Managing brand performance in financial services

May 5, 2010

In recent years, corporate brands in financial services businesses, both retail-facing and B2B, have become a major factor in the attraction and retention of clients, talent, partners and capital. In this industry it has not always been so, but in today’s crowded, highly competitive global marketplace, a strong brand can be a major source of advantage. Corporate brand salience has become particularly important in service industries, where economic value is delivered through intangibles and offerings are often seen as interchangeable. Why have corporate brands come to matter so much in financial services? Much of the answer to this question lies in the growing understanding among corporate executives of what brands actually are and how they add value. Not so long ago “Brand” might have been defined as “An advertised ‘promise’ linked to a logo and a graphic/visual identity.” This definition, while not entirely incorrect, misses the interplay between brand and business strategy, and the link to business economics. Today, the meaning of “Brand” is linked more closely to value creation: “A Brand is an intangible asset yielding economic returns that is used to attain, over time, a targeted reputation. This is accomplished through management of both the actual experiences delivered to stakeholders and the visual and verbal communications used to express the company’s aspiration and value proposition to these stakeholders.” The role of brands in overall reputation management has become much clearer in recent years. Brand management includes defining the targeted experience of customers, as well as capturing and conveying strategic intent to all stakeholders including clients and prospects; employees and the broader pool of talent; shareholders; and the broader investment community.

The rise of brands in the financial services industry
Thirty years ago, the corporate brand for a financial services company was something advertising people worried about, something external to the business itself. Corporate brand management in the industry essentially consisted of periodic – or more accurately, episodic – corporate brand image advertising campaigns, perhaps accompanied by a shift in visual branding elements. Funding justification was often based solely on what competitors were spending, rather than on actual return on investment. While these elements undoubtedly still factor into brand investment decisions, expectations have changed. Top executives are under pressure to ensure the corporate brand, or brand portfolio, is being managed carefully for shareholder return, just like other corporate assets. Today, industry leaders have come to understand that brands play a much bigger role in achieving and sustaining success than in the days when virtually all brand issues were delegated to the advertising department. This shift has come about in part because of the realization among investors that a growing percentage of a company’s financial value, especially in service industries, is accounted for by intangible assets rather than physical assets like real estate, plant and equipment. Intangible assets include the quality of client relationships, employees expertise, intellectual capital, proprietary software and, yes, brands. According to valuation experts, these intangibles can account for as much as 30% of the firm’s total value. The process of realization was accelerated by the rise of the service-based economy and consolidation within industries, not least in financial services, that occurred in the 80s and 90s, and which is again in full swing. The mergers and acquisitions that marked this period involved placing a value on intangible assets – which began to raise significant questions about, and subsequent exploration of, the value of brands. Today, it is understood that brand strategy and brand management are fundamental aspects of business strategy and business management. Brand decisions are no longer relegated to the advertising department; most CEOs, divisional heads, corporate strategists and even finance and accounting departments are now intimately engaged in managing the brand assets of their company.

Brand management as a source of competitive advantage
The importance of brands as financial assets and a source of financial success is much clearer than it was even ten years ago. Today the key question should not be whether a brand has real financial value, but rather what skills and level of investment are needed to manage the corporate brand/brand portfolio for optimal financial return. With this shift of focus there has emerged a need for developing and integrating skill sets that enable real and professional management of brand performance. Many companies are finding that achieving excellence requires a careful combination of both internal resources and specialized external expertise. The increasing professionalization of the brand management function has also led to the creation of the same sort of diagnostic, analytic and measurement tools around brand performance that already exist for the management of other assets and functions. One of the greatest challenges facing executives in this area is that good brand management now requires a wide variety of skills, from the creative to the analytical to the financial. This must be taken into account when considering the backgrounds of CMOs and brand managers, the composition of their teams and the overall governance of the function within the corporate structure.

Success through good brand management
Companies that take on the challenge of brand management early and effectively can reap significant competitive advantage and even create dramatic turnarounds in market position. Two excellent examples in the financial services industry are Mastercard and Dun & Bradstreet. Both focused investment and top talent on driving brand performance for competitive advantage. These examples have been chosen not for their currency but for their longevity of success: the results of a good strategic move are often evident only over time, and continued investment in a winning concept is vital to success.

Mastercard vs. Visa
In the case of Mastercard, for decades the credit card company had struggled against its main rival, Visa. Visa had achieved and sustained competitive advantage over Mastercard by:

  1. Finding, keeping and investing behind a clear benefit of high relevance to cardholders at that time: ubiquity of acceptance, nicely captured in their “Everywhere you want to be” message

  2. Contractually obligating, unlike Mastercard, its card issuing member banks to invest a specified percentage of card revenues in building the brand

  3. Effectively relegating the Mastercard brand to a second tier among shared member banks through #2 and among cardholders through always positioning its brand in communications against “upscale” American Express and never directly against Mastercard

For two decades, the Mastercard team tried to break out of the “perceptual lockdown” Visa had managed to impose on the Mastercard brand. After many attempts to find an angle that could beat ubiquitous acceptance, in the mid-1990s the Mastercard team identified a fundamental shift in values emerging among cardholders that could open an avenue for their brand to beat Visa on relevance to consumers. That lever was a shift away from aspiring to live a rich lifestyle and using a “prestigious” card, toward enjoying the rewards of everyday life and using a card for everyday payments. The team realized that in this context the brand’s greatest relevance could be not its functionality (including ubiquity), but rather the authentic things it enables people to achieve in their everyday lives. These insights led to the emotionally compelling “Priceless” campaign. This brand turnaround resulted in significant share gains for Mastercard for the first time in years. It contributed to Mastercard’s successful IPO and the subsequent run up in valuation. Last but not least, least, it resulted in a copycat brand communications effort by VISA (“Life takes VISA”) indicating that Visa is now attempting to play catch up on achieving everyday relevance.

Dun & Bradstreet
The second example is a B2B financial information player: Dun & Bradstreet. In the late 1990s the company was facing a crisis of confidence among investors and demoralization among employees. The company had suffered serious declines in market cap associated with a failed diversification strategy and erosion of competitive position in its core businesses against lower cost, internet-based data providers. This situation led directly to the decisions to spin off non-core companies (including Moody’s, Donnelly and ACNielsen) and to recruit a new CEO and COO from American Express. These two new, highly brand-conscious leaders placed the revitalizing and leveraging the brand literally at the center of their turnaround strategy for the company. The new brand strategy refocused the company on its unique core strengths. D&B was shown as a business partner, not simply financial data source, providing the highest quality, most accurate and tailored information to ensure its customers feel confident in the decisions they make about transacting with other companies. The brand building effort was directed at customers, investors and employees alike. The turnaround in sentiment toward the company amongst all three groups was rapid and strong. The CEO and COO credit the rebranding program with consequent quadrupling of the stock price from 2000 to 2004 during a period when the S&P 500 lost value.

Implications for the future
In closing, here are a few thoughts about what’s needed to properly manage your company’s brand for financial success:

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