Four strategies for beleaguered banks
Dean Crutchfield Article, CMO Strategy, January 4th 2009, Advertising Age
There’s an old British saying that where there’s muck, there’s brass. Right now the muck is the Financial-services industry, and the brass is the massive opportunity (for CMOs) in the category for ground breaking branding and marketing—one that rivals the defining of the dot-com era.
Once one of America’s most admired and valuable industries, Financial-services has lost its luster and international standing, creating a multibillion-dollar brand vacuum.
There was a saying in the 90’s that 1 out of 2 of your customers would change their spouse in a lifetime, but only 1 in 6 would change their bank. You were assured that your customers would simply hand over their money if you promoted a few attractive services. But trust is earned, and successful brands are a story well told. The category has exhausted both. Many financial brands seem vacuous—nothing more than graphic identities, your reputations hollow shells. Now you must make a case for why consumers should even consider you in the first place. That’s what makes the category so exciting from a marketing standpoint. It’s time to take a hard look at advertising, brand consulting, change management, digital, direct marketing, innovation, media, public relations and retail and their roles to reinvent the industry.
Wall Street has a saying that when you need to reduce risk you need to “get closer to home” and Financial-services companies would benefit by heeding this advice and focusing on four keys to success in this new era:
A clear idea and proposition
True values extend far beyond the bounds of what function Financial-services companies actually perform. Instead they’re anchored in human emotions, concerns, aspirations and ambitions.
If a Financial-services “brand” stands for something powerful, people will buy into you. New rules are needed to permit new forms of endeavour to define what direction the industry needs to move in and what are the challenges your brands need to overcome. To understand how much your current brand must change and what its role is in the business, there is a need to redefine your brand’s meaning by looking under the hood and identifying what you really are and why you’re in business. This is how “who you are” connects to “what your customers need.”
This is not cooking water – it will provide a ‘blueprint’ of your brands future, your organizational style and the direction you need to take for all brand actions and communications. Questions you need to ask yourselves include if your company will engage in more “reciprocity” with customers? Do you allow customers in, reveal new strategies and admit to mistakes in a clear and concise manner? Will you attempt to undertake initiatives that appear generous, that offer clear messaging and transparency? Are you able to suggest an initiative for customers to try, one which provides a new insight? Can your brand offer customers the opportunity to actively participate?
A brand positioning, with integrity, is communicated internally and externally; it helps create a preference (for the business) to your employees and customers, it builds loyalty and can drive growth, force change and create innovation.
An example of how to break the frame and “sustainably” build a successful $7Billion sub-prime business is Grameen Bank. By focusing on the idea of solidarity lending, Grameen Bank has helped break the cycle of debt for nearly 3.5 million sub-prime members and has a loan recovery rate of over 95%! In April 2008, Grameen Bank opened its first branch in New York and plans for more.
the right kind of leadership
As Jim Collins writes, “All good-to-great companies began the process of finding a path to greatness by confronting the brutal facts of their current reality.” As CMOs you have to recognize that high performance takes humility. These times call for leaders who can hold others’ fears, and foster collaboration and commitment across the entire enterprise.
Accomplished CMOs know their strengths and surround themselves with those who shore up their weaknesses. To evaluate humility they need to define their own rock hard beliefs, plan how they intend to lead, how they will prepare and handle the ongoing crisis and what will be the learning process to achieve quantifiable results.
American Express went against the grain when their CMO, John Hays made the ground breaking decision to help reinvent the business model of philanthropy (i.e. you can make money by doing good) by being the first partner of Product Red, launching the RED card in the UK in ‘06. Humility was required when allegedly the initial launch was nearly scuppered by the realization that thousands of potential new “conscientious consumers” were declined by the unwitting prohibitive rigidity of their UK membership application criteria, but was overcome by the sheer scale of the fanfare and global media attention.
recruiting and retaining talent
The integrity of a Financial-services brand is compromised through fear and those who espouse phrases such as “hiring freeze” and “natural attrition” should be fired. “People” are Financial-services greatest asset; the most important thing a Financial-services company can do is to have a continuous recruitment strategy in place—including success planning—that constantly searches for new talent with new skills.
Rebuilding a Financial-services brand that has integrity and transparency to your employees requires delivering short-term actions that can take the brand deeper into the employee relationship. For example, do you encourage a network effect in your call centers and customer services retail branches and promote peer-to-peer activity that enables employees to actively search for new talent?
The UK’s First Direct (one of a handful of sub-brands HSBC allows) is an excellent, profitable example of the nurturing of talent. Based around the idea that there was a better way to bank, First Direct launched in ’89 as the UK’s first “telephone” bank.
A key to their off-the-chart customer loyalty lies in their approach to hiring talent (actively recommended by staff) that fit the culture with a strong customer service mindset. The company urges its employees to interact with other colleagues to consider better ways to improve customer service. Its call centers always rank the highest in customer satisfaction surveys and has made First Direct the most recommended bank in the UK for the last 13 years in a row.
The culture to deliver value
Culture is the engine that makes a Financial-services company work. How do you separate value from commodity? There are two determinates of value creation in Financial-services: how tightly the ship is run and the closeness of the company’s relationship with the customer. A study by the American Marketing Association reveals it can cost five times more to acquire a new customer than to keep a current one. By retaining just 5% of your customer base can increase your bottom line up to 25%!
The service profit chain model (Heskett, Sasser, & Schlesinger, 1997) examines the relationship between organizational style, employee attitudes, customer satisfaction and sales performance in the retail-banking sector and proves that content employees lead to satisfied customers that generate better sales performance.
Evidently, the most effective Financial-services companies are built from the inside out by taking something that is already there and amplifying it, not by creating something new. The key is that the culture can communicate a unique position in the market place, so if you can’t build a unique advantage over the competition on what you sell, make the advantage how you sell.
In this regard, Goldman Sachs remains unique. For all the industry’s ails, it is still recognized as a gold standard in corporate branding with a true sense of “rigor” that so defines its brand. Its lauded extraction from over reliance on sub-prime months before the meltdown, consistently demonstrates its fleet of foot ability to make big decisions fast. It’s sense of purpose and its highly collaborative one firm culture delivers the powerful advantage to its reputation, marketing and sales efforts.
Now Goldman Sachs is a Bank; they have a massive opportunity to redefine what a global financial brand can be. If they can maintain that strong culture and sense of purpose that so defines them, they can take the lead in a category that needs redefining.
The most impactful way to maximize this massive marketing opportunity is to appeal to today’s consumers with a new approach built around “precision” marketing, “flexibility” of the products/services you offer and deliberate “reciprocity” in the relationship with your customers. The industry can easily capitalize on these more than any other category, but you need to demonstrate, not assert, that it will be delivered.