Whether we like it or not, a sound corporate identity is the best way to build a customer base
Madame Alchemist is congenitally brand illiterate. The question 'What car do you drive?' would typically yield the answer: 'A red one.' Our neighbourhood DIY expert famously asked her to show him her nails, a perfectly reasonable request to view the available steel attachments commonly found in a garage or toolshed. She held out her well-manicured hands.
Branding is the bridge across this conceptual divide. When you buy a coke, do you describe it as 'the brownish gassy liquid that comes in a red patterned cup?' Are you not grateful that 'McDonalds' (apologies to the ever-excellent Burger King) is shorthand for 'a white-flour sesame bun, enclosing a thin slice of tomato, a carefully measured and quality-assured hunk of fine-ground, flame-grilled ....oh, you know what I mean.'
The financial services industry is notoriously bad at branding. The insurance companies are probably better at it, because it is easier to remember 'Norwich Union' than the 47 sub-clauses that comprise your home insurance document. However, ask even more sophisticated investors about the company they bought their Isa from last year, and you'll hear : 'the zebra one,' 'the one with very bright pink adverts,' 'the one with stars' or, notably, 'Fidelity.'
Brand capital has been described by one manager as the difference between the net asset value of a company and its price per share. It is perception, reputation, recognition, all rolled into one. And it comes into play when the economic environment is more testing, like now. It sounds like the sales pitch from a public relations or consultancy firm, but it is probably true that the moment to splash out on these bottom-line-detracting activities is when money is tight.
So, a number of asset managers are turning their attention to a subject many have long thought beneath them. Suddenly brand executives are being invited to the top board tables to explain what they are offering. Essentially, it is the strategy of getting your product recognised. In the UK there are 1,600 unit trusts to choose from ' how do you ensure you make the shortlist of 10, let alone the last three? Worldwide, there are over 80,000 funds to choose from, more than the number of publicly listed companies.
After the glory days of the 1990s, some financial groups have half a dozen brand names and hundreds of products aimed at all sorts of investors. Who cares how many S's SSSB now attaches to its name ' we all stopped counting after the first one anyway. After their spending sprees, Morgan Stanley and JP Morgan are similarly afflicted. KIS, KIS, we plead: Keep it simple. Our brand awareness is breaking down. Your brand capital is shrinking.
The global recession may be over before it has begun, but don't bank on it. Watch how asset managers start to position themselves in the more subdued economic environment. The debate about the relevance of past performance as a guide to selecting a fund has some interesting input for branding reviews. If you base your brand identity on outperformance, how do you maintain it, and what happens when you fall short? Performance alone is clearly a weak brand proposition, as well as a doubtful way to pick a fund.
Brand equity, once won, should not be squandered. Asset managers will have to manage it internally as well as externally. If an investor buys a fund through a fund supermarket, which brand name prevails - that of the supermarket, or the product provider?
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