How Financial Marketers Should Calculate The Real ROI of Branding

CEOs often ask financial marketers to quantify the ROI of their institution's brand strategy. But is this the right question? Should banking providers measure the ROI of branding in more than just dollars and cents? Here's how financial institutions should take the conversation — and their brands — to the next level.

Financial institutions have a big branding problem. It’s not necessarily that their brands are undifferentiated or poorly executed (which is often true). It’s that there is no standardized metric or database that financial marketers can use to measure and quantify the value and ROI of their brands. Yet many executives in the C-suite demand to know the ROI of branding before investing in strategy.

Financial leaders who have completed strategic rebranding programs unequivocally attribute their investment with a range of direct and substantial benefits, ranging from higher acquisition rates, increased lending volumes, greater employee engagement, improved NPS scores, and expanded market share.

Paradoxically, the same expectation for ROI projections is rarely applied to many other capital investments that financial institutions routinely make — in technology, branch automation or other similar operational projects. When compared to things like online banking system upgrades, a “brand” is an intangible asset. Nevertheless, a weak or poorly differentiated brand strategy can severely squelch a financial institution’s growth (which, in turn, impacts other investments like new branches).

Few leaders ever ask the question: “What is the risk — the lost opportunity cost — of an ineffective brand strategy? Are we hurting ourselves with a weak brand, a confusing name or an outdated brand image?”

Your financial institution’s brand (i.e., your reputation and image) is a far more valuable asset than a $2.0 million investment in a freestanding branch. Your brand shapes market and consumer perceptions and defines your competitive market positioning. Many leaders concede that their brands are ill defined and can’t clearly articulate what they stand for. Their brands are inconsistent across channels, not understood among their employees, and randomly expressed in various media.

Senior leadership teams understandably love to see the ROI metrics of other marketing functions like loan promotions and email marketing, but these are short-term measures. While vital to driving revenue, they are not the most important strategic measure of a high-functioning organizational brand program that creates competitive market distinction. These are larger and significant measures that impact growth, market position and the internal alignment of your corporate culture.

Why ROO is a Better Long-Term Measure of Brand Success

Financial ROI alone might actually be the wrong way to gauge the success of investments in your brand. Market growth, successful brand differentiation, high NPS scores, cultural alignment and employee satisfaction can all be part of a wider set of vital signs indicate thriving and well-focused organization.

Organizational improvements that help you increase your competitive differentiation, raise awareness of your unique value proposition, and bring positive shifts in consumer perceptions that lead to accelerated growth, plus market share and retention are the type of strategic outcomes that you could lump up under a new measurement: ROO (Return on Objectives).

In working with large credit union and community bank clients across the US and Canada, we have identified a wide array of organizational growth metrics, multi-year trend patterns, and consumer and leader anecdotes, cultural shifts and stories that undeniably illustrate that their brand investments drive measurable organizational improvements.

Phil Hart, COO of Logix Credit Union’s (formerly Lockheed Federal Credit Union), a $5 billion institution based in Burbank, California, shared his reflections on the value of strategic branding initiatives.

“We’ve learned that making data-driven market decisions and growth forecast planning —combined with understanding our target member’s preferences and behaviors — has led us to make more intelligent and far more accurate decisions,” Hart explained. “This helped increase Logix’s bottom line performance and to deliver rich and distinctive member brand experiences.”

Global Leaders Understand the Value of Their Brands

“Branding demands commitment; commitment to continual re- invention; striking chords with people to stir their emotions; and commitment to imagination.”
— Sir Richard Branson, CEO, Virgin

Sophisticated public companies like Amazon and Starbucks don’t ask about “the ROI of branding” when they invest resources into their experience and culture. These organizations actively manage, design, reinvent and proactively work to keep their brand evolving, relevant to consumers and best-in-class.

The most successful CEOs on earth intuitively understand that a strong brand image supported by superior experiences — online, in-store, via mobile channels — and an innovative internal culture yields huge payoffs. For them, the ROI is obvious: accelerated growth and soaring stock prices.

The most renowned measure of the economic value of brands is a decade long program developed by Kantar Millward Brown called BrandZ. Each year they identify the most successful brands in the world by industry, including financial services. Their formula attributes stock performance, increased revenues, market share growth and consumer survey perceptions to quantify an organization’s brand value.

In 2017 BrandZ valued the Visa brand at $111 billion, Apple at $235 billion and Chase Bank’s brand at $14.3 billion. Google was ranked the #1 brand in the world, valued at $246 billion.

Quantifying Metrics That Matter

Strategic branding programs that become an enterprise-wide focus strongly influence and ultimately improve growth and ROI. But like many major strategic growth initiatives, they are better defined as ROO investments that must be made to evolve, compete, retain and inspire people, resulting in sustained performance and consistency.

Following a 2014 rebranding and name change program to attract a younger audience and badly-needed loan growth, Jim McCarthy, CEO of Trailhead, a Portland, Oregon-based credit union, attributed the bulk of their financial success metrics to their enterprise-wide, transformative branding initiative.

“We don’t have the budget to do large ad campaigns,” McCarthy shared. “We’ve attracted a Millennial audience with our new and distinctive ‘Trailhead’ brand image. Employees feel a new sense of pride in our brand.”

The results for Trailhead have been staggering, and record growth trends continue three years later:

  • In the first year lending increased 18%; Loan to share ratio increased from 59% to 78% and website traffic increased 28%.
  • New account growth increased 367% to 131 accounts a month.
  • Trailhead achieved its highest earnings in 10+ years — net interest margin increased 71BP, while net worth grew 54BP.
  • Net member growth went from seven straight years of negative numbers to +18.9% the first year, then averaged 15.7% growth annually the next three years.

While Trailhead’s performance numbers are not about ROI alone, no one could argue the direct value, payoff and residual benefits of the investment in a comprehensive rebranding and renaming program. It moved Trailhead from seven years of stagnation to accelerated growth, financial health and a staff culture on fire with renewed enthusiasm and newfound focus.

Trailhead has also successfully acquired a critical and elusive younger Millennial target audience. Millennials aged 25 to 34 grew 173% from 2014 to 2017, reducing their average member age by an incredible eight years in a three-year period.

Perhaps most significantly, you have to wonder what financial trajectory Trailhead would have found itself on it they had never pursued their rebranding initiative. Would they have grown at all?

Some CFOs use pat formulas to estimate the ROI for projects such as building a branch. But quantifying the ROI for a rebranding project or name change is nothing like a breakeven analysis or an ROI for a $2.0 million freestanding branch investment, where you can build models around fixed costs, predictable growth patterns, operating costs and net interest margins.

As your organization faces critical investment scenarios beyond technology alone to evolve and innovate your brand, name or logo to increase relevance to your markets (or targets like younger professional Millennials), consider using ROO in making wise decisions that balance risk against driving sustainable growth, market expansion, cultural focus and enhanced competitive performance.

This article was originally published on . All content © 2024 by The Financial Brand and may not be reproduced by any means without permission.