Brands on the Brain

The American Heritage Dictionary defines “brand” as “a trademark or distinctive name identifying a product or manufacturer.” But that dusty definition doesn’t begin to convey the powerful competitive advantage that a potent brand confers on its owner. A strong brand isn’t just a trademark or a name; it’s a promise of the high level of quality and service consumers can expect to receive every time they buy. If you can fulfill that promise, you’ll have loyal, happy customers who wouldn’t think of buying from anyone else, and who’ll become powerful evangelists for your institution.

Banking executives seem to know all thisu00e2u20ac”even though they’re often at a loss for how to design and carry out an effective branding strategy. A recent survey by the Corporate Executive Board, for instance, shows that while fully three-quarters of bank executives surveyed agreed strong branding is critical to their company’s success, more than 60% of those same execs did not believe that their own institution had a clear and distinct brand.
Their frustration is understandable. Effective brand building is getting harder and harder all the time. Why? Well, for one thing, everybody seems to want to get in on the act. The U.S. Patent and Trademark office reports that trademark registrations topped 140,000 in 2003, twice the number 10 years before. Similarly, grocery shelves are groaning with new labels; Wired magazine says 45,000 different products are offered by grocers these days, compared to just 14,000 20 years ago.

Amid all that consumer-related noise and clutter, then, how do you devise a branding strategy and execute it effectively? Volumes have been written on this very topic, of course, but allow me to offer the following five rules:
Whatever you do, don’t rely on advertising. “The ongoing myth is that brands got built by advertising,” says Marc Andreesen, founder of Netscape, the first great Internet brand. “Actually, the evidence is exactly the opposite. Brands get reinforced by advertising, but they get built by grassroots adoption and word of mouth.” That’s exactly right. If you doubt it, look at Starbucks. The company spends just 1% of its revenues on advertising, compared to 10% for the average retailer, and has nonetheless built one of the strongest consumer brands anywhere in less than 10 years. How did Starbucks do it? The answer lies in Rule 2.

Brands are built where the product is delivered to customers who are delighted. “Our brand is based on the experience we control in our stores,” says Starbucks Chairman Howard Schultz. That’s exactly how CEO Vernon Hill is turning Commerce Bancorp. into one of the most powerful banking brands in the Northeast. Commerce doesn’t just satisfy its customers, it “wows” them with great serviceu00e2u20ac”and turns them into passionate proselytizers in the process. That’s how a great brand is built, one customer at a time, over and over and over. The Commerce brand has been a huge wealth creator for shareholders. Commerce’s assets have grown by 27%, on average, over the past decade, while its earnings per share have increased by 18% annually, on average, during the same period.

Keep your brand as narrowly focused as possible. If brand building is all about delivering on promises, then make sure you can deliver on the promises you’ve made! One way to do that is to keep your value proposition simple, straightforward, and relevant to your customers’ needs. Volvo promises safety. Starbucks promises a good cup of coffee. McDonald’s promises cleanliness and consistency. No one has ever argued that McDonald’s has the best burgers or Volvo has the sportiest carsu00e2u20ac”yet has that hurt their brands? Not a bit. These companies define their brand promises narrowlyu00e2u20ac”and then keep them. This point is especially salient in the banking business, where the temptation to unnecessarily broaden product sets can be overwhelming. My advice: Fight that temptation! It’s an important first step to building a potent brand.

Highlight a unique attribute of your institution. Yours may be the oldest player in your market, or the biggest, or the hungriest. Regardless, let people know what makes you different! Your institution’s unique attribute doesn’t even have to be its most important one, just something that sets you apart and makes you special in people’s minds. Remember, Avis capitalized on the seemingly banal attribute of being the second-biggest rental car company, and became one of the best-known brands in American industry.

Make sure your brand relates to the product your institution delivers. You laugh, but I still don’t get Citi’s “Live Richly” campaignu00e2u20ac”particularly when I walk into a typical dirty, dingy Citi branch. The brand promise has absolutely nothing to do with the service the company delivers. It is, in my view, worse than useless.

Are these rules all you need to know about brand building? Not a chance! But they’re a good place to start. And the rewards can be immense. As we’ve seen from Starbucks, Nike, and McDonald’s, a strong brand can be a hugely powerful competitive weapon.