Brand equity is well-trod territory in many industries. A notable exception? Retail banking.
It’s not that banks don’t have brand equity; rather it is that the brand equity of the banking industry overall – and key individual players – diverges significantly from what it could be. Let’s remember that brand equity is strategic, an asset that can be the source of competitive advantage and derives from a customer’s trust and loyalty. So, it is no surprise that customers increasingly associate banks with less-than-extraordinary levels of service and innovation. The recent Millennial Disruption Index, for example, placed the four leading banks among the 10 least-loved brands.
Strong brands command higher loyalty rates and research has shown that strong brands generate three times more market share than brands with moderate reputations. Imagine the change in customer loyalty and satisfaction if banks were to significantly improve their reputations and increase customer trust.
Banks have typically followed a product- and channel-centric business model where customers were primarily viewed as consumers of different banking “products” needed at specific “life-stages” that can be sold through “channels” – mainly branches. Once customers are acquired at one of the life-stages through one of the channels, the cross- and up-sale engine gets deployed.
The problem is that the product-centric nature of their business has prevented banks from creating meaningful relationships with customers. A strong brand has a relationship with its customers but, typically in banking, a brand is nothing but a “name.” The challenge for banks is to both “stand out” among their peer group of traditional banks and “stand up” to disruptive startups.
Here are five steps to achieve those goals:
Identify and align on priority customer segments. The reality is that most banking segmentations fail today because of a heavy emphasis on affluence. Affluence is only one dimension of a more complete (and actionable) view of current and potential customers. Having a needs-based segmentation of consumers to understand their differences, attitudes and motivations helps to prioritize and align products and services.
Clarify the brand frame of reference and understand the consumer’s purchase process. A very important second step is establishing the context within which the brand really matters. It’s a straight-forward process, but one frequently overlooked and requires answering the following questions: are banks competing on security and financial returns alone, or are they competing on convenience and control, or yet some other set of consumer benefits? Complementing those insights with a deeper understanding of the consumer’s path-to-purchase and how much attrition vs. loyalty happens along the way is also critical.
For example, how do consumers become aware of the bank? What kind of research do they do? What is their experience in opening an account? What are the keys to developing loyalty? How does performance compare to competitive brands? How successful is the brand in taking potential customers through all the stages without losing too many of them? Where is the leakage of customers and why? What encourages priority customers to get through all the stages? What specific attributes and features encourage this desired behavior? Note that this research may discover significant flaws with product or service delivery, which could require a redesign.
Refine brand positioning to align with revised market understanding. How do you create a strong brand? Based on needs of the prioritized segment, and purchase process, identify the relevant benefits that you want the brand to convey (functional, emotional and aspirational) and its identity (personality and characteristics). Then, make the brand unique and distinct from the competition. This is where most bank brands fail to deliver, tending instead to regress to the mean and mediocrity.
Develop the brand strategy and supporting marketing plan. What is the brand portfolio’s “Uber” brand, which refers to the umbrella brand, usually at the bank level? What then are the sub-brands and brand extensions at the business unit or product level or, put differently, the over-arching brand strategy? Treat the brand as a strategic asset by differentiating it compared to competitors, delivering more relevant benefits, using one of the following approaches:
- Umbrella Uber brand strategy. The bank should dominate a specific “brand equity territory,” for example, customer service or best pricing or convenience, each of which would require significant investments. This will also require differentiation within the product portfolio and service levels to cater to the different segments in order to drive relevance. A simple, transparent, uncluttered product portfolio will be best suited here.
- Split or tear apart the Uber brand into a portfolio of brands. For example, could there be a sub-brand catering to Millennials? Each brand should have its own distinct personality and each company distinguishes on its operating basics to drive focus and clarity for the core promise.
- An Uber brand with very distinct sub-brands that serve specific needs and/or segments, for example, a wealth management/financial planning service that has its own unique brand aligned to a segment. Another example is a payments service that is branded separately to cater to a specific payments need, such as person-to-person (P2P). This strategy rethinks the financial needs of today and creates new value propositions to align.
Define and measure against brand metrics. How will you measure the performance of the brand? An ongoing and periodic measurement of awareness, the purchase process, customer acquisition and experience is required in order to track performance of the effort. Some measure of reputation, trust and satisfaction is required within the overall measurement plan, such as a Net Promoter Score.
Essentially, banks must choose whether to establish a brand inclusive of several segments, focus on specific high-value segments or create sub-brands to engage segments beyond the reach of the main brand. Such decisions are critical to the future of every bank and must be approached with analytic rigor. Fortunately, modern Big Data analysis allows for behavioral and attitudinal demand segmentation, an approach that reveals the differences in customers’ demands and offers insights into what your brand could and should stand for to win the trust of customers and drive loyalty.
Mr. Gupta and Ms. Turner are Principals at The Cambridge Group, with offices in Chicago and New York. They can be reached at firstname.lastname@example.org and email@example.com respectively.