In the frenzy of bank consolidations through acquisitions and megamergers, are bankers destroying some of their most important assets- their brands?
So often, it seems, one brand is chosen as "the name" for a merged bank. Examples abound: Bank of America instead of NationsBank, Wells Fargo instead of Norwest, First Union instead of Signet or CoreStates. And there are more.
What causes this need to adopt a single brand identity? Is it based on diligent customer research? Or is it an attempt to appease the egos of senior officers and directors in order to close the deal?
Some argue that a single brand name is necessary to gain operational efficiencies and economies of scale. This argument is hard to accept. Even after operational systems are combined, activity is still tracked at the branch or unit level, and each of these may have a different identifier or name.
Others may suggest that having one name makes it more efficient to manage marketing campaigns and collateral materials. Yet they will also argue that there is a need to tailor information to be competitive within a specific market.
How much more complex is it to have a different name in one market versus another? Is it necessary to throw away the brand equity established for an institution and adopt a new moniker?
The answer is, arguably, no.
Consider the millions of dollars that have been spent to develop a bank's brand equity and image and successfully communicate it. Why squander this simply because of a merger or acquisition? Successful companies within financial services and other industries have successfully managed multiple brands.
First, it is important to understand the importance of a brand and the dangers that may be encountered when changing it, especially in conjunction with a merger or acquisition.
The brand is a promise to the customer. A successful brand means more than the price of a product or service or the slogan in the bank's advertising. It stands for the consistent delivery of tangible products or intangible services that the customer values.
The brand becomes the relationship bond between customer and company or institution. It has an emotional element that is hard, if not impossible, to duplicate. When viewed in this manner, the brand becomes an important link with the customer that cannot be taken lightly.
In a services industry, every encounter with a customer either reinforces or erodes confidence in the delivery of the brand promise. In banking, this may take place during a visit to a teller, a telephone call to customer service, or a request for a loan.
For a bank to maintain or increase its brand equity, all areas of the bank that touch the customer need to understand and consistently deliver this promise. The brand also creates an easily understandable image in the customer's mind that becomes associated with the brand and its value.
Time and again after a merger or acquisition is announced, we read in the press of anxiety and questions being raised in the minds of customers about the merging entities. We have heard about potential loss of personal service, the closing of branches, and even the loss of an icon or personality such as "the Boatmen's guy," who was integral to the brand image of St. Louis-based Boatmen's Bancshares before its acquisition by NationsBank.
Such concerns among customers, real or perceived, can be compounded by the changing of a brand name. This is not as simple as changing one's socks. It cuts to the core of the relationship that has developed between customer and bank.
Imagine for a moment how a customer would react if Chrysler put its name on all Mercedes-Benz products, services, and dealerships. No one would consider such a change. Yet it happens with banks all the time.
A number of potential issues and their impacts must be considered and understood before proceeding with a branding change after a merger or acquisition.
Which entity's brand message is more dominant and valued?
Do customers of the bank undergoing the name change believe the brand promise of the new bank?
How do customers react to their first less-than-superior experience with the new bank? Is it an "I told you so" that it is not the same as it used to be?
Which corporate culture is adopted, and how does this affect the customer experience?
How does the name change affect different customer segments-retail, small-business, commercial, etc.?
The name changes announced over the last couple of years lead one to question the net effect.
Norwest Corp. and Wells Fargo & Co., for example, were two strong regional banking companies with very distinct brand images. One has to wonder how Wells Fargo's big-city, technology-driven image and a heritage linked to the Wild West, stagecoaches, and Pony Express would be welcomed in Minnesota, with its rural roots and customary demands for relationship- type banking and service.
The key question is, will this be a successful transition, or does Wells Fargo run the risks it encountered in 1996 with the acquisition of First Interstate?
Another example of identity lost is First Chicago NBD Corp. after its acquisition by Banc One Corp. of Columbus, Ohio, now known as Bank One. Gone is the identity of the largest bank in the nation's third-largest city, the "city of big shoulders," known around the world as the home of Michael Jordan. What image does Bank One conjure in one's mind?
By contrast, Citigroup was announced as the umbrella organization under which the Citibank, Travelers Insurance, Salomon Smith Barney, and Primerica Financial Services brands continue to exist. Synovus Financial Corp. of Columbus, Ga., has acquired a number of banks in the Southeast and has intentionally maintained their identities to preserve a community banking flavor and retain customer relationships.
Outside the financial industry are many examples of how brands have been retained after mergers. Philip Morris bought General Foods and Kraft Foods in the 1980s. Neither adopted the Philip Morris name for its products. One can still buy Kraft macaroni and cheese and General Foods international coffees.
An example of managing different brands for the same product line in different regions of the country is McCormick and Schilling. McCormick bought the Schilling spice company in 1947, and ever since they have maintained separate brand names, McCormick in the East and Schilling in the West. The ingredients and packaging graphics are essentially the same, yet the merger let them become the largest spice marketer in the United States.
Is there a lesson to be learned when two strong regional banks combine? In the automobile industry, General Motors bought Saab, and Ford bought Jaguar. Yet there is no attempt to put the GM or Ford logos on those acquired brands.
Before a merged or merging bank leaps to the conclusion that it must change names, it should measure the strength of the brand image and brand equity for each bank across all current and target customer segments, measure and understand the regional brand strengths and weaknesses of both banks, explore the history of the two brands and how they changed over time, measure the financial value of the two brands and acknowledge that some value would be lost with a name change, and understand the resources required to maintain and strengthen the chosen name and make it fit with the corporate mission and vision.
Should a decision be made that a name change is appropriate, a migration strategy should be developed, based upon a clear understanding of the current position of the brand and the desired position of the new brand. Action should be taken to influence customers' perception of the brand. The decision should be based on sound market research, not just the timing of branch closings or the change of signs at branches and offices.
Ask this question: "If I have a loyal customer who has no reason to switch to another bank before any merger or acquisition, why would I want to suddenly provide that customer with a reason to consider switching because I've changed his bank's name and identity?"
Taking these steps and considering the full range of options can help assure that a merger's value is not diluted by arbitrarily discarding a most valuable asset.