BRANDING IN BANKING

Branding has become a hot topic in banking. Banks of all sizes, including small ones, are investing much mental energy, thought and money in their brand. I find that ironic, since in almost all cases, when a bank gets acquired thei brand is eliminated almost offhand, implying that there is no brand equity in the bank's name and logo. This begs the questions: is branding a wise investment for all banks, or only for the very largest?

There is another question associated with the branding issue. As I head banks discussing their brand, they focus often on the look, the colors, the logo and the consistent application of 'look' standards to ensure the brand 'look' is applied appropriately everywhere. However, in a service industry, particularly one with such little product differentiation as banking, the people ARE the brand, not the logo or the color. While those are important identifiers in any branding initiative, they are much less relevant in service industries. Banks do not sell patented products, or hard goods. They sell, by and large, undifferentiated transaction, protection, asset accumulation and credit products where the primary difference is price, not features. There are exceptions to this statement, but it does apply to the majority of banks. The question is, why focus so much on the look, when the brand is created by repeated customer experience with bank employees?

The purpose of a brand is to ultimately create customer loyalty and be the first in the customer's mind when they consider the next purchase in your product offering. The typical steps to achieve this results are:

1. Awareness. In order for a prospect to become a customer and to develop loyalty to one's brand, they first need to know the brand exist, and be able to identify it. This is where the 'look' comes in, coupled with advertising and other brand awareness tactics. Knowledge is the first step, but it is not sufficient to change customer behavior and create loyalty. Example of this first step: recognizing the Wells Fargo stagecoach or the Citibank star when you see that logo as representing that particular bank.

2. Consideration. Once a customer or prospect develops awareness of the brand, their next step is to begin considering the branded company as they think about new purchases. Examples include thinking of the branded bank as a possible place to apply for a home mortgage or open a checking account, just because you know and recognize the brand, and believe it stands for something you look for in a service provider.

3. Purchase. Once a customer or prospect gives the bank consideration due to their awareness of the brand and what it stands for, the next step is to actually make the buying decision. This is the real purpose of the brand, but it isn't the final destination.

4. Loyalty. The ideal branded behavior occurs when the prospect not only becomes a customer by making a purchase, but remains one for future buying decision because of what the brand stands for. This coveted end result can only happen when the bank provides for a customer experience that is consistent with the brand promise. This is the tough part: good advertising and catchy brands can get the prospect in the door, but they can't keep the customer in. Retention and loyalty depend on how the customer feels every time they interact with their bank, by phone, in person or through other channels. Consistent brand reinforcement is the winning strategy. The problem is, it is extremely difficult to execute, since it requires effective execution across many employees and many times.

The value of a brand is so high when it achieves customer loyalty, that most companies work hard at solidifying their brand identity. Well-recognized brands like Coca Cola or American Express are worth billions of dollars, since they come with customer goodwill and future purchases. This is why banks look for establishing strong brand identity. They are looking for that customer retention beyond the industry's 18%-20% level (for checking accounts), since such retention improves today's and tomorrow's bottom line results.

The reason so many brands are left by the wayside when acquisitions occur is that, in many cases, they do not have enough loyalty to be worth keeping. Maintaining a brand is expensive in two ways: it is costly to produce separate stationary, signs, business cards etc. for a separate brand. In addition, it does not allow for full brand leverage when the holding company buys advertising, creates company-wide campaigns etc. A brand must be quite valuable to justify keeping after an acquisition. Most acquired banks can't make that claim.

What is special about those banks that have successfully developed their brand? Here are some thoughts, exemplified by two very different banks: Commerce of NJ and Frost of TX. Commerce is a new brand, 30 years old, the creation of a retail executive, and it stands for convenience. It is not location-specific. Frost is a 160+ year brand, and it is a Texas-branded bank.

1. Articulate the brand clearly. Many banks have a brand, but only few say unequivocally what the brand means and what it stands for. Most banks have the look but not this clear statement. As a result, both employees and customers are confused as to what the brand truly stands for. This is certainly not the case for Commerce Bank. Everyone I speak with knows the bank touts convenience. While this is not the only element in their brand identity, it is the perceived driver by their customers, prospects and competitors. Frost, on the other hand, is all about Texas Values. These values are embodied in everything Frost does, from recruitment to advertising, and appear everywhere in the bank's Relationship Book, which guides their interaction with all main constituencies.

2. Stay true to the brand and its values consistently. Commerce achieves this allusive goal by having extremely specific and explicit expectations regarding every aspect of its branch operations, look, merchandising, advertising etc. No element is too small to pay attention to, from fluffing their Commerce premium items to ensure they look attractive to leaving the computers and lights on at the branches at night to create the perception of availability (this on top of their extremely long open hours). The 'look' is augmented by a two day orientation program for all employees which ensures they understand what the customer experience is expected to be, as well as the special atmosphere Commerce is committed to creating in its branches. It's somewhat like Southwest Airlines - the product is delivered well, but the aura around it is more about 'fun'.

Frost pays similar attention to their brand elements, although they are less physical in nature. The branches do reflect the bank's Texas origins and values by their Texas flag, maps on the walls, boot cleaners by the door etc. In addition, and perhaps more importantly for Frost Bank, employees understand thoroughly how to interact with customers, their peers and communities. The bank's value system is spelled out with no room for ambiguity such that employees know how to serve customers 'the Frost way'. While they don't give the store away, they do create a sense of care and caring that is unique to the bank and that so many others try to emulate, both within and outside Texas. The reason this is so important to the bank is because it is an integral part of their branding strategy.

In both Commerce's and Frost's case, the brand is articulated very clearly and is supported by training, procedures, physical look, marketing initiatives and CEO blessing. As a result, both within and outside the company, the brand is identified easily and the Consideration element, the first step toward creating brand equity, is strong in their market. Some banks measure unaided awareness as an indication of brand recognition. They tout it as an indicator of their image campaign's success. Unfortunately, recognition is only the first step in brand development, and is only valuable if the prospect takes the next step, which is Consideration. Both Frost and Commerce have moved to that phase and beyond, as indicated by their ability to attract new customers and achieve significant year-after-year growth, coupled with strong customer loyalty.

The Frost and Commerce stories prove that there is no one path to a brand's success. It's hard to find two more different approaches to building brand identity. One, Commerce's, was determined before the bank was started, and has been the cornerstone of its strategy and success ever since, guiding branch openings, staffing decisions, physical configuration etc. At Frost, the brand evolved through years of existence, a strong family presence and the realization that the bank is committed to doing business a certain way, and will bring value primarily to customers who are looking for mutual commitment to/from the bank, relationship seekers, rather than transactors.

The way to cement a brand is by offering multiple images that reinforce the identity already created. This is why your Marketing Department insists on a compliance with their logo and other brand standards. However, as demonstrated by the two companies described above, it is the consistent reinforcement of the message through every possible means that cements the brand and makes it tangible for customers and prospects alike. The repeated confirmation of the brand promise by employees, facilities and advertising is the magic formula for success. At its heart, though, is the employee understand of what the brand stands for, and their commitment to execute on that each and every time they touch a customer, prospect, peer or shareholder.