BRAND BUILDING FOR BANKING INSTITUTIONS – Advantages,

Challenges Functions & Constituent Components

 Executive Summary

This paper details the importance of the function of branding for banks. I have tried to examine
the unique nature of banking as a service which is nothing but an unsecuritised loan from an
individual to a bank, which is incidentally known as a deposit.

After the description of the nature of the business in which banks are, I have tried to illustrate
how a very strong brand can benefit a bank in boosting its volume of business and profitability.

Next I have discussed the kind of challenges that a brand manager will face especially in the
banking sphere given the dynamic conditions in the sector.

After this I have presented a schedule of functions which a brand manager must accomplish in
order to be able to build a brand. It’s a mapping of the brand building process for banks.

And finally I have tried to describe a few critical components of a bank’s brand followed by the
conclusion.

 Unique Nature of Banking as a service

Banking as a service is unlike any other. As we know that banking by nature is a customer
entrusting his or her hard earned money with a bank without any collateral security in return. The
whole transaction is based entirely on trust.

A bank earns its income based on the spread. This spread refers to the differential between the
rate at which a bank accepts unsecured deposits from the general public and the rate at which it
lends. Higher the spread, higher will be the profits of the bank. The bank also has to ensure to
generate a minimum volume of deposits and move a substantial volume of credit in order to
maintain reasonable levels of profits.

Other sources of revenue for a bank include fee based incomes from activities such as Wealth
management, Demat services, Bill payment services, escrow account services, foreign exchange
services; ATM services and so on and so forth. Most of these services generate revenue for the
bank and unless and until the customer trusts the bank completely, he or she will never use these
services. Therefore building trust with the customers, potential users of the bank’s services is one
of the most important functions of a bank and that is accomplished through proper branding.

The importance of branding is brought into sharper focus by the fact that in terms of services that
banks offer, there is no much scope for differentiation per se. The nature of the depository
services and loan services in terms of interest rates offered is more or less identical across all
banks (though some of the banks may have a certain price advantage due to lower costs), the
wealth management advice differs from institution to institution but its efficacy tends to remain
the same, with all the banks sharing their ATM networks, the ATM penetration too, is no longer
a differentiating factor. Even the foreign exchange services are identical across banks.

So then the question arises, that with such homogeneity in services rendered and the products
offered, how does the bank create and retain in the competitive advantage?

The answer to this question lies, not in creating a product which is packed with features,
(because the fact remains that no matter how innovative the product is, it can be copied within no
time by competitors because no patent protections apply to financial products) but winning a
piece of the customer’s mind, creating a positive image in the customers mind so that whenever
he or she thinks of any of these services, the first thing which hits him or her is the name of the
bank or the financial institution in question.

And the answer to all these challenges is effective branding. So the key to acquiring and
retaining customers in order to maintain long term profitability and competitive edge lies in
creating and maintaining a favourable brand image in the minds of the target customers.

Advantages of Building a strong, trusted and highly recognizable brand

Customers by nature are cognitive misers. They do not want to do a lot of research and find an
out which bank is the best and which one is best suited for their needs. Implausible as it might
seem, the choice of banker decision often follows no rational criteria. In such a scenario, any
bank will do well to build a strong and highly recognizable brand for it in order to tilt the
decision making of the consumers in its favour. A strong brand is like an imaginary signpost in
the head of a person who is in need of any type of banking service ans simplifies the decision
making process for the customer, be it a long term relationship like that of depositor or a one off
transaction like getting a travelers cheque.

A strategic Resource

Just like funds, a bank is well adviced to invest in building a strong brand because at the end of
the day, it turns out to be a very useful strategic resource for the bank. As already discussed that
potential customers are cognitive misers, a brand helps in lowering customer acquisition costs
and ensures that the customers so acquired stay with the bank. It is a verified fact that customer
acquisition costs are far higher that retention costs. Thus every rupee spent on branding brings in
a higher return on investment in this way.

Higher Revenues and profitability

Not only will a strong brand help generate a higher volume of revenues, it will enable the bank to
command a higher premium for its services, which means it can accept deposits at a lower rate
and lend at higher rates and charge higher fees for all the allied services. This will boost the
return on investment and increase shareholder value through increased profitability.
Better Human resources

A bank, just like any other organization cannot function without the contribution of high quality
human resources. There is always a shortage of people with the right skill set in the market. A
strong brand helps the bank in attracting the right type of and high quality manpower to apply for
position in its ranks. Here too we can see an indirect benefit of branding spending in the form of
value which will be added by the highly qualified and motivated professionals.

Faith among other stakeholders

Besides inculcating trust within the customers, which is of paramount importance, a good brand
will lead to higher goodwill among other stakeholders namely the investors. Past experience
shows that State Bank of India’s market cap benefited from a successful integrated marketing
campaign launched by it. A good brand is also favoured by the government and in case of hard
times, the government comes forward to assist the banks who have greater goodwill.

Challenges in Building a Brand

As we have observed that branding presents a whole host of benefits to the financial institutions,
but it must be noted that due to its unique nature, branding a financial service comes replete with
its own set of challenges that must be surmounted before a brand can be built.

Getting the Buy in of the top management

Branding for financial institutions was still a nascent concept in India until a few years ago. No
matter how much we espouse and describe the benefits branding, it is very difficult to
demonstrate its effectiveness in numerical terms. No one can dissect the revenue of a bank and
pinpoint that exactly this portion of the revenues were due to the branding efforts. But still, one
should not take this limitation as a damning one as there exists a strong correlation between
branding spend of banks and their relative market positions and brand equity.

Different Services and Clients

Brand is nothing but what your company and its offerings stand for your target customers. But in
a bank offers a whole gamut of services to a very wide variety of clients, right from a depository
services to a poor daily wage earner to the salary account of a middle class employee to foreign
exchange services to a jet setting global professional to wealth management services to high net
worth individual to demat services to a housewife who is planning to get into stock trading. A
bank faces the challenge to present a meaningful sales preposition to each one of these segments
based on their specific needs and demographic. Agreed, that it is next to impossible to remain
relevant to all particular groups but a bank can build an umbrella brand around certain concepts
which will help identify it positively to all customer groups. For example, ICICI is playing
completely on the word “trust”. It is not specifically advertising any particular service but tries to
depict that “trust” is the underlying factor in all its services to all market segments and this
strategy is working very well. Similarly, SBI for some of the segments conveys the concept of
convenience.
Client interaction cannot be closely controlled

One of the most critical components of a bank’s brand is the kind of face to face interaction
which the customers have had with the employees of that bank. Understandably, the brand
manager can control the message that is flashed in the media, but it cannot closely monitor every
interaction which customers have with the employees. If a bank intends to present a common
message to the market, it must undertake employee training programmes which will ensure a
uniform, fruitful and cordial interaction between the employees and the customers so that there is
positive word of mouth and long term customer retention. A minor challenge is presented by
adjustment of training expenses. While the expense can be seen under the HR head, bulk of the
benefits will be reaped by the branding department.

Positioning in the light of current developments

The current trend in the banking industry is that of consolidation. Mergers and Acquisitions are
the order of the day. UTI bank and Global Trust Bank, Centurion Bank and Bank of Punjab are
some of the recent examples. In such a scenario. Spending money on branding a bank, when the
bank’s name itself may cease to exist in a few years time, may seem foolish. In face of a merger
with a bank which stands for something completely different that the current positioning of the
merging bank, it becomes very difficult to retain the brand equity while the name is discarded.
This is a challenge which can be overcome with subtle retentions which hint towards the past and
also strong reminders to the customers that only the name has changed by the organization
hasn’t.

Branding Exercise Functions

Now that it has been argued that brand building is not something which is “optional” to the
banks, we must look into how exactly a bank must go about building its brand. Following is a
laundry list of functions which a brand manager must execute in order to build a strong brand for
a bank. Some of the functions are generic while some are specific to the financial sphere.

Establishing Brand preposition

Brand preposition refers to what your brand stands for. ICICI has a very specific and strong
brand preposition TRUST. It must drawn on what is the existing image of the bank’s brand in the
market. It must establish how does the bank intend to serve the specific needs of the customer
with a view to partner in their growth.

Integrated marketing Communication

As mentioned, customer’s of a bank very greatly in terms of need and net worth. Therefore it is
very important to control the message that various segments are getting. For this the brand
manager will have to keep a tight leash on the kind of channels used by the marketing function
namely print, electronic outdoor and cyber. The brand manager is the custodian of the message
of the bank and therefore has to make sure that the intended message goes out to every segment.
Enlisting employee support

The biggest brand ambassadors of a bank are not the film stars and the sporting idols which
endorse the brand, they are the humble employees who sit behind the counters and conduct the
business of the bank on a daily basis. One of the most critical functions of a brand manger is to
first convey the message that he wants the customers to reach, to the employees. Unless and until
employees buy into the branding effort, no amount of advertising can help build a banking brand.

 Careful planning of client interaction

The first step would be to carefully list out the points where an outsider i.e. a customer has the
interactions with the bank and then examine the quality of interaction which is taking place and
then find out if there are any gaps, shortcomings or digressions from the intended message. In
case any such anomaly is detected, it must be set right immediately by retraining the employees
in customer interaction soft skills.

Branding a core area in senior level decision making

A brand manager must make sure that branding finds a place in the long term decision making of
the bank. It must be a two way process. The strategy of the company must be determined with
the kind of brand in place and also the branding must be tweaked in order to compliment the
strategy which has been set by the top management. This will help the branding function of a
bank to contribute meaningfully to the success and growth of the bank.

A note on what comprises of the Brand

As per the textbook definition, brand is a symbol, a word, a letter or a combination of them all
which helps the customer identify the product or service.

But the concept of branding in the sphere of banking now extends far beyond that. These days’
banks have a 360 degree approach to building a brand. It contains the following things.

Taglines and Slogans

Almost all major banks have in their promotional campaign, a slogan which underlines their
philosophy towards the customers.

SBI prides itself in pure banking nothing else. It depicts the hassle free dealings which its
customers enjoy. Andhra Bank claims that it has “much more to do, with you in focus”. This
shows the highly customer oriented approach of the organization. HSBC claims to be the world’s
local bank whereas Detusche Bank has a “passion to perform”

A assists the brand building process by succinctly defining what the bank offers to its customers
in terms of a banking experience.
Brand Colours

Brand colour imparts a visual appeal to the communication process. SBI has a common colour
known as the SBI Blue in all its advertisements and stationery including in branch signage. ICICI
has golden orange and Centurion bank of Punjab has red and navy blue, ABN Amro bank has
blue and green strips in all its visuals while HSBC is strongly associated with crimson red.

A colour might seem like something trivial, but it is a potent tool of anchoring the brand in the
minds of the customer and develops high brand recall.

Theme Music

Many banks have developed theme music for themselves, most notably the tune of ICICI Ban,
which have an audio appeal and help the customer readily identify the brand in electronic media
communications like television and radio advertising. The theme music also plays in the
background as you open the homepage of some of the banks’ websites.

Logo

A logo itself says a lot about the bank. The logo has come to acquire so much importance in the
branding exercise of the banks that many have changed the logo to suit the communication needs
the most notable examples being Bank of Baroda and Jammu and Kashmir Bank. SBI’s logo
signifies a keyhole, showing safety as well as the philosophy that it reaches the heart of every
customer. Deutsche bank has its logo an upward sloping line, encased in a square which signifies
growth in a secured environment.

Interior design

Last but not the least, a brand of a bank is also defined by the interiors of its customer service
branches. Jammu and Kashmir bank revamped the interiors of its bank to resemble an office
where the customer could walk into any end. ICICI got rid of the cage for the cashier and SBI
dedicated 80% of the available space for customers and the rest for the employees on the floor.

 In Conclusion

 In today’s times, Branding has attained a great importance for the banks due to the intense
competition in this sphere. Branding is one of the activities which can help banks gain an
advantage in the cluttered marketplace. Branding presents its own set of challenges thanks to its
lack of definition and frequent M&As but still it cannot be dispensed with because in a scenario
of identical and easily imitable products, the battle of market share is the battle of mind share.