Bank Market Study

**Update- A fresh look at the banking category**

By Tom Dougherty

The Banking Category
The Banking Category

Since this the existing banking category market study was conducted two years ago, the landscape has changed and remained exactly the same all at once. The market landscape looks different, as acquisitions have ruled the scene, with Wells Fargo buying Wachovia, Chase buying up the resources of WaMu, TD Bank snapping up Commerce Bank and PNC acquiring National City.

What has not changed is the stunning similarity of their messaging. All of them, with few exceptions, still market the table stakes of having many ATMs, keeping your money safe, being convenient, having online and mobile banking, along with low fees and better rates.

That is, from the point of view of potential customers, just noise that does nothing to create preference. Even by acquiring a unique brand like WaMu (which in terms of attitude and tone was on the other end of the spectrum from Chase), Chase is still about “Chase What Matters,” an overly clever line that feels like it was written on Madison Avenue and is, therefore, not believable.

And table stakes, what you need to even play in the game, still take prominence.

It’s the same with the Wells Fargo-Wachovia merger. Wachovia had remained the king of an undifferentiated brand with only a “Wells Fargo Company” listed near the bottom in red in their marketing. TD has swallowed up Commerce by carrying Regis & Kelly over into the acquisition and, while it has a nice feel, it doesn’t create preference. (TD Bank does look different, however, but it’s messaging around ease-of-use and convenience doesn’t resonate.)

As we stated in the original study, the financial straits the nation found itself in – and even with the anger directed towards banks – was actually an opportunity for bank brands to take advantage because consumers were emotionally raw. (And let’s not even get started on the failure of credit unions to take advantage by being stuck in the same stories they’ve been peddling for decades.)

Bank marketing as an industry is pedestrian
The banking category has little brand differentiation.

We could only come up with one bank that tried to take advantage, which was SunTrust, a regional bank with locations mainly in the Southeast. Its themeline of “Live Solid. Bank Solid” is a reaction to overspending and making bad loans, and can suggest a feeling of comfort. (“Comfortably,” by the way, would have been a better marketing word than “Solid.”)

However, our research has shown that the idea of “safety,” an overused message in light of the financial crisis, wasn’t a switching trigger nor was emotional. Even the WaMu customers felt their money was safe despite the Chase takeover. They still had their money.

The frightening thing for nearly all of the players in the industry is that the only one attempting to be a reflection of the target audience is the market leader, Bank of America. The banking giant has gone through its own evolution (even making red its primary color instead of blue, which has dominated the market), and it has pushed the reflection of Americans – as voiced by Kiefer Sutherland – who take control and don’t like to be told what to do.

When the market leader has the best branding, that spells doom for the rest.
A market leader can market table stakes as a defensive posture because the market leader is often the default choice among potential customers. But Bank of America has worked harder than that.

You would assume that, with all the turmoil surrounding the banking industry, smaller regional banks and local credit unions would be making hay on all the anger and discontent.

You would be wrong. They continue to wallow away in what they “believe” differentiates them: Knowing your name, being friendly and being local.

Two things are wrong with this approach. First, it assumes that those that bank elsewhere find the employees unfriendly and treat them like a number. Research tells us that nothing could be further from the truth. All banking is local and the relationship is with your local branch.

Secondly, they confuse those values with the triggers that cause a customer to switch. In fact, they are neither rare or terribly important as switching triggers.

Opportunity still exits – Citibank, for example, has an opportunity it hasn’t nabbed – but time is running short. The biggest players will continue to look to acquisition as the only way to grow, instead of doing the smarter and less costly chore of creating brand preference.

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The Original Banking Study posted in 2008:

More Trouble Ahead for Banks

The banking category is in the midst of tough times. Certainly, the mortgage market has created much of the terrible financial news and the steep declines in shareholder value. Profits are down, confidence is low, and the heads of many of the nation’s largest banks have rolled or will be lopped-off soon. Is all of the bad news a result of the poor financial decisions the banking executives pursued to quench the greed of their shareholders? Is another fundamental problem looming on the horizon? A problem banks will be forced to come to terms with shortly? The answer is a resounding yes.

Tough economic times often reveal more fundamental flaws in an industry. For example, the skyrocketing fuel costs crippling the airline industry has opened a window to an operational model that is fundamentally flawed. If the airline executives use this momentary clarity to fix those problems, they will emerge more competitive and powerful. The same can be said of banks.

No Brand Differentiation

We conduct marketing research all over the globe, evaluating brand meanings, preference, loyalty, switching triggers and equity as the start to brand building – and the answers we are hearing are the same. The banking industry is in desperately bad shape.

No major bank has differentiated itself from the competitive set. As you’ll see, it’s shocking how similar the messaging is between the market’s players. Banks have been satisfied to spend recklessly on ineffectual advertising that does nothing more than build a bit of awareness and no preference instead of battling for customer loyalty based on definitive brand practices that create preference,

As the chickens come home to roost, we can expect shareholders to hold these banks accountable for the huge sums spent on advertising and demand some return on that investment.

What Banks Do Today

Consider the typical bank advertising you see every day. Ostensibly, most advertise to gain access into a new customer’s considered set of possible banking choices. The idea here is to create awareness in prospective borrowers and savers, and then instill in them a preference of a bank over the competition so that bank can attract assets.

The banks are hopeful that a potential customer will leave their current bank, switching or adding, for example, checking accounts. The thinking is that most banking customers (and we will include credit unions in this mix as well) consider their primary bank to be the one in which they currently maintain their checking account. Once the bank has your primary checking account, it attempts to strengthen that relationship by gaining more “share of wallet.” They try to establish other types of accounts, ranging from CDs, savings, securities, credit cards, mortgages (gasp) to all manner of personal and business loans.

What Banks Need To Consider

The science of stealing market share, which is the only reason to advertise in any mature marketplace (and banking is a very mature market), requires that you know and understand the answers to three questions about the target audience you wish to influence.

  1. What constitutes the prospects’ belief systems and how can your brand best reflect the values and precepts of that target audience?
  2. What is the highest emotional intensity in the category, often represented by a key switching trigger?
  3. To what does the customer aspire and what are they most fearful of?

You will notice that the subjects of all of these questions are customers, not the bank and its services. This is because, in commodity markets, it is impossible to differentiate yourself based on product or service alone. In other words, you can’t grow a bank’s market share by “out-banking” a competitive bank. You need to instill the prospects’ self-description into the brand so powerfully that they are in fact choosing an extension of themselves rather than a brick and mortar bank.

Today Banks Only Sell the Process of Banking Itself

So what do banks tell you today that is meant to influence your loyalty and get you to switch brands? Well, as you will see, they promise that they listen to you and they feature free checking, ATMs, competitive rates, friendly employees, convenient hours and locations. These are simply descriptions of what it means to be a bank. Research proves that few pay for checking today, while most believe their bank is convenient and think the local branch employees are friendly. Otherwise, they would likely not stay. So, if a customer already has free checking, why would anyone switch banks so that they can get free checking or, as we have seen, “extra free checking”? This makes about as much sense as a restaurant trying to get new customers by advertising that they have food.

Two Big House of Cards Ready to Fall

A bank’s first house of cards begins to tumble when shareholders ask the bank to demonstrate how effective the marketing dollars are being spent to create preference. Shareholders are demanding greater accountability, especially in the current financial climate.

Banks are coming face-to-face with the fact that their marketing of brand preferences is a figment of their own imagination. What this means is that in a vastly similar market (see the brand by brand  analysis below), preference is being decided by location and convenience — the second house of cards that’s about to collapse.

In the absence of any demonstrable differentiation or preference, banks have traditionally invested in bricks-and-mortar and delivered asset deposit growth by building more branches. Therefore, the nature of growth can be categorized into more locations (organic growth) and acquisition (fiscal growth). Both of these, without brand preference supporting them, are disasters waiting to happen.

Banks Have Developed Little to No Brand Preference

Currently, real estate and construction costs are the bank’s greatest investment and resulting main asset. Research demonstrates that customers, who have developed very little brand affinity with any major bank, are hoping that they will never need to visit a branch or ATM and can conduct their financial business with a debit card, direct deposits, email deposits and direct bill pay. The moment this desire becomes completely realized, the bank’s main asset quickly becomes its greatest liability and a bank branch simply becomes an expensive and cost-wasting billboard rather than a place of needed financial transaction. All of the investment in branch amenities, teller pods and meeting rooms is transformed into the habitat of dinosaurs.

Major Changes Ready to Happen

For customers, the above scenario is not very far off. From the perspective of the bank, such pronouncements of doom have been heard before and are about as believable as those cranks who warned of over-exuberance in mortgage lending, the foolishness of interest-only home mortgages and the dangers of escalating ARMs.

This is the next shoe to drop and the general population cannot wait to rid itself of the need to visit a bank, and most have already done so. It is simply an inconvenient necessity.

The Biggest Players

Let’s start with the default winner in terms of who does the best job of branding. Be warned, however. The bar is set pretty low.

Commerce Bank

Commerce bank claims America's most convenient bank in the bigger banking category

Commerce Bank comes closest to owning a brand, although its position is not emotionally intense. They have positioned themselves as “America’s Most Convenient Bank” and have adjusted their hours to reflect that promise. This is a legitimate position and has some meaning in a market lacking authentic brand differentiation.  It speaks to the bank’s focus and promise, but does not identify a customer precept beyond “I am a person who demands convenience.”

Our market research indicates that convenience is not a switching trigger. Most bank customers already believe their current bank choice is a convenient bank.  As an aid in growing share, the position might influence customers who have to change banks because of a move or change in job but it is not enough of a brand preference to encourage the vast majority of customers to switch.

It most certainly matters to Commerce Bank customers, who are evangelical about the bank. But, even this remarkable activity (in banks anyway) has not demonstrated the ability to influence anyone other than the already converted.

Here is the important point, though: When the need for bricks and mortar vanishes — so will their current differentiation.

Grade- B

Wachovia Bank

Wachovia has not real position in the bigger banking category

Wachovia dropped nearly 10% Friday after an analyst downgrade and news its CFO was leaving.

Robert Patten of Morgan Keegan slapped a sell rating on the Charlotte, N.C.-based bank following its miserable second-quarter earnings results and concern that the company might have to raise more capital.

Wachovia reported a staggering second quarter loss $8.9 billion earlier this week and said it was cutting its dividend by 86% to 5 cents a share, among other things to preserve capital.

Wachovia is quite possibly the most guilty of what we will call “brand blindness” than any other of the nation’s largest banks.  The brand message is non-existent as it is impossible to discern who the Wachovia user believes they are when they choose Wachovia.

Wachovia would argue that the customer is “someone who gets more” based upon their marketing and advertising messages, and, as a result asks the question, “Are you with Wachovia?”

But getting more by choosing Wachovia is impossible to fathom when we look at their brand messaging.  Wachovia promises us free checking, low ATM fees, convenient locations and membership in an exclusive club, membership with Wachovia (the power of I’m with…).

In the epitome of self-aggrandizement, Wachovia breaks every rule of effective branding to increase market share.  They talk about themselves, never touch the switching triggers that research tells us exists and instead pounds their chests and boasts about being the 800-pound gorilla.

“I’m with”… does not matter in banking because everyone believes banks are all the same and that the incentive to switch is non-existent. This is because attributes such as safe, reliable, friendly, convenient, low fees, ease of use, and trust are all considered the providence of “my current bank”regardless of who that bank is.

Wachovia will find themselves owning acres of worthless real estate in bricks and mortar unless they dig deeply into the anthropology of those they wish to influence, infuse those values and beliefs into their brand promise and develop a brand that reflects the target audience and not the bank itself. Otherwise, the only way they win is if they uncover a deep pool of prospects that currently have no bank, or checking account, or credit card, or the ability to use an ATM.  No doubt customers like that will proudly say… “I’m with a bank now!”

Grade- D-

Bank of America

Bank of America claims table stakes in the  banking category

Bank of America has finally tried to capitalize on their name… THE Bank of AMERICA. It is clever, but no substitute for a truly meaningful brand. A brand that is truly meaningful to target audiences identifies the highest emotional intensity in the market and the precepts of that audience. As the Bank of Opportunity, they are close to being a brand, and in the brand-blind market of the banking industry, it might just be as close as it gets to, well, still not great.

Bank of America is caught believing that a brand promise is the same as an advertising tag line. They can be and very well may be the same, but in this case, the Bank of Opportunity is too much about the bank and not enough about the customer.

Opportunity is today’s version of “possibilities” , a vague promise that there is something worth getting out there but we are not ever quite sure what it is. If seeking more “opportunity” is the most emotionally intense reflection of the target audience, then Bank of America has a winning brand.

However, research shows that the brand promise of opportunity is a key flaw in the Bank of America’s claim. Brand needs to be about your prospect, but it must also reflect the realities of your business model. In one of our research studies, 21% of Bank of America customers were unhappy with their bank and would consider switching banks. (Although it should be noted that they aren’t switching, because they believe a new bank would simply be more of the same.) Therefore, not only is the claim of “opportunity” not believable, it is also not the most emotionally intense current running through the market.

Bank of America has almost twice as many branches as its nearest competitor, which means that they have built their brand with bricks and mortar upon location and convenience and not customer preference.  What will they do with all those branches when no one wants to use them anymore?  It is a fair question.

Most of their marketing messages are an attempt to sell category table stakes.  The Bank of Opportunity is in fact the bank with credit cards, free checking, ATM Machines, On-line banking, and investment services. Now there is brand differentiation for you.

Grade- B-

Chase Bank

It is difficult and, in fact nearly impossible, to tell the difference between the marketing and brand messages of Chase and those of Wachovia.

Both promise that you get more, but Chase reminds us all that “getting more matters.” They have also fallen victim to diminishing their theme line by infusing it with cleverness. “Chase what matters” has, on its surface, the promise of  “The Company You Keep” (from New York Life). But here the word play becomes just plain trite. By including the corporate name in the theme, Chase has reduced it to a Madison Avenue substitute for a strategy and has raised barriers to sincerity.

Chase wants you to switch banks because they give you more.  MORE turns out to be rare and unusual things like free checking, convenient locations, and reward’s points.

“Free rewards points because getting more matters” is a direct lift from one of their ads.

The company still suffers from a crisis in corporate identity, as they have not yet decided if they are JP Morgan Chase or Chase.  They use both and, as a result, tell their customers that you do indeed get more here, including two brand names.

The Chase commercial messages are a complete waste of the bank’s resources in that there is no evidence of the preceptive fiber of the customer and the aspirations of their lives. Instead, the commercials are the usual snippets of life, utilized to show prospects how important it is to have a credit card and then to use it. Now that is a switching trigger.

Grade- D

Wells Fargo

 Wells Fargo bank claims heritage in the bigger banking category

Much like Chase, Wells Fargo has decided to dilute its equity markers by making their tag line trite and a bit tongue in cheek. “The Next Stage” is supposed to remind us that we are moving ahead and is also intended to reinforce the brand equity marker of the Wells Fargo Stage Coach. Warning: Cleverness only pleases advertising agencies and marketing executives.  Cleverness simply raises barriers to prospects by SHOUTING “this was made by an advertising agency” and reminding them not to take it too seriously as it is just an advertising line.

In our market research, Wells Fargo returned no significant brand equity, in that it was not associated with any important precepts and excited no-switching triggers. However, they did return strong signal equity in that their customers and their competitor’s customers alike recalled the stagecoach. No real value was associated with it, but it was recalled. To almost everyone, Wells Fargo was simply a bank.  And unfortunately their brand does nothing more than reinforce that claim.

Wells Fargo talks about aspirational dreams and the “someday” wishes of all of us, but they pay them off with what we get from them today.

What is it that we get (you’ll never guess…?)— Free checking, great rates, convenient locations and credit cards. “Get started on your someday today.”

Grade- C

CitiBank

Citibank had the beginnings of a brand promise a year or so ago when they promised that customers who banked with them could “live richly.” Now, borrowing from Wachovia and Chase, they have reduced the promise to triteness by including their brand name in the promise.

“Citi never sleeps” might more accurately be stated as the Citi brand “continues to sleep-walk.” They must have decided that “live richly” was “just a tagline” not a brand promise. It is obvious that they have forgotten that a brand promise should instill preference in the target audience and “Citi never sleeps” just makes everyone’s eyes red.

How is this brand promise different and better? They promise us that by using their credit cards, you can help write your story.  Wait a moment…Citi has credit cards?  Do they have free checking, convenient locations, friendly employees and investment services?  Why they might just be a bank too.

Grade- C-

Washington Mutual (WaMu)

 

WaMu was the  perfect example of unbridled enthusiasm and confusion among bankers when it comes to effective brand preference.  They had confused cool and of-the-moment advertising with effective brand messaging.

WaMu used to be the darling of Wall Street and now it is the ugly stepchild. By servicing the greed of its shareholders, they have in fact turned their backs on the very customers they promise to serve.

In the greatest irony of all, Washington Mutual promises “No worries,” which is exactly the burden that those who keep deposits at the bank carry now.

WaMu promised us that — “We’ve got your back…wahoo hoo!” And guess how they deliver that promise? Well, they tell us that “We don’t nickel and dime you,” and, as an example of such magnanimous behavior, they tell us that “you get free checks for life.”  Wait a moment…free checks?  Have we not heard that before?  We wonder if they are also convenient, friendly, competitive and have investments? To date, this is what has counted for smart branding in the banking market.

Grade- C-

SunTrust

Suntrust LogoSunTrust begs to know “How Can WE Help You?” And then promptly tells us that one way they can help us is if we use our credit card more… “Use your card more, you get a chance to win miles every time you use it.”

In a textbook example of branding yourself as a commodity, SunTrust wants us to bank with them because we “get what you need when you need it.” They also claim we need to use services like the telephone, online banking services, and more ATMs. This qualifies as more of what we need when we need it.

If you did not look at the non-existent SunTrust brand, but looked only at the switching triggers, you can see that SunTrust thinks they are positioned to steal market share from those competitors who do not have phone lines, online banking or ATM machines. I guess they are positioned to talk to people living in 1975. (Oh wait, we had telephones in 1975… never mind).

SunTrust is a perfect example of a business that spent cash and resources on a corporate identity (like a new logo, name and mark) and thought that they were developing a new brand. They confused brand with a new logo, mark and name. The problem is that brand is a reflection of the customer you hope to influence and, while corporate identity is part of it, it is only one part of it.

Grade- D

BB&T

Branch Banking and Trust Company (BB&T) is another bank that confuses expansion and growth with brand success. BB&T has not differentiated itself from any of its competitors and instead has satisfied itself by building more branches and locating them across the street of its many competitors. What this says is that they fundamentally understand that they have developed no brand preference and, if they are located more than 300 yards up the road from a competitor, they will lose business.

But, to an even greater degree than others, BB&T has decided to differentiate itself by hanging their hat on one of the most generic values of all… TRUST.

In one example, BB&T spent 60% of its commercial air time informing us that a veterinarian needs the “trust of her customers” and that, at BB&T, they do the very same thing.  After all… “You can tell we want your business.”

And they go after your business by offering free checking, many ATM machines, competitive rates and convenient locations.

Demonstrating how things can change quickly (and, possibly, how desperate banks have become), BB&T just added a new tag line to their logo so it now reads — “There’s Opportunity Here.” This is not a joke, which to those of us who know that BB&T has its headquarters in North Carolina (as does Bank Of America), it almost seems to be. There is opportunity. Right down the road at Bank of America, who has already laid claim to being The Bank of Opportunity.

Remember the key questions to grow market share:

  1. What constitutes the prospects’ belief systems and how can your brand best reflect the values and precepts of that target audience?
  2. What is the highest emotional intensity in the category, often represented by a key switching trigger?
  3. To what does the customer aspire and what are they most fearful of?

BB&T wants us to believe that the beliefs of the target audience can be summed up in how much we care about BB&T.  After all, we can tell they want our business.

As far as key switching triggers, BB&T believes they are trust and contact with human beings. The problem with this thinking is that most everyone we have surveyed already believes that their bank is trustworthy.

We have a rule for this: Don’t ever believe your own internal press.  All that really matters is what the customer believes to be true and what you believe to be true does not matter.  What is believed controls preference, even if the belief is false.

Grade- D-

Conclusion

End Notes

There is more opportunity in the banking market today than in almost any other industry. The major banks remain undifferentiated and deliver little to no brand meaning. Bank of America and Commerce Bank come closest to having effective brands, but both have fallen short of success.

Banks currently define themselves and their brand in terms of commodity products and expect customers to switch banks so that they can have “all the things they currently get from their current bank.”

As the ability to impress customers with convenient locations and spiffy lobbies becomes less and less important — as technology improvements allow customers to never go to the bank — the industry needs a new and more vital brand strategy to deliver importance. As always, importance is directly connected to how much the brand reflects and speaks to the customer and not how much the brand speaks to the business or company.

Who Is To Blame?

Who is to blame for all of the terrible bank marketing?
Who is to blame?

Are banks responsible for the mess they are currently in? Sure, even though the current economic situation has made the mess worse. They are guilty of bad financial decisions and they carry responsibility for thinking that “if you build it they will come.” That same thinking is leading them to more problems in the very near future. If they continue to behave and market themselves as if they are commodity banks, the target audience will continue to think that way until a competitor wakes up and wins. When that happens, the other banks will fight for the crumbs.

What banks need is a new brand promise, one that is a reflection of who the target audience is when they use that bank and is positioned against the competition. The problem now is that the players in the market say the same thing so they are not positioned against anybody.

Take The Test

Is it as bad as we have said?  Take the test. Take any bank you can think of and insert its name here-

  • (Insert Bank Name Here) has many ATMs
  • (Insert Bank Name Here) has convenient hours and locations
  • (Insert Bank Name Here) has free checking
  • (Insert Bank Name Here) has friendly employees
  • (Insert Bank Name Here) has online banking
  • (Insert Bank Name Here) has credit cards
  • (Insert Bank Name Here) gives you more
  • (Insert Bank Name Here) really wants my business
  • (Insert Bank Name Here) has competitive rates

These tough times are an opportunity for any bank that can get out of their own way and is willing to change.  Soon, it won’t matter if banks are willing. Change is coming.

 

More articles and commentary on banking

 Building a robust bank brand

Bank branding is worse than ever

How banks can grow market share in a mature sector

You need to analyze the market

Banks: Consider stopping all advertising right now!

The worst at marketing a brand