There’s an old adage in financial marketing: “It’s all about the rate.” Recent evidence from two different case studies suggests that’s wrong.

Case Study #1

Take BankWest’s promotion to launch a new savings account, where they tested two versions of their online ads. Both versions of the ad were animated. In the first version, the ad started by introducing a big rate. In the other version, they led with a photo.

Bottom Line: The version of the ad leading with the photo generated three times as many deposits as the version leading with the rate.

Key Question: Have you ever tried testing two versions of your marketing?

Case Study #2

Yesterday, some well-respected voices in the financial industry blogged about a South African bank that conducted an interesting marketing test. One version of the bank’s loan mailer had a man’s photo in it, another version had a woman’s photo.

Bottom Line: The woman’s photo impacted the bank’s male customers about as much as dropping the loan’s interest rate by 4.5%. (Women, it seems, were less impressionable.)

Key Takeaways:

• With both deposit and loan promotions, there’s a lot more to it than just the rate. Other psychological and emotional factors are at work.
• Be brave and have the courage to experiment. Financial marketers need to conduct more tests like these.
• Pay attention to what’s really driving your results, but be prepared to have your assumptions challenged.
• The next time you do a rate-based promotion, shift your focus from the rate to a photo and see what happens.

Little details can have a huge impact on the bottom line. As one credit union marketer recently pointed out, even something as subtle as a pronoun can make a big difference.

Further Reading:

• A Pretty Woman Beats a Good Loan Deal
• Sexy Nude Chicks by Ron Shevlin
  
• If sex is selling then I am buying! by Tony Mannor
• The Little Things by Andy LaFlamme

Here are the results from the latest effort to determine which financial institutions have the strongest brands, this one from Bancography.

Banks with assets > $30 billion

1. Wells Fargo Bank, MN
2. U.S. Bank, MN
3. The Northern Trust Company, IL
4. Union Bank of California, CA
5. PNC Bank, PA
6. Manufacturers and Traders Trust Company, NY
7. Comerica Bank, TX
8. Bank of America, NC
9. Branch Banking and Trust Company, NC
10. JPMorgan Chase Bank, NY

Banks with assets $2-30 billion

1. Woodforest National Bank, TX
2. Westamerica Bank, CA
3. City National Bank, CA
4. City National Bank of West Virginia, WV
5. Nevada State Bank, NV
6. First Interstate Bank, MT
7. S&T Bank, PA
8. The Frost National Bank, TX
9. Commerce Bank, MO
10. Amarillo National Bank, TX

Credit unions with assets > $1 billion

1. Mountain America, UT
2. Arrowhead Central, CA
3. J. S. C., TX
4. University of Wisconsin, WI
5. Police & Fire, PA
6. GECU, TX
7. Chevron, CA
8. Tinker, OK
9. MidFlorida, FL
10. OnPoint Community, OR
11. Community First, WI
12. Security Service, TX
13. Members 1st, PA
14. Boeing Employees, WA
15. Lake Michigan, MI
16. Alaska USA, AK
17. Affinity Plus, MN
18. Indiana Members, IN
19. Apco Employees, AL
20. Keesler, MS
21. Redwood, CA
22. Randolph-Brooks, TX
23. Affinity, NJ
24. America First, UT
25. Veridian, IA

Credit unions with assets < $1 billion

1. ASI, LA
2. Trona Valley Community, WY
3. First Community CU of Houston, TX
4. White Sands, NM
5. Pelican State, LA
6. Utah Central, UT
7. Water and Power Community, CA
8. Golden Plains, KS
9. Midland Community, TX
10. Complex Community, TX
11. American Heritage, PA
12. Bull’s Eye, WI
13. Valero, TX
14. I.L.W.U., CA
15. America’s Credit Union, WA
16. Justice, VA
17. United Heritage, TX
18. EECU, TX
19. Navy Army, TX
20. Town and Country, ND
21. Austin Telco, TX
22. Neighborhood, TX
23. Idaho Central, ID
24. Actors, NY
25. Service 1st, PA

According to Bancography, this is how they calculated their rankings.

“Bancography quantified the proportion of each institution’s long term value that is attributable to the intangible factors that constitute an institution’s brand. These factors include the institution’s reputation, service quality, image and market awareness. The brand value index identifies institutions that produce financial results beyond what their capital base, market conditions, and competitive environments would predict.”

Key Question: How did they measure reputation? Service quality? Image? Market awareness?

It looks like they did a lot less measurement of intangibles like feelings, perceptions and emotions, and did a lot more mathematical number crunching. Bancography illustrates its system in the following graph:

“Institutions are ranked by brand premium,” Bancography explains. “The proportion of value that the institution’s brand adds to its book value. The red dots show absolute brand value.”

“In the banking industry, product offerings are often very similar, so it is paramount for financial institutions to build differentiating brands.”
– John Mathes, Bancography
Director of Brand Strategy

Translation? Basically, it sounds like they compared each financial institution’s financial performance with some sort of industry average to generate a “multiple.” Bancography says this multiple is based on balance sheet income, variability in earnings and varying market conditions. They excluded one-time windfalls like the Visa dividend and other extraordinary gains.

Reality Check: This system assumes that “brand” is the cause of any above- or below-average results without providing any correlating evidence, nor does it factor in many other variables.

Bancography is using this study to draw attention to its recently launched Brand Strategy arm. Bancography, a company better known for helping financial institutions locate their branches, did not have a Brand Strategy section on its website last fall.

Source: TMG’s Payment Industry Insider

A research company studied brands in 75 different categories to measure the degree of differentiation among competing companies. Banks were among the companies studied.

Guess what? Banks are viewed as having zero differentiation. The good news is that banks weren’t the only undifferentiated category:

“Banks, motor oil and 20 other categories – nearly a third of all the categories examined – did not have any differentiated brands. The products and services were ‘known,’ but not known for anything in particular.”

For some reason, soap manufacturers have figured out something most financial institutions haven’t. The study found that 100% of soap brands differentiated themselves.

It makes sense. Look at the six brands of soap to the right. All six are distinct. Most people could probably articulate something different about each of them even if they don’t personally use those particular brands.

• Dial works longer.
• Lava is for tough guys with dirty hands.
• Dove is smoother, and for women.
• Zest opens your eyes.
• Neutrogena is pure, simple and clean.
• Irish Spring leaves you “Fresh and clean as a whistle.”

One reader of the study blames hollow bank slogans and endless mergers for the lack of differentiation among providers of financial services:

“Take the category of banks. They produce one meaningless slogan after another. ‘Where money lives,’ ‘Embracing ingenuity,’ ‘The clean Swiss bank,’ ‘Here today. Here tomorrow.’ Slogans like these and endless mergers have commoditized the category.”

Add to this the many similar-sounding names endemic to banks and credit unions — 1st, First, One, Community, etc. — and you’ve got another major contributor to financial “blanding.”

Bottom Line:

• If you don’t clearly stand for something — anything! — consumers will think you stand for nothing. This is a recurring theme in financial services.
• Failing to create meaningful differences forces people to define you by their own criteria — usually quantifiable things like rates, fees and the number of your branch/ATM locations.
• You absolutely must distinguish and differentiate your financial institution from the countless bland options that already exist or risk reduction to a simple commodity.

Key Questions: Can your organization succinctly articulate a clear, unique and meaningful brand promise or position? Do key stakeholders in your organization agree on this brand position?

Reality Check: Is there anyone else in your industry who could credibly make your Brand Promise? (Hint: If you said anything about “friendly, personal service,” or something like being “the best provider of financial solutions,” the answer is most definitely “yes.”)

Note: The original study is available offline from Brand Keys.

The Northwestern Financial Review ran a story back in 2004 on research conducted by financial consulting firm NewGround Resources. The study included 480 credit unions. From the article:

• Only 2% of those in the survey believed that there is “lots of differentiation” among credit unions
• 68% said they expect their member representatives to deliver a memorable experience over and above the basics of good service
• 78% of credit unions said they were in the business of “building emotional loyalty”
• 26% said they had outgrown and changed their name
• 38% were planning to change their name
• 21% said lack of creative thinking was their biggest challenge
• 69% said their main competitor was a local or nationwide bank
• 20% said their main competition was other credit unions

Key Question: How can you deliver a memorable experience when you don’t offer anything different from your peers?

Reality Check: Credit unions now compete with credit unions. More community charters means more competition. This could strain the cooperative spirit that has historically existed between peers.

Three business professors did a formal experiment after reading an article about NPS. They did two separate studies: one involving 9,900 customers of a telecom company, and another involving 6,700 customers of a financial institution. Their conclusions were published in the Harvard Business Review (“How Valuable Is Word of Mouth?” October 2007).

The researchers devised formulas to calculate the lifetime value of referrals (Customer Referral Value, or CRV) and the lifetime value of the customers themselves (Customer Lifetime Value, or CLV). Oddly enough, neither formula accounts for the cost of goods or services, as Ron Shevlin at Epsilon noted.

Nevertheless, it is an extremely thorough examination of “intention” vs. “action” vs. “purchasing patterns” vs. “profitability.” In fact, it’s probably the only study of its kind.

Here are the highlights:

#1 Most good intentions remain just that – good intentions.

• 68% of the financial services firm’s customers expressed an intention to refer people to the company, yet only 33% actually did
• 81% of the telecom’s customers thought they’d recommend the company, but only 30% actually did
• Very few referrals actually generated customers: 14% at the financial services firm and only 12% at the telecom company
• Of referrals who became customers, only about 10% were profitable

#2 Your most loyal purchasers are not your most valuable marketers.

• The customers who buy the most are not your best marketers. What’s more, your best marketers may be worth more than your most best customer.
• The best referrers have remarkably low purchasing values. For the telecom company, those who spent between $200-300 (30% of all customers) made referrals worth over $1,000, while those customers who spent $2,000 (10% of all customers) made referrals worth only $40.

#3 Half of customers’ referrals are made to those who would have become customers anyway, whether they received a referral or not.

• The article didn’t identify the profile of the typical “auto-referrer” – customers who make referrals regardless of whether there’s an incentive or not. Who are those much-coveted ‘brand disciples?’

#4 Referrals made by customers following an incentive campaign can be attributed to that campaign for about a year.