Branding a New Entrant in the Financial Essay

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Branding

A new entrant in the financial services industry will want to have a strong brand. In this industry, branding is absolutely critical for several reasons. First, many of the firms that are currently in that market have brands that go back 100 years or more and are essentially household names. It can be difficult to counter that brand power. Second, financial services businesses need to engender trust in their market. When people are putting their money with a company, they need to have complete faith in that company's ability to safeguard their money. Thus, trust is very important to the financial services industry. Brands help to convey trust, which is in part why the biggest financial institutions tend to be well over a hundred years old. Longevity and history play a strong role in fostering trust. This paper will explore the role that branding will play at a startup financial services industry firm, including highlighting the benefits of branding and a discussion of branding in the financial services industry at the current moment in time in the UK.

Definition of a Brand

Klein (2008) notes that there are many entrepreneurs who use the term "branding" interchangeably with "marketing" and "advertising" but this is not entirely accurate. There are subtle differences between the two. Branding is essentially a subset of marketing and advertising is an activity within marketing that supports branding. A branding strategy, however, should encompass more than just marketing, and for a startup business in any industry branding is a critical element of success.

A brand communicates a lot to consumers. Di Somma (2013) notes that a brand conveys several messages to consumers. A brand means that consumers know what to ask for. When talking about the product or service, the brand identifies your company. Brands in some cases can define an industry if the company is successful enough, for example if you want to Xerox something, the brand defines the entire industry. That is unlikely to occur in the financial services industry, but it is worth remembering what the optimal state of being in branding is.

The brand also creates associations with quality, or traits. The company needs to take the time to communicate with customers what traits are associated with the brand. Consider the recent campaign from NatWest, dubbed "NatYes." A spot from this campaign is available on YouTube (2013). This spot highlights two elements of brand association. For example, the "Yes" component conveys helpfulness and positivity, which the bank is using to promote its mortgage business. The tagline "Helpful banking" reinforces this image. So for the consumer, the expectation is that the NatWest bank brand will be associated with a bank that is there to help you meet your needs, in this case to buy a home. Brand associations are powerful because if the brand becomes associated with a trait that is desirable, that association can help to compel consumers strongly. A negative trait association is something that will be problematic, and can linger with the bank longer than warranted.

The brand is therefore the personality of the institution and the promise that the bank makes to the world. NatWest is offering a helpful personality; other banks emphasis trustworthiness. Arguably, banks will have a tougher time selling trustworthiness these days, but a new financial startup might be able to enter the market with that as a brand attribute simply because it has no negative history. That said, consumers do prefer that their banks be well-established, and there is often wariness of new entrants into the market, unless the new entrant is able to bring with it from another market these attributes. Virgin Money was able to do this, bringing the Virgin brand and its attributes over to the financial services market (Brownsell, 2012).

Types of Branding

There are many different types of branding. These include corporate branding, product branding and partnership branding. There is also own label branding but that is probably not appropriate for a startup financial institution. Corporate branding reflects a brand that applies to the entire company, which product branding reflects a brand that reflects one particular product. So with a car company, there is a company-wide brand that conveys specific attributes (value, quality, etc.) but then each car will have its own brand as well. That individual brand will be associated with traits that are common to that one vehicle or family of vehicles.

An interesting idea is that of partnership branding. A startup financial institution will need to establish credibility very quickly.

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Partnerships can do that, because you borrow the brand power and attributes of another brand. This is a shortcut to building your own brand. You as the startup institution will need to bring something of value to the table in order to find a brand partner, but there is potential here for a startup bank to borrow the values associated with a partner brand.

Aims of Branding

Branding seeks to do a couple of things. First, it sets to create an identity where there currently is none. This is a new institution with no name yet, so there is no recognition on the part of the consumers for this new financial institution. The brand therefore will need to foster instant recognition. It is assumed that nobody will start a bank without a lot of money so the branding will mostly be effective with saturation marketing to allow consumers to understand the brand immediately.

Branding also seeks to differentiate the company from the competition. Banking is a competitive business and while in many cases the switching costs are not that high, consumers are often hesitant to go through the trouble to switch their banking brands. A new entrant into the market will need to use its branding efforts to differentiate itself from the existing players. Virgin immediately started building brand attributes like "banking with a bit of soul" to differentiate itself from the competition, for example. That slogan is quite empty, but it seeks to create a different set of attributes than what other banks are using. Thus, it is not important if Virgin Money has any soul or not, just that consumers have more positive feelings about the brand, which contrast with the way many consumers feel about the old-established banks (Ridley, 2013).

Branding is also important for creating a consistent look and feel for the business. Indeed, a well-defined brand can almost serve as a mission statement because the people within the company know what the brand's values are, and the customers do as well and hold the company accountable (James, 2013). We know that a brand like Apple is not going to release a poorly-designed product because design is an established part of the company's identity. Nobody either in the company or in its customer base would allow it. So the brand is something that can help to define the company and what it does, both externally and internally (Spring, 2013). A company like FedEx was called "Federal Express" because the express part of the brand was critical to convey to a skeptical market what their service offering was. The brand only became shortened later when it was well established and they no longer needed to directly convey that they were "express."

Branding in Financial Services

The trend in branding for the financial services industry is to move away from the more traditional emphasis on things like safety and security. These attributes have been eroded somewhat by the role of the banks in the recent recession, but also these attributes do not truly resonate with people. Banks have grown to have a negative association with things like bad service and being generally uncaring, so we are seeing a move away from traditional branding at banks. Many banks still have powerful, highly recognized brands, not the least because of their prominent high street locations and the ubiquity of their offerings -- everyone has to deal with a bank at some point so we become at least vaguely familiar with who is in the industry. Interbrand lists 10 financial institutions as being among the top 100 brands in the world (Interbrand, 2013), but only one of these, HSBC is a prominent player in the UK retail banking market. HSBC has positioned itself more as a high end bank, focused on their presence in countries around the world as a means of differentiating itself from the competition and seeking to attract consumers who benefit from that attribute. Yet it also shows that retail banking brands in the UK are not among the heavyweight brands globally in the industry.

The local banks are moving towards branding that emphasizes a more personal touch. Whether it is banking with a soul or helpful banking, they are selling the service element in order to differentiate from the negative perceptions of corporate banks. All banks are inherently corporate, but putting a more personal face on banks is something that the industry is working towards in order to make itself more attractive.....

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