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This is not a good thing for the financial industry, which, to put it mildly, hasn't been a media darling over the past two years due to the housing and lending crisis and the credit crunch. Because of the complicated nature of the industry, there's already an uneasy relationship between it and consumers, and those bad feelings grow as negative press clippings continue to pile up.
The 'real long-term damage'
Gene Grabowski, chair of the crisis and litigation practice at Levick Strategic Communications, said the industry has for too long "distanced itself" from the American people. "For the institutions themselves this is bad news," he said. "Most Americans are unclear about what these companies do and are abstractions to most people. But the news that's being leaked out would lead any ordinary person to believe that their investments are at risk and that's the real long-term damage.
"The short-term damage is that no one cares who owns Lehman Bros. or Merrill," Mr. Grabowski continued. "What they care about is their own investments and that threatens to undermine consumer confidence and the U.S. economy."
He said financial-service companies should set aside more money to communicate with the American public. He suggests full page ads; getting executives on TV and radio shows to underscore the role they play in they economy; authoring op-eds that "talk about the important role and service they play in the economy and service they provide."
It seems as if some are already taking his advice. At least one newspaper has reported getting calls from financial advertisers about the availability of ad space later this week for what would likely be a message of reassurance. Financial advertisers are so far either declining comment or declining to confirm they are readying new advertising campaigns.
According to one newspaper executive, the campaigns could launch as soon as Wednesday, with full-page ads from several financial advertisers. The executive declined to identify the marketers involved.
Bank of America, which is buying Merrill Lynch, declined to comment on advertising plans. Lehman Bros. also declined comment as did some regular financial advertisers including the New York Stock Exchange.
"There's a massive communications job here," said Michael Sitrick, CEO of Sitrick and Co. "But there are also significant opportunities created. Investors and employees need reassurance that there's an orderly transition being made, that BofA is the rescuer here and that Merrill will be stronger than ever as part of Bank of America."
Must come clean with public
Ira Matathia, director of consulting at BrainReserve, said this could be an opportunity for the financial industry to actually earn points with consumers if they were to come clean with them. "People are looking for, more than anything else, something to believe in," said Mr. Matathia, who is of the opinion that all types of consumers have lost faith in banks and that a run on banks is still in the realm of possibility. "What people are believing in today is straight talk, and there's not enough of it out there."
One ad executive who declined to be named also had similar thoughts. "A lot of these financial-services companies are going to have to go back to classical messaging that describes what they do" and that is tactical and credible rather than touchy-feely, the executive noted. "Those things are going to become incredibly taboo."
"In and of itself, nobody cares whether Lehman goes out of business, but what it does is creates a sense that people are eager to see the turn or the bottom ... call it whatever you will," added another agency executive, who said that, so far, the financial services and automotive sectors have pulled back on ad spending. The fear is that as the economic climate worsens, other industries that have been withstanding the pressure -- such as telecommunications and packaged goods -- are going to reconsider spending.
Mr. Grabowski said some big financial-services companies see themselves as elite institutions and are viewed by the public as being aloof. "So when they get a bailout or need financial assistance, too many people in America don't agree with it and view it as special treatment," he said.
Must gain customer support
He added that these institutions need to do a better job of educating people about what it is they do and the role they play in the economy. "They need to do a better job of investing time and money in talking to consumers and taxpayers just as much as they do to other institutions and policy makers," he said. "Because of this they don't have the political base when they go to ask for help. It's not enough for Alan Greenspan to understand the role of these companies in the economy. If they are going to seek financial help, they are going to need to build a political base. They have to they build a political and customer base that's supportive."
Mr. Sitrick went on to say that after such a raft of negative headlines -- Citibank, Countrywide, Indymac, Lehman, Merrill -- the entire brokerage industry may well be in need of a marketing communications overhaul, in not at least a check-up.
"There's a question as to whether they've all been tarred by the same brush," he said, adding, "but there's a delicate balance here: To bastardize Shakespeare, you don't want to come out with [a campaign] where the reaction will be 'The lady doth protest too much' -- but people who were already cautious will be even more so; you need to speak to them."
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Contributing: Claude Brodesser-Akner, Rupal Parekh, Ira Teinowitz, Natalie Zmuda