The Fragile State of Bank Reputations: Results from Our 2012 Study

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Trust. Admiration. Respect. Good feelings. The science behind the formulation of consumer perceptions about brands says these are the building blocks of corporate reputation.

So when was the last time you heard people use words like those to describe how they feel about their bank? For that matter, when was the last time they used them to describe the way they feel about somebody else's bank?

It turns out not to have been as long ago as one might think. In 2011, 24 of the 30 large banks in an American Banker/Reputation Institute survey garnered higher reputational ratings from consumers compared with the previous year. Even more impressive, two institutions in 2011, Harris Bank and Zions Bank, scored above 70 on our 100-point scale, crossing into territory that Reputation Institute, a reputation management consultancy, considers the difference between strong corporate reputations and merely average ones.

But this year, both of those banks are back below the 70-point mark, along with everyone else in the survey. The number of banks scoring below 60, a hallmark of a weak or vulnerable reputation, rose from six to eight. And that was before JPMorgan Chase set off the latest wave of public anxiety over banking with its headline-grabbing disclosures of recent trading losses.

Our online survey was conducted in January and February-too early to capture the impact of the JPMorgan Chase news, but certainly timely enough to measure the buildup of frustration Americans have been feeling toward banks.

If any of the initial anger over the financial crisis has dissipated with time, it easily has been replaced with more recent indignation over increased fees (both real or proposed) and over the interminably long wait for a recovery in the broader economy, with the heightened rhetoric of election-year politics only serving to fan the flames.

Consumers appear to have less patience now for distinguishing between big bank brands, except when it comes to differentiating between large banks and the very largest banks (since the inception of our ranking three years ago, the giants have consistently populated the bottom tier). Reputation scores for most regional banks, meanwhile, landed within a tight range of one another. With so few points separating the best from the rest, it looks as though reputation isn't the differentiator that some banks might have hoped.

There's an advantage, though, to a scenario in which you're tarred with the same brush as everyone else: it forces you out of a relative value mindset, which Reputation Institute's Anthony Johndrow says is exactly what companies need to do if they want to build a sustainable approach to managing their reputation.

"Banks are very competitive, so they tend to think of reputation as another chance to beat their rivals. But it's not a race, or if it is, then it's a very long one, especially given where banks are right now," says Johndrow, a managing partner at the firm.

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At its core, corporate reputation is the accumulation of feelings that come out of the direct experiences people have with a company, along with the messages the company puts out about itself and the messages others put out about the company.

Direct interaction-the experiences people have as a customer, investor or employee of a company-makes a big difference to reputation scores. Every bank in our survey was rated by at least 100 people who reported having some level of familiarity with the brand. But in cases where respondents reported having had a direct experience with a company, their ratings yielded reputation scores that on average were 10 points higher than the scores from respondents who had no direct experiences with the company.

Interestingly, the big, multinational banks in the survey, which tend to have weaker and more volatile scores, got an even higher lift than their regional counterparts when rated by people who reported having had direct experience with them.

Respondents also tend to rate a bank more favorably (7.3 points higher on average) if they have been exposed to the company's own messaging, through its advertising, marketing, public relations activities or social responsibility efforts.

But outside of their own financial institution, most people (75 percent) know about bank brands based mainly on what they hear about them from others, either in traditional media or social media venues, through family and friends, or in the advice they seek from experts. That kind of experience translates into a relatively tiny score lift of less than 2.5 points.

The math suggests that banks, like other companies, are best off focusing on their existing customer relationships. But Johndrow argues that in thinking about their relationships, too many banks are emphasizing the customer experience over customer expectations.

Customers these days expect companies-in banking or any other industry-to engage in citizenship, good governance and innovation, along with having solid financial performance and trustworthy products and services. Customer experience, Johndrow says, is a narrower concept that "does not address corporate behavior, which a broader reputation lens includes."

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Historically, the monoline credit card issuers ranked even lower than traditional banks in the minds of consumers when it came to matters of corporate reputation.

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Comments (2)
Can you share how many unique respondents' views were used for this survey and how they were selected. Am I correct in assuming they were not necessarily customers of the institutions they rated? Thanks, Gail
Posted by games | Wednesday, July 11 2012 at 3:56PM ET
Can you share how many unique respondents' views were used for this survey and how they were selected. Am I correct in assuming they were not necessarily customers of the institutions they rated? Thanks, Gail
Posted by games | Wednesday, July 11 2012 at 3:56PM ET
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