Principles of Financial Services Branding
By Interbrand


1. Introduction

Traditionally, branding is a concept associated with physical products and consumer packaged goods companies.
A quantum leap is occurring in the influence of brands in financial services. Mega merger mania and global deregulation is driving the rise of global brands.
Switzerland-based bank UBS AG now dwarfs its local competitors and London-based bank HSBC Holdings plc is re-branding all its global retail operations under one corporate brand.
In the UK, market shifts such as the increasing consumer interest in financial decision-making and the Internet as a channel, are forcing companies to invest in brand building exercises with consumers.
At the same time, powerful consumer brands such as Virgin and Sainsbury's in the UK have successfully launched financial services with no previous experience, but with loyal consumer relationships.
Branding is transforming the way financial services are communicated, just as surely as IT systems are transforming the way banks do their business -- and assisting new brands to set up banking without branches.
How is that transformation reflected in the way financial services companies are defining and managing their brands and their businesses for the future? Interbrand conducted a survey designed to answer that question.
We asked 24 financial institutions around the world how their principal customer brand is used and managed, both externally and internally.
The answers reinforce the increasingly held view that the brand is fast becoming the major competitive asset for financial services companies.
But more importantly, the answers also show that the role of the brand within the management of business is changing dramatically and the way businesses operate is changing as a result.
Although some long-established banks and insurance companies still see their brand merely as an aid to awareness and recognition, the new entrants and those institutions that are radically transforming themselves put the brand at the center of their corporate strategy.
This means they are aligning all their communications, operations and systems to their brand mission and values. In addition, they are working to make all of their employees effective ambassadors for the brand.
These companies say that the brand symbolizes all that makes them different, so they are trying to ensure that their individuality is transmitted in all their activities.
They are taking the same stance as Kenneth Chermault, Vice-Chairman of American Express, who said in a recent interview, "While there are many directions a financial services company can go today, we will only do that which supports the growth of our brand."
In other industries it is well accepted that putting the brand at the center of corporate strategy is critical to success: BMW, Coca Cola and Tesco are good examples.
Our survey indicates that some financial services companies now take that line and are working to make it happen.


2. Emergence of Branding

The Changing Role of Brands in Businesses

The changing role of brands from a marketing tool to an organizational principle for business is part of an historical trend.
Brands were first regarded merely as trademarks (brand names and logos), which differentiated one product or service from another.
This concept of brand differentiation was then extended into whole visual identity systems with guidelines for everything from packaging to advertising.
The idea was always to differentiate the look of the product.
More recently, it has been recognized that brands define ongoing relationships through the power of their personalities and values, which further differentiate the branded products and services from their competitors.
Initially, only the customer relationship was considered.
Now, the leaders in brand management recognize that brands define relationships with all their key audiences -- notably investors and employees.
They also acknowledge that relationships and values relate to behaviors.
This means that in the best managed brands, the brand's values are accepted and practiced by the workforce, particularly in service businesses like travel, hospitality and, banking and insurance.
The employees have a relationship with their brand that is the counterpart of the intended customer relationships.
This recognition that brands now serve as much more than just an identity system can be illustrated by the concept of the "brand iceberg."
Like a real iceberg, only a small proportion of the brand's mass and power is visible.
The rest is intangible and hidden.
But effective brand management requires attention to the hidden brand elements as much as to the visible ones.
The survey respondents who are most advanced in their brand thinking endeavor to manage the brand's identity.
This is not just through its visual expression but also through intangible elements such as proactive investor relations and employees who deliver the brand values in customer interactions.
Consequently, they ensure that all the interdependent elements of brand management have been revised to reinforce the brand strategy.


3. Four Branding Stages

The survey responses show that there are four clear types of brand use among financial institutions around the world.

- Stage 1: Visual Identification
- Stage 2: New Subsidiary Development
- Stage 3: Catalyst for Corporate Change
- Stage 4: Centerpiece of Corporate Strategy

Each stage builds to the brand-centric strategy evident at the fourth stage. The key difference between the first type of brand use and the others is that at the visual identification system level, the brand is externally focused only and little attempt is made to incorporate any core brand values within the management of the business itself.
At the other levels, a greater or lesser effort is being made to address and inspire the workforce and other audiences (such as investors) through the brand.
At the second and third stage, there is an active attempt to inculcate the brand values into employees' working approaches.
At the fourth stage, the values have been integrated into the business processes and into corporate policies.

1. Stage 1: The brand as a visual identification system

Among our survey sample, a clear brand architecture or hierarchy and a carefully protected brand identity are universal.
All had a well-defined brand name and visual identity that is familiar to both customers and non-customers.
Every organization has someone dedicated to overseeing the expression of that brand, ensuring that it is not distorted or wrongly exploited.
A sustainable brand must be clear, consistent, unambiguous and protected. For the companies who are at the first level of brand development, visual identification is the only role described for the corporate brand.
These companies have traditionally placed a lower priority on developing and associating values with the brand and have focused on it principally as a naming device, which raises customer/prospect awareness.
Consequently, they have left much of the brand's potential value unused by not clearly defining a brand personality or a relationship with all stakeholders and employees.
Several respondents from bank marketing departments highlighted the contrast between marketing and banking mentalities as the principal cause of the limited use of the brand.
As one put it: "Marketers think laterally and in color.
Bankers think only in black, white and grey." Further discussion clarified this contrast of mindsets -- if revealing some sweeping generalizations.
Marketers are orientated around customers and want the bank's services to address their differing needs and preferences.
Bankers are orientated around their systems and procedures and want to match customers' requirements to those constraints.
Clearly, these two attitudes will trigger very different types of customer relationships - and hence distinct brand personalities.

2. Stage 2: The brand as focus for stand-alone product development

The second type of brand use we encountered in our survey separates the operating brand from the master brand.
The established corporate brand identity is reserved for the traditional offering of financial services and a new daughter brand is established for a new type of service such as telephone or Internet banking.
The rationale for this strategy appears to be that while the personality, style and culture of the overall organization is too entrenched for a radical change, a new service can be developed which is managed in a completely different way and kept separate from the parent.
In each instance, the new sub--brand is an integral part of the intended relationship between the brand and its stakeholders.
The survey reveals that in these cases the corporate brand continues to be confined to a name and a visual identity for external communication, as described at stage one.
However, in the telephone and Internet-based operations, the sub-brand is heavily used for both internal and external explanation of the service and is seen to be central to the development of the new business.
It also enables the new service to be strongly differentiated from the parent organization and brand.
The critical change occurring is that the operations staff (bankers) of the new service, and not just the marketing staff, sees the brand as conveying the underlying service promise.
The brand communicates the values and nature of the service and the nature of the relationship between the brand and the customer. In so doing, it is also informing employees about what they should seek to deliver to customers and encouraging behaviors that reflect the new sub-brand's values.
The difficulty these new branded services face is that they remain part of a parent institution.
The organization infrastructure, such as systems, human resources and premises, is often shared with the parent company, for whom the new organization's brand values have no currency.
There are two ways to resolve this difficulty.
One is to separate the sub-brand completely from its parent and give it its own premises, HR policies and tailored IT systems -- all of which are aligned to the brand vision and values.
The other is to re-align the corporate brand so that its vision and values -- and consequently its policies and systems -- are consistent with those of its successful sub-brand.
The latter approach is obviously the better way to capitalize on the experience gained in the new operation.
This is particularly true if the sub--brand is part of a broader strategy for transition from product to customer focus.
However, it is a much greater organizational challenge.
As one survey participant commented, "internal jealousies and rivalries often hinder the transfer of best practice between the parent and the new brand."

3. Stage 3: The brand as a catalyst for change

The third type of brand use is seen among financial institutions who are using the corporate brand as a catalyst for a significant organizational and cultural change program.
The companies in this group have identified a need to improve the competitiveness of their service -- primarily though raising their standards of customer service.
They have also recognized that the powerful retail brands entering the market are doing so on the back of their association with value and consistent service.
So they want to build their brands to compete more effectively.
They know that their brands have high awareness, but need to convey stronger relationship characteristics of quality customer service and personality if they are to resist the competition from new entrants.
In this third type of brand use, the brand is given a more central, strategic role in the parent business than in the other companies discussed so far.
It is positioned as an emblem of the vision and values of the whole company and is used to emphasize the importance of customer relationships to the business.
It is used as much to motivate staff as it is to communicate with customers and it is managed by a cross-functional team who have a long term, business-based perspective on its development.
This is a transitional stage of brand development.
The companies involved all intend to move to the highest level of brand management, placing the brand at the center of their business strategy, but acknowledge that the sustained shift of values, culture and behavior will take some time to achieve.
The critical issue for these organizations is whether they can sustain the momentum behind the new brand-driven culture until it is universally accepted. It is harder than setting up a new stand-alone service with a sub-brand, but has a much higher pay-off, since it will align the whole organization.

4. Stage 4: The brand as the centerpiece of corporate strategy

About 25 percent of the companies surveyed describe a management structure and range of activities which indicate that their master corporate brand is at the center of their business strategy.
In these companies, the CEO and top team developed and agreed on the corporate brand strategy and positioning at the same time as the business vision and strategy.
The brand has become the embodiment of the company vision and direction and the brand mission and values serve as the lenses through which proposed changes and improvements are filtered.
These companies have a brand-driven organizational infrastructure with brand-committed senior management teams leading a workforce who live and breathe the brand vision and values in their regular activities.
They also have all the features observed in the second-level companies such as stand alone sub-brands and companies going through organizational transformation and have been maintaining these disciplines for long enough that they have become part of the intrinsic fabric of the company.
One of the respondents in this group commented that his management's view was that: "Building a differentiated brand is the only strategy that will lead to long- term value creation" as well as assisting the success of other acquisitions and process improvements.
As a consequence, the chief executive and the senior management accept responsibility for the brand's performance.
So do their individual departments and most of the staff.
The brand development team includes service, operations and sales people as well as marketing.
Brand managers share responsibility for customer satisfaction, internal communication and monitoring/evaluation of the brand.


4. Conclusion

Key Lessons for Managing the Brand

What are the critical actions for financial institutions that wish to maximize the value of their brands?

- Understand and bridge the gap between banking and marketing mentalities by establishing the financial value that brands bring to the business.
- Demonstrate ongoing, visible commitment to the brand across the whole senior management team.
- Align internal communications with brand values. Make the message meaningful and inspirational. Repeat it often and through multiple media.
- Manage the brand with a high and wide degree of participation, but control it centrally until the brand values are second nature to all.
- Build the brand philosophy and values into recruitment, training and HR practices as well as business processes.
- Measure brand performance in a manner that encourages customer bonding and not just awareness. Use employee performance appraisals to encourage behavior in line with the brand values.

Those financial institutions that have succeeded in building a powerful corporate brand have done so through strong management and have used it to generate greater shareholder value, including the power of the brand in mergers.
None of the companies we surveyed had experienced a major change in their ownership, but this is one of the increasing trends in the industry.
This suggests that if branding could be used to catalyze a successful merger, acquisition or, in some countries, privatization, it would drive the creation of substantially more value.

Conclusions - The Value of Values

The state-of-the-art in strategic management through the corporate brand sees financial services companies using their brand as the uniting symbol of their differentiated direction and values.
For the leading practitioners who are already there, the next stage will be for them to integrate brand values into their balanced business scorecards or other performance measurement systems.
They will set targets for managers and staff related to the delivery of brand values in their daily work and their reward/bonus systems will recognize achievement in upholding brand values.
The top-level brand practitioners in our survey are already tracking brand performance closely but none have yet tied these measures into their scorecards or bonus schemes.
Having implemented all that, these leading edge companies will then start to report externally on the performance of their brand, demonstrating publicly how they have increased shareholder value.
As long as shareholder value continues to be the yardstick by which equity markets evaluate company performance, and as long as intangible assets constitute over 80 percent of many companies' market value, there will be unceasing pressure on company directors in financial services to show effective management of their most important intangible asset, their brand.