Developing and Branding Innovative Internet-Based Delivery for Financial Institutions
Bauer, James L., The Journal of Bank Cost & Management Accounting
The growth of the Internet as a marketing medium presents most "traditional" retail financial institutions with significant challenges. A"traditional" financial institution can be defined as one that offers one more products or services to individual consumers or small businesses primarily through physical branch offices or through a field force of agents. The common theme is that marketing, sales and service are conducted through high cost, physical and highly personalized channels. Were the products and services being sold complex, high value, high priced or high margin, could such physical distribution channels be economically justified? However, given the power of the Internet as a low-cost, massmarket marketing, sales and service channel, the growth of the Internet provides a major challenge to those institutions with extensive physical and human distribution channels.
For"traditional" financial institutions, the problem becomes even more complex because of the need to transition from the "old" model of physical distribution and personal service to the "new" model of Internet-based direct marketing and delivery. 'Traditional" products and services have one set of features, benefits, cost structures and pricing. Internet-based products, because of the nature of the delivery channel, have a significantly lower cost and delivery structure. The "traditional" products represent the source of current profits and funding for the development of new products. However, by offering Internet-based products with different pricing structures, the"traditional" institution runs the risk of cannibalizing its existing profit stream as customers migrate to lower-cost offerings. Yet, at the same time, new competitors, unencumbered by the existing infrastructure, can offer lower-cost Internet-based products and steal customers from the traditional competitors. Were these the only issues that needed to be addressed, they would present management with significant challenges. Still another level of complexity is added by the fact that "traditional" financial institutions consider one of their primary assets to be their brand. For most "traditional" financial institutions, the brand has been established over the period of many decades. While the brand may include negative connotations based on such real-life experiences as poor service, inflexible policies, high prices or mistakes, most financial brands retain strong connotations of trust, stability and security. All of these positive attributes of brand ran be of great value to "traditional" financial institutions in developing their Internet-based value propositions and marketing programs.
While branding is clearly important for products and services, it takes on special import for providers of services. With physical goods (for example, soft drinks or athletic shoes) the variability of the product is easier to control than with services. Assuming the product meets the manufacturers' quality control standards and the actual physical product meets or exceeds the consumers' expectations, the brand promise has been met.
The physical product, combined with the consumers' expected experience, as generated by the marketing and advertising, should be complementary. With services (in particular financial services), the brand promise needs to be supported by the actual service experience. This is particularly important in financial services, which, since they involve people's money, are a high-involvement, high emotion product. Consumers' interactions with their financial service providers are generally highly repetitive and long-term, measured in years or even decades. For some products, for example, transaction accounts, there are hundreds if not thousands of contacts or interactions each year. Other products, for example, investments or insurance, may have fewer interactions but have larger economic or emotional value at stake.
The quandary that most traditional financial institutions face with branding on the Internet is the fact that success in the off-line (or physical) world does not represent a guarantee of success in the Internet (or virtual) world. …