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Branding is a relatively new concept for the financial industry.They are slowly realizing that they needto manage their strategic assets, too.
“Ultimately, a brand is the things peoplesay about you when you’re not there,”says Jeff Bezos, CEO of Amazon.com.With so much brand jargon in businessthese days,it is hard to understandwhata brand really means to a business. It isoften associated with slogans, advertis-ingcampaigns,logos,andorganizationalnames. But as Jeff Bezos illustrates,brand is much more emotional in naturesince it is tied to ideas of reputation,trust, and quality of a firm. We followthe view that brand is what a personfeels after repeated interactions withany aspect of products or services. Sincethe brand is so connected to what yourfirm stands for in the minds of your keyconstituents, it represents a promisethat the firm makes with its clients todeliver a set of experiences.Brands like BMW, Sony,FedEx andVirginare successful because they deliver timeand time again on the promises theyhave made to their customers. For ex-ample,Virginpromisesinnovativeservice,value and fun, and delivers it throughinitiatives such as Premium EconomyClass on its Virgin Atlantic Flights, VirginHolidays, and Virgin Bride. These com-panies haverecognized that their brandsare a strategic asset to be carefully man-aged over the long term.
Theimportanceofbrandsinbusiness
If brands are a strategic asset, then howdo they impact business? Strong brandsaffect business performance, as demon-strated by exhibit 1.Not only do strong brands result in bet-ter investment performance, but theyalso decrease acquisition costs sincecustomers aremore likely to repeatedlypurchase a product/service that theyhave come to trust and to whom theyhavedemonstrated loyalty.Thestrengthsof these relationships directly affect thebottom line: evidence shows that itis much more expensive to acquire acustomer than to keep one.There are multiple competitive advan-tages associated with strong brands.First, clients are more willing to pay apremium price for strong brands.Second, a strong brand simplifies clientchoices. Once a client has purchased abrand, he/she will not need to gothrough the entire decision-makingprocess again, but instead will rely onpast experience to guide them. Strongbrands will thus help to reinforce clients’decision to choose a firm and to staywith them over time.The benefits of strong brands are notlimited to external business perfor-mance;theorganization benefitsaswell.People are naturally attracted to firmswith strong brands, which translates toa better pool of talent applying for posi-tions.Once employeesjoin a firm,if theysee evidence that the brand is managedwell and is a priority within the com-
Research
Branding for banks
01002003004005002002200120001999199819971996199519941993199219911990 Value growthIndex 1: most valuable brands in S&P 500Index 2: less valuable brands in S&P 500Index 3: S&P 500 companies
Source: Prophet, Business Week
Exhibit 1:
Strong brands make a difference
The brand-driven value chart portrays the growth in value based on three indices over a 13-yeartime period. The three indices were normalized to 100 for the first time period to set a baseline forthe value growth.•Index 1 represents the 50 most valuable brands in the S&P 500 in 2002, based on Business Week’sstudy on the world’s 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 periodThe value growth represents the investment performance of a USD 100 investment in each index overthe given time period. For example, a USD 100 investment in Index 1 with the most valuable brandswould have resulted in a USD 450 return in March 2000.
There are multiplecompetitive advantagesassociated with strongbrands.
From the chart, it is evident that the strongest brands have enjoyed significantly betterbusiness performance than less valued brands over time.
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UBS News for Banks
IV/2003
 
pany, they are more likely to have confi-dence in the firm and will thus morestrongly support management decisions.
Brand management challenges infinancial services
While there are so many business bene-fits associated with brands, it is interest-ing that so few financial services firmscommit to activelyandconsistently man-aging their brands. In general, brandmanagement poses several challengesin financial services:•Brand management is a relativelynew concept for the industry•Brand relevance is difficult to main-tain with so many client types•The similarity of product offeringsmakes differentiation more difficult•The client/advisor relationship, oftenthe key to the industry, is hard tocontrol•Industry trends have made brandpositioning more complexThe idea of managing a brand is a newone for the industry, as many financialservices firms have historically perceivedbrand management as only relevant toconsumer goods. As a result, financialservices firms are not likely to havestrong brand management capabilitiesin-house. Interestingly, the results of theannual Interbrand survey in 2002showed that only four (Citibank, Mor-gan Stanley, Merrill Lynch, and JP Mor-gan) out of 75 of the most valuableglobal brands are bank brands.
1
Thusthe opportunity exists for banks to gaincompetitive advantage by investing inbrand management and enjoy the busi-ness performance benefits.In addition to the challenge of the nov-elty of brand management, a firm facesthe challenge of staying relevant to itsmany different types of clients in thefinancial services world. Banks serve avariety of clients with differing needs,which in turn makes it difficult to builda brand that is relevant to all groups.However, financial services firms cantransform this challenge into an oppor-tunity to tailor a more comprehensivegroup of products/services to a specifiedclient type. For example, the individualwealth management client not onlybenefits from the standard equity invest-ments, IRA (Investment RetirementAccount) and ISA (Investment SavingsAccount) accounts, but also can takeadvantage of foreign exchange servicesand innovative products like equity-linked securities that were once solelythe domain of business clients.Another difficulty that financial servicesfirms face in brand management is thesimilarity of product offerings from firmto firm. Product innovations in financialservices are short-lived since it is rela-tively easy to copy new product offer-ings. The result is that financial firmsmust find other aspects of their busi-ness, such as the client/advisor relation-ship, as a means to differentiate fromthe competition.The difficulty in differentiating based onproduct offering leads to the elevationof the client/advisor relationship to themost important driver of client loyalty.This trend creates another challenge forfinancial services firms since the most in-fluential way of reaching the client is ac-tually the most difficult to manage. As aresult, financial services firms face thechallenge of managing the process ofeducating client advisors and other staffwho have direct contact with the client,to ensure that they deliver a consistent,branded experience. The investment inthe advisor results in a virtuous cyclewhere client-facing staff are more will-ing to engage clients, the brand is thenstrengthened, and client-facing staff be-come more enthusiastic about servicedelivery.A final set of challenges in financialservices involves the difficulty of posi-tioning brand(s) in the face of industrytrends such as the global/local debateand recent merger and acquisition activ-ity. The task of positioning a brand in-volves deciding which part of “what abrand stands for” will be actively com-municated to the target audience. Manyfirms, from SMEs (Small to Medium-Sized Enterprises) to larger ones, haveencountered the challenge of highlight-ing global capacity and simultaneouslyemphasizing the ability to deliver locallytailored products/services. At the sametime, the slew of mergers and acquisi-tions in the late 1990s required financialservices firms to make significant deci-sions about the relationship betweentheir brands. For example, Citigroupwas tasked with integrating Smith Bar-ney in its portfolio, as was UBS with
Research
UBS News for Banks
IV/2003
3
1
Interbrand Best Global Brands Survey, 2000.
Individual clientsBusiness clients
• Retail• Affluent• Core Affluent• High Net Worth• Ultra High Net Worth• Prefer long-termsolutions customizedto their situation andpersonal preferences• Prefer personalrelationshipwith advisor• Small firms• Corporate clients• Institutional investors• Prefer buying morestand-alone productsthan individualclients• Prefer intelligentadvisors who areaware of complexfinancial needsand can leveragestrong support ofcorporate resources
Client typesProduct/service preferenceClient interaction preference
Exhibit 2:
An act of balancing
Financial services firms are faced with the task of balancing product/service client preferencesas well as preferred ways of interacting with a financial services provider.
Banks serve a variety of clients with differingneeds, which in turnmakes it difficult tobuild a brand that isrelevant to all groups.
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