Before we discuss Marketing it is important to consider a bank’s brand, and ask “why is its brand so important to a bank?”
When a brand is well established, it summarises what a company stands for and establishes an emotional and non-rational reaction from a person seeing the brand. It doesn’t affect everyone in this way, but it will affect the bank’s target market (which is existing customers and prospects).
Because globalisation and technology increases competition, buyers have many options and this situation is known as a buyer’s market. Just churning out new products is no longer enough to differentiate itself: a bank needs to build a connection with its clients. This is achieved through its brand.
A brand is powerful when it gives prospects and customers the perception that it can answer a problem, an anxiety, issue, or deliver a dream. Some brands are even synonymous with their solutions, such as Gillette for shaving, Xerox for copying machines, and Coca Cola for refreshments. Other brands have unique characteristics for their products, such as Toyota for reliability, Jeep for endurance, and Apple for innovation and ease of use.
To achieve such an emotional reaction and recognition, the first step is for a bank to know and understand its customers, as we have discussed in previous modules. The bank needs to understand its target market as granularly as possible by identifying meaningful segments.
To understand its customers and target market, the bank must segment its customer base to a granular level that reveals its unique characteristics. A bank must then actively manage its segments to interact with customers in a much more focused way that improves the bank’s understanding of its segments and how to communicate effectively with them. This process of continually interacting, learning, and improving makes it easier to build and maintain their brand.
Another important concept to understand is that a brand will never be everything to everybody, no matter how successful such a brand is.
When a company extends the ‘brand umbrella’ to many lines of business or creates too many ‘line extensions’, it weakens the brand.
To describe a ‘line extension’, imagine a beer called Coca Cola, or an off-road car called a Bentley. Companies may launch new products in other business lines, but they will use another brand name and identity, sometimes referencing the main brand through the logo. Once a business extends its brand to any business or line extension, it will start to confuse the consumer on what the brand stands for, weakening it overall. It is fundamental for a brand manager to understand clearly what the key brand attributes are, the strengths, and how the target market of customers and prospects sees and perceives the brand. To have a strong and meaningful brand, a bank must focus its efforts on building and maintaining how the target market perceives it and avoid any distraction, as mentioned above.
The financial services industry is changing at a speed never seen before due to new challengers and also because of changes in compliance and capital requirements.
This is forcing institutions to react by reducing in size, geographic coverage, and lines of business. We are also seeing more and more specialised companies within the financial industry, and these challengers are coming with very specific roles to play, and making financial services easier and cheaper for customers. They are establishing very focused brands, all at the touch of a finger on a mobile phone.
The established institutions need to understand what their perceived strengths are, not the ones their executives believe they have. These are the ones that their target market understands and perceives. By knowing this, they can build their position in the market and their brand to ensure that they keep or gain market and value share. If the bank positions itself as a universal financial service provider (one that tries to be everything to everyone) they won’t be safe from the disruption. Bragging that they have the largest branch network or billions of assets won’t work either.