How Banks Can Boost Image in Chaotic Times

There Is Nothing Like a Crisis to Test the Fortitude of a Brand -- Something Financial-Services Firms Know All Too Well

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Hardly a day goes by without some bad news about a great financial-services brand. From new brands such as E-Trade (circa 1996) to old brands such as Merrill Lynch (circa 1914), you almost feel brand value evaporating with each passing day. And you can see it as their stock prices sink, often affected by declines in the value of their intangible assets -- the largest of which is the brand.
Above the fray: HSBC has avoided the blame game of other financial-services firms.
Above the fray: HSBC has avoided the blame game of other financial-services firms.

There is nothing like a crisis to test the fortitude of a brand and the skill of those managing it.

Those that have the best brands, that have built and strengthened them for years and are managing them wisely, now reap the benefits.

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Goldman Sachs, for example, has been widely lauded and admired for being immune to the subprime mortgage crisis. But wait a second: It had a $1.48 billion write-down in the third quarter for investments in the same types of products that have tripped up Citi, Merrill and the rest. In other words, it made the same bad decisions as its excoriated peers, but you would never know it.

Lloyd Blankfein, Goldman's CEO, admitted at a recent conference that the firm was no better at seeing the future than anyone else -- it made the same, in retrospect, bad investment decisions; it just reacted more quickly.

And yet the Goldman brand remains largely unscathed. Of course, it had a great brand before. But Lloyd and his team continue to manage it adroitly. The brand stands for integrity and competence -- two core values that Lloyd's candid comments reinforce. The company knows exactly how to sustain its brand. And because of this we give it the benefit of the doubt, believing positive explanations of its problems because they match our positive view of the brand.

Meanwhile, heads roll at its brethren, which are paying the price for failing to strengthen their brands before these tough times struck and compounded the problem by failing to properly manage them when the crisis hit. Continuing bad news sinks their stock prices, reflecting a massive erosion of the value of their most important intangible assets: their brands.

Two drivers
Can the damage be minimized? Can these hard times even be used to increase brand value? The answer to both: yes.

Two key drivers of economic brand value are the "role of brand" in a category and the strength of an individual brand in the category. The role of brand measures the impact a particular brand has on customers' decision-making processes. In a category under siege, the role of brand is more important than before the subprime crisis hit, as people seek out safety and competency. In other words, as the tide is rising, brands have the ability to create and secure value as customers increasingly rely on brands in their decision making.

The second driver, the strength of an individual brand, is enhanced or harmed depending on how brand managers respond to the new market conditions. Those who do the right thing will pull ahead of the pack as people seek out stronger brands; those who do the wrong things managing their brands likely will face relegation to second-class status in the years ahead.

Brands in trouble need to do three things: 1.) Manage their brands as a portfolio, 2.) over-communicate confidently and consistently, and 3.) exceed expectations in addressing the problem.

Two brands
Every financial-services firm has, at a minimum, two brands, even if they are called the same thing: One is the corporate brand, and the other is the offer brand. They are related, but they also have a degree of separation. The offer brand's primary target is the client or customer, and its primary objective is to drive revenue. The corporate brand's targets include employees, regulators, investors and media, and its primary objective is to drive reputation enabling the most favorable competitive context -- for example, easy access to inexpensive capital, an environment that attracts most talented employees, favorable regulations and good press coverage.

Of course, most financial-services companies have more than two brands. In these times, it becomes critical to understand how the corporate brand is affecting the offer brands and how the offer brands are affecting the corporate brand -- to think of them as a portfolio of brands that are constantly evolving. Where the problem is seen to reside -- in the offer brand, in the corporate brand or both -- affects everything. For example, if the corporate brand is suffering most of the damage but the offer brands are relatively unscathed, it is first critical to contain the damage. Second, it becomes possible to use the healthy offer brands to help support the sickly corporate brand. Apple, in dire straits not that long ago due to poor strategic decisions and minuscule market share, used the iPod, a terrific product brand, to breathe new life into its corporate brand.

Communications is the second critical element to saving a brand. Far too often, when a brand gets in trouble, the organization goes silent. Big mistake. For most people, evasiveness in the face of bad news is seen as an admission of guilt.

Putting heads together
Instead, and in consultation with legal, it is critically important to force all the internal and external communications leaders -- advertising, investor relations, public relations, executive speechwriters, website, employee communications and the CEO -- into one room, every day if necessary, if the crisis is unfolding fast, to hammer out the messages that will win. An important key is to use research to continually test and refine messages and drive agreement across the group. Then every communication mechanism needs to broadcast that same exact message far and wide.

The last element of a successful campaign to save a foundering brand is to exceed expectations. By avoiding the blame game that other financial-services firms have played, pointing fingers at the rating agencies for this mess, HSBC instead implicitly accepted more responsibility than most of its peers and was the first to take the bold step of effectively guaranteeing by taking onto its balance sheet $41 billion of structured investment vehicles that faced potential losses due to the credit crunch. It did this even though it had no legal obligation to do so. HSBC knows how to create brand value in times of chaos, and knows that what it does today will create massive amounts of brand value that will last for years if not decades once the dust settles.

It's following in a proud tradition. In the bankers' panic of 1907, J.P. Morgan stepped in and saved the U.S. economy by adroitly re-establishing confidence in the financial system and in cash-starved, though otherwise sound, companies. That effort built JPMorgan into the one of the great financial-services brands for the next 100 years.

Now is the moment of truth for financial-services brands. Bold actions that exceed expectations combined with strong communications and brands managed as a portfolio can, if done correctly, increase brand value even under dire circumstances. The actions of those managing financial-services brands in these difficult times could well determine the brand winners and losers for the next 100 years.
Tom Agan is executive director-head of consulting for Interbrand, New York.
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