BRAND BUILDING FOR BANKING INSTITUTIONS – Advantages, Challenges Functions & Constituent Components

Posted: November 27, 2010 in branding, marketing

 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 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 ie 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 develop 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.

– Submitted by Shreye Mehtani
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