by James Cerruti, Executive Vice President and Managing Director of the BrandLogic Brand Strategy & Research Practice. The following article, appearing in Vision 2010, was published in conjunction with this year's SIBOS Conference, the world's premier financial services event.

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.

In this article we will explore why brands matter in financial services, how their role has been changing, and the competencies required to create and sustain competitive brand advantage and the implications for business strategy going forward.

Why have corporate brands come to matter so much in financial services? Much of the answer to this question lies in the growing understanding amongst 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 brand 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 those days thirty years ago 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.

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.

Partly in response to the new emphasis on intangible assets, the brand consulting industry (as opposed to its precursor, the corporate identity/graphic design industry), came to the fore during the 1990s to address the need to bring diagnostic, analytical and financial measurement tools and techniques to bear on managing this large – but still nebulous – category of intangible assets called brands. Since then, an evolution of understanding about the role, influence and monetary value of brands has been occurring.

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 ever present “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 VISA brand; and

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 renowned “Priceless” campaign used to great effect worldwide.

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

Looking ahead, there will be (as always) internal battles over strategic direction and investment priorities. However, experience gained over the last few decades has clearly shown that the importance of brands in financial services markets cannot be ignored. The answer to the question posed by the title of this article is clearly that brand management is indeed a strategic necessity today and not an area of optional investment. In closing, here are a few thoughts about what’s needed to properly manage your company’s brand for financial success:

- Recognize and embrace the full complement of skills now needed to achieve excellence in brand management from the analytical to strategic to creative competencies.

- Assemble a crack team to manage the brand, or brand portfolio, performance to the highest standards.

- Achieve and sustain strong brand relevance with customers; brand differentiation is not enough.

- Discover the right concept and sustain investment behind it over an extended period of time, but be prepared to modify or alter course based on shifting customer values.

- Drive the brand concept through to the experiences delivered to each stakeholder group not just communications.

- Ensure brand strategy is part of the business strategy across the organization.

- Put in place the metrics to measure market and financial performance of your brand(s).

 

About the author:

James Cerruti

Executive Vice President and the Managing Director, Brand Strategy & Research Practice
James brings to his senior role with Brand Logic over 20 years of experience in leading strategy, marketing and brand consulting engagements, in North America and worldwide. His consulting career includes executive posts as the President of Vivaldi Partners, a New York City-based marketing and brand consultancy; as one of the founding partners of FutureBrand, and as a Director with Coopers & Lybrand. His numerous brand strategy clients have included: Allianz, Bank of Montreal, CarlsonWagonlit Travel, CNA Financial, Deloitte, Deutsche Telecom, Dun and Bradstreet, First Union, FleetBoston, HyundaiKia Motors, KPMG, MasterCard International, Merrill Lynch, Olympus, PNC Bank, PricewaterhouseCoopers, RBC Financial Group, Remy Cointreau, Scudder Investments, Siemens, State Street Corporation, Telefonica, US Bancorp and Zurich Financial Services.

James holds an M.B.A. in International Business from the Monterey Institute and a B.A. from Antioch University. He is fluent in Greek and conversational Spanish and French. His work has been published in the Journal of Business Strategy among others.

About SIBOS and Vision 2010
The SWIFT International Banking Operations Seminar known as SIBOS is the world's premier financial services annual event. It is  sponsored by SWIFT (the primary standards setter for international payments and securities clearing systems). SIBOS conferences are  attended by executives from SWIFT member institutions (over 8,000 worldwide) and its broader community of interest from around the world. It is the leading international forum for airing and discussing issues facing financial services participants, especially as regards international payments and securities services. Vision 2010 is the annual  publication of  SIBOS received by all SWIFT  members, as well as members of the broader involved community of corporations and regulators around the world.