Branding a Bank. Is Banking a Commodity? IS CVS a Commodity?

Paying Before The Pump. 

By Tom Dougherty

It seems counter intuitive to believe bank branding to be a vital element when trying to create value for what is commonly labeled a commodity product; however, your brand just may be the only market value you can claim. The battle for your “market share” of wallet needs to be fought with heavier artillery then mere banking benefits, and yet most banks and credit unions have thrown in the towel, competing solely on free checking, ATM fees, competitive rates and competitive pricing. When you brand a bank, surely this must be more than what current banks claim?

When you brand a bank look to other markets as a model
Banks need to be more than a bank

The financial services market place is littered with the wreckage of once-upon-a-time bank brands whose products became commoditized, surrendering the brand fight in exchange for product benefits (as opposed to brand benefits). Observe most street corners, and you immediately notice the once proud Exxon, Shell, BP or Texaco brands all selling “product” at the same price, hoping to lure customers with a commodity convenience store selling six packs of soda water or cases of discount-priced cigarettes. The battle no longer centers on margins in their core competency, but instead takes the shape of a shadow war over preference and total transactions. The branding differences are just not there anymore.

CVS Seems Akin To McDonald’s

Brands seem generic. Few invest in their brands beyond category benefits. In addition to banks, credit unions and gas brands — pharmacies have also failed to differentiate, substituting location for brand equity. The race is on for drug stores to expand into new locations and build bigger, more expensive superstores. Can you see how banks and credit unions have done the same?

On any given corner, three or four banks have build branch offices. There is no investment in brand, and consumers move loyalties like so many prescriptions and their patronage goes to the new and “nearest” drug store as soon as it opens. In short, the customer values location over brand equity, and there are now drug stores and banks on every corner and in every strip mall.

Something is wrong when CVS, Citi Bank, Bank of America and Wells Fargo seems akin to McDonalds. There are no branding differences. No personality. No Clarity. When companies try to brand a bank they miss the mark.

Consider the categorical trap of the gas station business for a moment. Brand identity and strategy beyond “biggest” is slim to none. They built their model around service stations where the brand’s value formerly took the form of the owner/ mechanic servicing the customer. As a result of the personal relationship, the consumer often secured a credit card for the brand even while traveling far from home. (Read about the pharmacy business here).

In order to brand a bank you need more than just a VISA affinity cardFurther down the road, Visa and MasterCard made the use of proprietary gas cards irrelevant and triggered the demise of the “service” station. “Fill only” stations introduced the hourly paid clerks instead of interested mechanics, and the entire market paradigm shifted. The “c” store profits account for the financial health of the average gas station. The key is not to allow this downgrade to occur in your business. Do not confuse the business of the bank’s business with that of the bank’s brand. From the vantage point of being brand developers, we see the same vicious cycle within automobile manufacturers and hotel chains: loyalty programs replace brand equity.

Fortunately, creating bank brands is not the province of simple minds. Brand equity is built around the precepts of the target market rather than financial product advancements and innovation. The advancements made to your banking service are what we call table stakes —requirements to compete in business, not the hallmark of brand equity. For example, table stakes for a hotel chain are spacious rooms, good beds, friendly service, fair rates and complimentary breakfast. Remember when hotels used to advertise air-conditioning and color TV? Amenities are table stakes as are change strategies based on segmentation.

The new breed of “suites hotel” advertises more space; high speed internet, complimentary breakfast and “managers happy hour.” These are not differentiating brand benefits because they reflect the value of the property and not the values of the customer. In Banking, table stakes are more of the same… free checking, convenient hours, convenient locations, many ATMs and competitive rates.

Where Is The Relationship?

When you rand a bank the customer and prospect are key
A relationship requires an emotional connection

Observe the automobile business as another source of lost brands. One brand (i.e. Dealer Family) may own half a dozen dealerships within a given geography. You might see ABC Ford, Toyota, and BMW all within a stone’s throw of each other. The relationship is not with the brand; it is with the dealer (sometimes). Most car buyers choose a style (like an SUV for example) and then shop all the brands to find the one they like best. There is little brand equity among any of the manufacturers. No wonder their stock is in the tank.

Brand a bank. A Good Example

Commodity productsBy you brand a bank,  your bank’s brand equity, everything sold or delivered holds more meaning. If you are Blue Rhino, for example, and your brand represents “a better way” and is positioned to provide guys with a stronger sense of control, then everything “Blue Rhino” has more meaning. Propane tank exchange represents a better way to keep your grill lit, and the brand is preferred by consumers over rival brands, their margins are greater and their distribution bigger. Blue Rhino realized long ago that they were selling more than just propane (a commodity) —they were selling a better way, and smart consumers continue to pay more for the actual brand. Stealing Share helped them deliver this brand to greater profits and greater demand.

Building bank brand equity requires knowing your customer as well as your financial product or service. It necessitates the understanding of the belief systems that drive banking consumer behavior and aligning your banks brand with these customer held precepts. It means viewing your competitive banking world without the preconceptions of your own paradigm. The biggest problem banks have when building their bank’s brand is getting the tried and true marketing principles to step aside in exchange for values that are important to your bank’s customers. Too often we assume what makes sense to us (our bank business) rather than taking the time to recognize what actually exists in the mind of the bank consumer.

Make Research Actionable

Powerful market research is often the meat of the financial services solution, but only if we ask the right questions. Our clients come to us (Stealing Share) for results, and for that very reason we do not ask questions to which we already know the answers. We never ask any question whose answer is not actionable. Knowing what to ask is a result of strategic work, a full third through our process and is not left to researchers. Our questions are designed by our strategists because we refuse to only know what is…we must know what can be. Only then can we begin to shape a bank or credit union brand that moves the needle. If commodity bank brands fail to differentiate themselves via their brand, they will continue to disappear in the banking haystack.

Supermarkets are in Trouble

Why Don’t Supermarkets Have Brands?

By Tom Dougherty

A maze. Branding a supermarketIt may come as a surprise to the category of supermarket chains to learn that almost to a fault, none of them owns a brand. They think they do, but they do not. The proof, as they say, is in the pudding. That is why we have so much consolidation in the supermarket category. Branding a supermarket must be difficult business as so few get it right.

The only reason to invest in the building and maintaining of a brand is to increase your preference or increase your margins. Against that acid test, supermarket chains come up sucking hind teat. There are a few major exceptions, and we will disclose them as we proceed, but the battle for supremacy in the supermarket gambit has come down to location, location, location.

Look around at your own neighborhoods and you will quickly see the reality of the situation. Supermarkets, like their poor stepsisters the pharmacy chains, are in a rush to build more and more stores. They realize that in order to dominate a local market, they need to be the closest purveyor to the shopper’s home. That is not exactly the pure definition of a brand is it?

The Supermarket Business Model Tells the Story

They recognize this fact in their bones which is why their business model has them scampering to build new stores as close as possible to developing residential areas. Yet, they pretend to themselves (and their stockholders) that they have a brand. To Harris Teeter, Kroger (which just acquired Harris Teeter as supermarket consolidation continues), ACME Markets, Lowes Foods, A&P, Pathmark, PUBLIX, GIANT, Win-Dixie and the Piggly Wigglies of the word I have a short and pointed warning… Watch Out! Wegmans is coming!

harris teeter Branding a supermarketHarris Teeter (recently ought by Kroger), for example, believes they have a brand. They believe they are “the upscale choice” but deep down they recognize the fallacy in that claim as they build more and more stores in more and more neighborhoods. They realize that their brand is not a destination, and that aside from the “brand” of habit, shoppers will not ride by a competitor’s store on a regular basis to shop at a Harris Teeter. They know that their store does not represent a “destination” — there is no sense of arrival, no sense of specialness and therefore no REAL brand.

Wegmans is a Juggernaut

Branding a supermarket is what Wegmans doesWhat makes Wegmans so formidable? They learned their brand lessons well and when branding a supermarket are playing brand hardball. Borrowing on the specialty marketers like Whole Foods, Fresh Market and Bread & Circus, and the upscale brands of Four Seasons and Ritz Carleton, they recognized that brands that differentiated the customer enabled these brands to become destinations.

Branding a supermarket as an experience and entertainmentThey became a magnet for those seeking specialness, specialty, high quality foods, and experience — within a geographic area. When the shopper believed they were a more discriminating shopper (what we call a Brand face), these shoppers were willing to inconvenience themselves by traveling a greater distance to satiate that self-identifying need.

They would also be willing to pay higher costs for that same self-identification. Remember that brand, the kind of brand that makes a category player a destination, is not a description of the store, it is the self-description of the customer — who they believe they are. The greater the store’s ability to satiate that self-description, the more powerful the brand. Does the Harris Teeter or Publix shopper believe they “have arrived” when they shop?

Do they see themselves as smarter, mores discerning and erudite? Not according to Harris Teeter or they would not need to build a new market every 1.8 miles! Wegmans HAS a supermarket brand.

Look More Closely

Wegmans took the lessons from Fresh Market and Starbucks and recognized that the modern grocery shopper wanted to have an experience when they shopped. They believed that shoppers wanted to have access to and be surrounded by “the world of fine choices” even when they were simply shopping for Campbell’s Soup.

Whole foods has an idea when Branding a supermarketThe baby boomers, Gen-x and Gen-y customers believe the shopping experience should be as entertaining as utilitarian and that the yearning for discovery was woven into the fabric of their being. Does it cost more to create a Wegmans than it does a Lowes Foods? You bet it does. It requires an investment in brand, brand management, architecture, interior design, customer anthropology, and world-class buyers.

However, these costs are dwarfed by the short-term solution of the escalating construction costs of duplicating sores in repeated markets within saturated residential areas.

The Supermarket Category’s Problem

Why then, is the supermarket category so stale and delinquent in its own space? It is not because they lack talented people or smart planners. It is because they have bought into an old and stale idea of brand. They have come to believe that they can differentiate themselves from the competitive set by restating generic category descriptions like fresh, quality, selection and fair prices. They think they can OWN a position that is the providence of the entire category… like, “the beef people.”

Where is the Future?

What does this mean for the future of the category? It means the stakes are being raised because the category is demanding more. The real problem for the major players can be found in the existing store space. The sooner they invest in their brands, the better for their shareholders because an investment in today will ultimately cost less than a forced investment tomorrow. Experience and discovery has as its table stakes; larger more open square footage, broader specialty departments, and an understanding of the preceptive fabric of the target audience.

Supermarket brand desertThis means existing store locations may be inadequate in the future. Bigger is not necessarily better, it is only better when bigger incorporates entertainment, discovery and experience. These are the hallmark of the busy and demanding shopper of today, as well as the shopper of tomorrow. Will a Starbucks coffee bar differentiate your brand? Not on your life.

Instead of adding a Starbucks coffee bar to your offering, ask yourself why the customer wants such an addition? Who that shopper believes they are and what other offerings might satisfy those beliefs. The answer to these questions might lead the chains to build Wegmans copies.

However, without the brand knowledge and management of a Wegmans, they will simply seem like artifice and be nothing more than pretenders to the throne. Wegmans has brand permission and that permission should spell fear in the souls of other chains and even the specialty retailers like Dean & DeLuca, Whole Foods, and Fresh Market.

Read about the retail space here

Read about Pharmacies here

Best Buy fails to be the “best” this holiday season

One of the greatest branding faux pas a company can make is failing to deliver on its brand promise.

Let’s take Best Buy, for instance. It is a company whose name alone suggests a brand that is your “best alternative” for electronics. This, however, is a branding promise that is hardly the truth and has led me to the assumption that Best Buy is hardly the “best” in anything that it does. That’s especially true when it comes to customer service, satisfaction and shopping experience.

Before I delve into my own Best Buy holiday shopping horror fiasco, let’s look at its recent online holiday shopping debacle.

As The Wall Street Journal reported a few days before Christmas, Best Buy was alerting customers that it couldn’t fill online orders. The crux of this situation was that droves of online customers turned to Best Buy to fulfill their shopping needs for Christmas. (Best Buy called the amount of online shopping “Overwhelming”).

The overwhelming response was a good sign for Best Buy. To stay relevant, it must combat the Amazons of the world as well as other prominent online retailers. Yet, Best Buy failed to deliver — and failed to do so during the most important retail time of year. Now, those hordes of hungery customers will most likely turn elsewhere next season. I surely would.

My personal experience didn’t go any better. Just a few days ago, my flat screen TV went kaput. I was really bummed out, of course, and quickly opted to hit Best Buy to get a slightly better replacement. In retrospect, I really should have gone to Costco as I would have saved time, and my shopping experience would have been much more positive, believe it or not.

Let me run down a list of what made Best Buy more like Miserable Buy.

1. It took 40 minutes to get any attention from an employee.
2. It took Best Buy four attempts to find me in the computer system. After the fourth attempt, I told them to “forget it.”
3. I had no idea which TVs were still available for purchase and which were not.
4. Having finally found a TV, I paid. I waited in my car at the loading dock for 20 minutes. Having lost patience, I returned to the employee who rang me up and asked where my TV was. To which the employee asked, “Have you paid?” I responded, “Yes! You rang me up!”

I wonder how can a company like Best Buy, with customer service as dreadful as this, truly look you in the eye and expect you to believe its promise of being the “best” of anything. I don’t believe it anymore? And, as its online and in-store shopping experiences continue to wallow, more customers just may purchase their products from a company who has the capability of fulfilling their brand promise.