Magazine article Journal of Commercial Lending

A Rose by Any Other Name

Magazine article Journal of Commercial Lending

A Rose by Any Other Name

Article excerpt

The emergence of electronic commerce means that brand identity will become an imperative for competitive differentiation among financial services providers. Bankers have long believed that a bank's name and image were of intrinsic value in communicating quality, style, and soundness. This belief is one of the reasons that they have been loath to give up local names in mergers. Brand identity becomes even more important as financial services move from local to regional to international distribution. Moreover, in a world in which financial services are megabytes on the Internet or pictures in virtual reality, brand identifiers become the signposts of quality that lead customers and prospects to individual electronic banks. Without strong brand identification, tomorrow's bank will be just another commodity provider in the new world of electronic commerce.

Why Brand?

The importance of brand identification is already demonstrated by products and services in which the bank's brand name has become secondary to a common service mark. For example, if consumers are asked what credit cards they have, they typically reply that they carry VISA, MasterCard, or American Express. They rarely reply with the name of their provider--except, perhaps, for affinity cards on which a well-known logo or brand appears. Credit cards have become generic names, like Kleenex. For American Express, this doesn't matter because the brand identity is wholly its own. But for banks that are issuers of MasterCard or VISA, their identity is fading fast, if it is not already gone. Shared automatic teller machine networks present a similar, although less advanced, example. In this case, banks have become more keenly insistent on preserving their own names as well as the common identifier of the network.

Similarly, the invaluable role of branding can be seen whenever providers need to differentiate a commodity in order to demonstrate the value added and to get a better price. Sunkist oranges. Chiquita bananas. And surely, we are all in awe of Frank Perdue's prodigious feat in creating brand value for his marigold-fed chickens. In every case, the commodity must have identifiable, superior qualities--taste, color, ripeness, and the like--that can be branded. Even an invented quality, such as a mouth. wash's superior ability to "eliminate halitosis" can become distinguishing.

By and large, financial services are commodities. While they can be differentiated by product superiority, for example, single statement or cash management accounts, even these products are readily copied. Bankers like to think of differentiation in terms of quality of service, people, or information content. All of these are significant standard competitive dimensions--the "musts" in financial services competition.

Packaged goods merchandisers convey product values through a combination of advertising, brand umbrella, and, very often, free samples. But it is very difficult to offer banking prospects a free sample of customer service. There are ways to accomplish this, but most of the differentiation of financial services is in a promise--better yield, information, or service--that the customer must sign up to get. Free samples in customer service come during the sales process: how easy it is to do business (most typically in getting a loan, for example, by phone or home visits for mortgages) and the persuasiveness of an investment manager's demeanor.

Brand names serve to differentiate commodities. …

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