Key Components in Brand Development

Bank and credit union executives today believe they understand the value of strong branding, even though the return on investment (ROI) of branding is difficult to measure. Measuring branding effectiveness is pretty simple; the institution is consistently successful at acquiring and retaining customers, or it is not.

The trick is to understand what goes into building a successful brand. Basically, there are two ways to do this: fast – think Southwest Airlines and Ally Bank – or slow – Walmart, Toyota and Rolex. The biggest distinction between the two is how much money is invested in a condensed period of time. But there is more to it.

Probably the most important concept for small to mid-size banks and credit unions to understand is that branding is not a marketing activity. Marketing can deliver the message to be sure, but the brand itself must be built on a foundation of good strategy, good policy, good execution and good customer-facing culture. These major operating components must measure up to superior value to build a strong and positive image that attracts new customers and builds profitable relationships with existing ones.

This takes me back to a foundational principle from The Service Profit Chain by James L. Heskett, W. Earl Sasser and Leonard A. Schlesinger, a book that was published in 1997 but still eminently useful today. The authors posited that customers continually calculate the value a company delivers based on four basic variables:

• The basic utility of the product or service – does it work the way it is supposed to work?
• The actual personal satisfaction with the purchase process and after-sale service – this is a combination of process efficiency and personal attention;
• The actual dollar cost of or return on the product – pricing policy;
• The human cost involved in the purchase and ownership of the product. 

Here’s what this concept looks like viewed as a mathematical equation. To build a strong value-based brand, the institution needs to think about all four factors and provide the best combination possible for the customer. The formula includes utility, price, personal convenience and process quality. The worst possible combination is striving to be the best in all component areas.

Customer focus groups (as well as personal experience) have led me to believe that customers selecting financial services providers are looking for accuracy, price and convenience. Younger demographic groups do not always equate convenience with a branch close to home or work. We all know there is a sea change in progress related to delivery and payment systems usage that favors remote functionality. Branches are fast becoming acquisition and new customer boarding facilities.

So, to cut to the chase, here are a few thoughts from my experience. The list is easy but the execution takes discipline and consistent application and performance:

• First, start with some self-examination. It is essential to be able to articulate the purpose of the organization as it relates to its customers: who are we and what do we do for our customers?
• An effective brand must be based on a solid set of corporate values that align with that purpose. Everyone in management and on staff has to live the values every day for the customer to see the difference. Everyone must walk the talk and senior managers are not exempt.
• Make a conscious decision about which value components you want to own and will spend time and money on. If you decide on product innovation (enhanced utility) and customer-friendly processes, you can actually trump price, but you had better be committed to innovation and process improvement. If you are not, price is all you have, which means you must be very focused on cost control.
• Management and staff incentives have to be aligned with the value proposition. If you talk a lot about service quality but reward staff only for production volume, unintended consequences arise.
• Brand messaging has to be consistent over time. That means devising a strong brand promise and message (based on your values) and sticking with it. Get professional help if you need it.
• The most important point is that you must perform on your brand promise. There is no substitute for consistent behavior toward customers. 

In my experience, most financial services providers do not give these basic steps nearly enough consideration, time or investment. The banks and credit unions that steadily grow and proposer are the most consistent and transparent in their dealing with customers.

A word about trust: America’s trust level in financial providers is rock bottom and continues to deteriorate according to the Gallup organization. The 2012 ranking of banking is just above that of the Federal government and the oil and gas industry – third from the bottom of the list. Banking also suffered the worst point drop of all industries in 2012.

My advice is not to get too bent about the data. Concentrate on what customers want and let the trust build back over time. Recent focus groups indicate that customers are strongly repelled by banks and credit unions that talk about trust. Don’t go there. Invest the right amount of time and energy into finding out what your desired customer wants and consistently deliver it.

Mr. Thames is a senior director with Cornerstone Advisors, Inc., a Scottsdale, Ariz., based consulting firm specializing in bank management, strategy and technology advisory services. He can be reached at [email protected].