educating client advisors and other staff who have direct contact with the client, to ensure that they deliver a consistent, branded experience. The investment in the advisor results in a virtuous cycle where client-facing staff are more willing to engage clients, the brand is then strengthened, and client-facing staff become more enthusiastic about service delivery.

Product/service preference

Prefer buying more stand-alone products than individual clients Prefer intelligent advisors who are aware of complex financial needs and can leverage strong support of corporate resources

Client interaction preference

Financial services firms are faced with the task of balancing product /service client preferences as well as preferred ways of interacting with a financial services provider.

pany, they are more likely to have confi- global brands are bank brands.1 Thus dence in the firm and will thus more the opportunity exists for banks to gain strongly support management decisions. competitive advantage by investing in brand management and enjoy the business performance benefits. Brand management challenges in financial services While there are so many business benefits associated with brands, it is interesting that so few financial services firms commit to actively and consistently managing their brands. In general, brand management poses several challenges in financial services: Brand management is a relatively new concept for the industry Brand relevance is difficult to maintain with so many client types The similarity of product offerings makes differentiation more difficult The client / advisor relationship, often the key to the industry, is hard to control Industry trends have made brand positioning more complex The idea of managing a brand is a new one for the industry, as many financial services firms have historically perceived brand management as only relevant to consumer goods. As a result, financial services firms are not likely to have strong brand management capabilities in-house. Interestingly, the results of the annual Interbrand survey in 2002 showed that only four (Citibank, Morgan Stanley, Merrill Lynch, and JP Morgan) out of 75 of the most valuable

A final set of challenges in financial services involves the difficulty of positioning brand(s) in the face of industry In addition to the challenge of the nov- trends such as the global/local debate elty of brand management, a firm faces and recent merger and acquisition activity. The task of positioning a brand inthe challenge of staying relevant to its volves deciding which part of what a many different types of clients in the brand stands for will be actively comfinancial services world. Banks serve a municated to the target audience. Many variety of clients with differing needs, firms, from SMEs (Small to Mediumwhich in turn makes it difficult to build Sized Enterprises) to larger ones, have a brand that is relevant to all groups. encountered the challenge of highlightHowever, financial services firms can transform this challenge into an oppor- ing global capacity and simultaneously emphasizing the ability to deliver locally tunity to tailor a more comprehensive group of products/services to a specified tailored products / services. At the same time, the slew of mergers and acquisiclient type. For example, the individual tions in the late 1990s required financial wealth management client not only benefits from the standard equity invest- services firms to make significant decisions about the relationship between ments, IRA (Investment Retirement their brands. For example, Citigroup Account) and ISA (Investment Savings was tasked with integrating Smith Bar1 Interbrand Best Global Brands Survey, 2000. ney in its portfolio, as was UBS with
UBS News for Banks IV/ 2003

Banks serve a variety of clients with differing needs, which in turn makes it difficult to build a brand that is relevant to all groups.

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PaineWebber. Both firms re-evaluated their brand positioning and thus the components of their brand portfolios Citigroup maintained the Smith Barney name with an endorsement by Citigroup, while UBS decided to retire the PaineWebber name.

Implementing brand management in financial services

Given the opportunities to leverage brands in the financial services world, what are the basics to keep in mind when implementing brand management? The checklist provides a high level view.

The slew of mergers and acquisitions in the late 1990s required financial services firms to make significant decisions about the relationship between their brands.
Although financial services firms face challenges the novelty of brand management, maintaining relevance to various client types, managing the client/ advisor relationship, and the complexity of brand positioning the empirical benefits warrant investment of their resources, through building or acquiring the skills needed to achieve proper brand management.

Brand management checklist P Do you know what you want your brand to stand for ? P Does the message your clients receive reflect your brand ? P Do the messages your employees receive reflect your brand ? P To what degree are the interactions with your clients guided by brand ? P Is brand incorporated in organizational decision-making ?

Do you know what you want your brand to stand for?

Ensure that you have established a set of goals for your brand(s) that is based on how you want your clients to perceive you, how you want to differ from the competition, and how you want your brand to support your business. With a goal for the brand in place, you will be able to determine how to position your brand in the short to medium term to achieve the end result.

Do the messages your clients receive reflect your brand?

Once you have set a strategy for your brand(s), identify the messages that will best communicate the brands promise. Integrating these messages across various channels, such as advertising, media/ investor relations, and sponsorship, will ensure that your clients receive a consistent message regarding your brand. The various communication departments within your organization may need to be re-aligned to establish consistency in your client messaging.

Stephen Root Prophet, London (England) sroot@prophet.com Prophet is a consulting firm specializing in brand and business strategy. Leveraging the thought leadership of David Aaker and a team of seasoned professionals, Prophet works with companies from strategy to execution to develop, grow, operationalize and protect one of their most valuable assets: their brand. Prophet has offices in Chicago, London, New York, San Francisco and Tokyo. Prophet is currently working with UBS.

Do the messages your employees receive reflect your brand?

After you have ensured that your client messaging is on-brand, verify that your employee communications consistently reflect your brand. Employees benefit from education about brand at all levels of the organization, not just marketing. Letters from management, e-mails, informal meetings, intranet sites, and road shows should all be infused with key messages consistent with your brand strategy.

To what degree are the interactions with your clients guided by brand?
Once employee communications are in place, it is beneficial that each client interaction represent the brand. To assess your client interactions, first identify all the points where your client interacts with the firm; assess each of these interactions with regards to the brand and determine what improvements are necessary; finally, modify those interactions to reflect the brand promise through initiatives such as training, mentoring programmes, and performance evaluations that improve and sustain better brand-related relationships.

Is brand incorporated in organizational decision-making?

Bibliography Prophet Annual Study based on Business Week 2002 Study on the Worlds Most Valuable Brands. Branding in Banking Prof. Dr. Manfred Bruhn. 2003. Aaker, David A. and Joachimsthaler, Erich. Brand Leadership. Simon & Schuster. 2000. Davis, Scott and Dunn, Michael. Building the Brand-Driven Business. John Wiley and Sons. 2002. Finally, check to see at what level senior management uses brand in business planning and organizational development. It is beneficial that the five- or ten-year plan, including product /service goals, highlight strategies that help an organization to achieve its brand goals. Brand goals are more easily achieved when each member on the senior leadership team is thinking about the long-term strategy of the company with the brand in mind. So what do your clients say about your firm when you are not there? With a solid plan to develop your brand, they will start to notice that your firm is delivering on the brand promises made to them. Your firm will also have a framework for making long-term decisions to grow your brand, gain competitive advantages, and ultimately improve business performance.
Stephen Root

UBS News for Banks

IV/ 2003