Few concepts in banking have been the focus of as much investment and research as the ever-elusive branding campaign.
On Sept. 3, American Banker reported that as of May, financial institutions had spent $377 million this year on brand advertising by financial institutions. This impressive figure is probably only the tip of the iceberg.
Millions of additional marketing dollars will be spent to create and protect brand awareness. However, brand equity and loyalty are much more than smooth-sounding slogans promoted with advertising.
This significant and often underestimated aspect of maintaining a brand identity involves the tens of millions of dollars that will (or should) be spent paying off brand promises at the point of sale.
The key to developing a brand that not only is recognizable and familiar but also distinguishes the bank in the marketplace is to build distinctive value propositions.
This means sales and service processes that deliver specific, real, and consistent value at the point of sale. This means distribution channels whose functionality fits the brand positioning. It also means sales teams who make the brand tangible to customers every time they enter the channel.
Though the hype of brand-building generally centers on marketing and merchandising, real brand management starts by engineering brand distinctiveness into every process and system the bank uses to sell and service its products.
Though nitty-gritty brand management lacks the glamour of multimillion- dollar campaigns, a company's management style can be distinctive for customers and profitable for shareholders.
Brand management is about making choices. There are choices about which values to create and which to give up. There are choices about the style and scope of channel functionality, and in which customer needs really matter.
Brand equity is about aligning the factors that create a difference at the point of sale. Deciding what not to do is just as important as making large investments in functionality, information, and merchandising.
The branch system is one of the most important and difficult distribution challenges for companies that embrace brand distinctiveness.
Unlike other types of service providers-retailers, hotel chains, restaurants, and fast-food chains-banks have branch networks that serve an infinite number of customer segments each day.
Banks can make the value proposition distinctive only if they are willing to make choices about how they want sales teams to spend their time and whom they want to serve. Until recently banks were not forced to make these choices.
However, building brand equity and distinctiveness means doing the right things extraordinarily well and eliminating activities that confound the value proposition.
The first step in establishing the value proposition is to understand the operating and sales characteristics of individual branches. This sounds easy, as there are large numbers of people throughout the industry whose main concerns are branch activities.
However, with the size of many networks and the enormous change in operating practices, few key decision-makers actually have hands-on knowledge of the sales and service activities in individual sites.
A recent client study by Furash & Co. showed dramatic differences between branch managers' priorities and what actually happens at the site. Branch managers believed that 80% of branch staff time should be spent on sales, but in reality, they were spending just 24% of their time selling.
To adopt new models, banks must start with an analysis of how work is managed and organized at the site. There needs to be a strong fact base of knowledge rather than theories about how it is supposed to work.
Bankers have to understand the details of the branch environment. How do platform sales and service representatives actually use their time? What is the nature of the work that is done in the site? Is technology used to maximum advantage? What are the training, motivation, skills, and experience of the people who do the jobs?
Though this is an arduous task that requires analysis of large amounts of data, it can have immediate and important paybacks. When a survey of this type is conducted, best practices are uncovered across a broad front. It's simple math.
If Ms. Smith can generate twice as many accounts of higher average dollar amounts than Mr. Jones, who operates in the same type of market with the same site configuration and IT platform, then it's important to know how Ms. Smith uses her resources. Systematic identification of best practices in resource management paints a compelling picture of what mere mortals can do with the same set of resources and constraints.
Benchmarking best practices is only part of the story. The challenge in brand management is to combine financial goals and constraints, operating competencies, and competitive positioning into a look and feel at the point of sale that is both distinctive and replicable across the network. It requires building the point of sale motor that burns resources efficiently while optimizing results. As with most machinery, the design must fit the goals.
Unlike Gillette's fully automated assembly system for its new razor, the customer and the sales team are integral components. Thus, key aspects of brand value creation center on the human resource practices and sales culture in the site, and the bank's ability to shape customers' expectations of what to expect when they come to the site.
In short, brand management in financial services means designing and managing the details of execution. The best manufacturers recognize the importance of execution excellence, and they foster an industry of industrial engineers and quality-management professionals.
Is consumer banking so different? Only in some ways. The sales and service teams make more of a difference.
Premier manufacturers understand the value of patents in protecting both ideas and brand identity. They patent processes and techniques that customers (and competitors) can see, but they cloak process management techniques behind the scenes, attempting to create competitive advantage in secrecy. Is it any surprise that no one may visit Gillette's new plant, and that its razor design is patented?
It is difficult to adapt this model to a highly regulated and commoditized industry.
However, if the products, IT resources, and channel capabilities are virtually the same for all competitors, how do you create competitive advantages that are not obvious to the customer or competitor? Increasingly, the answer lies in the way companies cultivate effectiveness within their work forces.
Research conducted by the Wharton Financial Institutions Center proved that when banks minimize the variation in their processes, align them with strategy and IT functionality, and then focus on human resources practices, they are more efficient, have higher returns, and garner higher customer satisfaction marks. Wharton's research has shown that when large banks make mistakes, the customer often believes it is the fault of the bank processes. When they do a good job, customers believe it is the individual who made the difference.
We adapted this research to our practice with similar results. Well- aligned processes and IT capabilities can generate even higher levels of productivity and customer satisfaction. The addition of thoughtful human resource practices to the production equation is integral to a successful process and capability evolution.
Few banks focus on the enormous opportunity to create distinctiveness through more creative human resource practices. This emerging area holds great promise and great challenges.
Many thoughtful companies will invest enormous sums to create brand awareness and equity. But the jury is still out on whether branding is profitable, or even possible, in consumer financial services.
If branding is possible in consumer banking, the key to developing sustainable brand differentiation lies much more in the way sales and service are engineered and executed than in any amount of media spending.
