Building a Powerful Financial Services Brand

Anshul Kaushesh

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As the business environment becomes increasingly hostile, more and more companies are discovering the value of brand as a strategic asset and a source of competitive advantage. According to a study by the consulting firm Brand Finance, nearly 72% of shareholder value is tied to intangible assets. And in most cases, brands are the most significant intangible assets.

Traditionally, financial institutions have enjoyed an enviable position where they were faced with little competition. But in an increasingly competitive financial services arena, these traditional advantages have virtually disappeared. As the entry barriers in terms of regulatory restrictions have decreased, making it easier for new firms to enter, consumers are presented with a plethora of options from both traditional and non-traditional players. Due to increased competition, product or service innovations have ceased to be a sustainable source of differentiation.  In such a scenario, competition often revolves around price, thus depressing the margins for all the players in the industry.

In such a scenario, brands can serve as an important means of differentiation. But the financial services industry is notoriously lacking strong brands. A consumer research done by Interbrand, the leading brand management consultancy, in mid 1999, revealed that only two financial services firms- Citigroup and American Express Co., figured in a list of world’s 60 best-known brands. A similar study by Booz Allen Hamilton studied the measures of brand strength and brand recognition. It was found that while brands such as Sears and Coca-Cola were recognized by 94% of the surveyed group, financial services brands were recognized by only 29% of the respondents.

The traditional business model in the financial services industry has been somewhat antithetical to branding efforts mainly because of the perception that brand building is expensive and carries no assurance of guaranteed returns. There is skepticism among fund companies about the applicability of traditional packaged-goods marketing and branding theory to financial services.  But the value of a financial services brand is real.  Booz Allen calculated the value of a financial services client’s brand equity based on brand related revenues and expenses. The institution’s brand equity translated to $ 4 billion in market capitalization. 

The changing market scenario coupled with the value that a brand can generate makes it imperative for financial services companies to initiate brand-building efforts. Their ability to attract and retain customers will now depend upon how fast they can strengthen and communicate their brands. Products or services in this industry revolve around something that is extremely important to customers: money. Thus, trust is an important factor influencing their decisions. And this is where a strong and well-recognized brand plays an important role.  Moreover, the increasing complexity of financial products increases the importance of the brand as a tool for disseminating important information to the customers.  For financial institutions today, the strength of their brand has become one of the critical parameters for differentiation and success. A strong brand influences customer preferences, maximizes return on investments in marketing efforts and strengthens the bottomline.  The players, who are able to build and communicate strong brands, will be best positioned to gain substantial competitive advantage in the marketplace.

However, not many financial service organizations have adopted a strategic approach to brand building. Some established organizations still see brand as an aid to awareness and recognition. Many brand-building initiatives in these organizations are characterized by sporadic, unplanned and uncoordinated efforts. But some new aggressive entrants view brand as a centerpiece of their corporate strategy and are aligning all their communications, operations and systems to deliver their brand promise. Interbrand, the leading brand consultancy firm conducted a survey to study how financial services firms are defining and managing their brands.  The survey results revealed that there are four types of brand use among financial institutions:

• The brand as a visual identification system: For the companies that are at the first level of brand development, brand is seen only as a means of generating awareness and recognition. These companies place very little emphasis on developing and associating any values with the brand.

• The brand as a focus for stand- alone product development: In the second type of brand use, the operating brand is usually separated from the parent brand. The established brand is used for traditional services while a new brand is created for new services like telephone banking, Internet banking etc. The rationale for this strategy is that it takes a long time to change the underlying beliefs of an organization; therefore, the new brand needs to be separated from the parent brand so that it can be managed professionally.

• The brand as a catalyst for organizational change: These companies recognize the need for building a strong brand. These companies want to enhance their competitiveness by raising the standards of their customer service. They have also realized that powerful brands emerging in the market derive their strength from superior customer service.  So, they focus on building their brands to compete more effectively. In these companies, the brand has a central, strategic role to play.

• The brand as a centerpiece of corporate strategy: Here, the brand is an embodiment of company’s vision. Corporate brand is used as a vehicle to drive change.  These companies are characterized by a brand driven organizational infrastructure, comprising of a senior management, which is visibly committed to the brand.  The brand vision is deeply rooted in the organizational culture and the brand values are reflected in everyday activities.

Most Indian financial service organizations would fall in the first category. Though many of them have initiated some brand building activity, the objective of most of these initiatives is to generate awareness and recognition. However, if these organizations want to leverage their brand as a source of competitive advantage, they need to view the brand as a centerpiece of their corporate strategy.

Creating and nurturing a financial services brand is a long and investment intensive process that goes through following steps:

• Defining the role of the brand in the business and outlining the leverage that it provides across markets.

• Choosing a suitable positioning strategy which clearly defines how the brand is different from competitor’s brand

• Planning all the brand building programs and communication

• Organizing to support these brand-building activities

• Constant monitoring and tracking of the brand value

Defining the role of a brand

The first step in the brand building process is to clearly define the role of the brand in the business. The role of a brand can be to inform customers and to generate awareness about the product, to communicate product attributes or to create a differentiated position in the marketplace.

 To understand the role of a brand, the marketer should understand how its customers and employees perceive their brand vis-à-vis the competitor’s brand. For instance, in the case of a complicated financial product, a well recognized brand serves as a shorthand way of communicating critical product attributes and helps to present the offering in a simplified way. On the other hand, brand can also be used for highlighting unique product attributes. When Citibank launched its Suvidha savings account scheme in India, the Suvidha brand name was used to highlight its unique attributes that distinguished it from the competition.

Positioning the brand 

The primary objective of brand building is to carve a niche for the company in the marketplace and own a distinctive position in the minds of the customers. When a brand is built, branding efforts should focus on owning a word in the prospect’s mind. A word that nobody else owns. Once a brand owns a word, it is almost impossible for a competitor to take that word away from the brand. For example, Mercedes is strongly associated with “prestige”, “safety” is owned by Volvo. Now, it would be a Herculean task for any new competitor in the marketplace to position itself on these attributes. 

A brand’s positioning strategy helps it differentiate itself in the marketplace.  A brand’s positioning platform defines the space that it wants to occupy in the customer’s mind. It is an invisible basis that gives long-term identity to the brands. A distinctive positioning in the marketplace helps maintain ‘distance’ and dissimilarity between brands in the ‘perceptual space’ of the prospect. 

The marketplace realities demand that financial services firms discard the traditional product based value proposition and compete on the basis of their core competencies. These core competencies can be a source of differentiation in the marketplace and can serve as their positioning platform. According to a framework suggested by IBM research, financial services firms can adopt any of the following four business models:

• Customer Centric Model: Building and nurturing customer relationships is the core competence of the companies embracing this model. These players understand customer needs very well and generally control the point of interaction with the customer. They empower the customer through education, knowledge and convenience and fulfill customer needs by partnering with fulfillment organizations.
  
  A US based company, myCFO, offers a set of tailored personal financial management solutions via online interactions. This company is adding the physical channel as well by developing brick and mortar locations. Sony also plans to leverage its knowledge of customers by entering the financial services industry through an online bank. It has tied up with JP Morgan and Sakura bank for industry expertise and channel support. Such developments pose a threat to traditional financial services players. They can regain control over customer relationships only if they create customer centric organizations that deliver superior customer value. Companies like Citibank are well positioned to adopt this model. These companies can then leverage this core competence and position their brands on superior customer service and experience.
   

• Production Centric Model: The companies who operate on the basis of this model have developed competencies in production of financial products or services. They either meet the customer needs directly or serve as a resource for other business models. These businesses compete on the basis of price, quality or convenience and they can position their brands on any or all of these attributes.
  
  For example, the Royal bank of Scotland group outsources its backend banking functions to companies offering such services. RBSG views its backend operations as a production centric line of business. The primary focus of the companies offering these services is production efficiencies and they take advantage of economies of scale to reduce their costs.
   

• Market Centric Model: These businesses offer value added services to both buyers and sellers. Often they provide a platform for transactions. They can also provide infrastructure, price discovery mechanism or supply chain support. E-bay, the online auction house exemplifies this market centric model. It understands the needs of both buyers and sellers and provides them with a platform to transact.  The ability of these businesses to understand the needs of buyers and sellers can serve as their positioning platform.
   

• Fulfillment Centric Model: Businesses that are fulfillment centric, focus on identifying and fulfilling the needs of buyers and sellers. Their expertise lies in transaction completion and settlement. They provide distribution conveniences, fair price relative to the speed of delivery, reliability and dependability and post fulfillment services. Ito-Yokado, one of Japan’s largest retailers is entering the financial services domain with its venture IY bank, which will enable customers to withdraw funds from IY bank or any other bank from ATMs installed in Ito- Yokado stores. Such businesses differentiate themselves on supply chain and infrastructure efficiencies and the intelligent use of next generation technologies to enable enhanced payment and transaction processes.

A coherent and consistent positioning strategy is a prerequisite for building a strong brand. The positioning strategy should clearly communicate the product benefits to its target segment. In the Indian financial services arena, though many players have stepped up their brand building efforts through advertising, not many players have been able to carve out a unique position for themselves. A few like ICICI, who have succeeded have identified their value proposition clearly.