Stress Testing Brands-The Results

Yesterday we got the results from the Treasury regarding the stress tests. The results were on one hand extraordinarily troubling, i.e. how is it possible that banks still need another $75 billion in funding to withstand future buffeting? On the other hand with this additional capital, the US Treasury deems these institutions financially capable of handling whatever future financial troubles befall them, which provides the confidence we need to grow our economy. The market has responded by bidding these banking stocks up, the NYSE Financial index is up about 10% this week and 87% off its low.

While I am encouraged by the strong response of the market to these financials, I told you earlier in the week that I would be revealing the results of my own “brand” stress test. What is clear is that based on our latest work with the BAV tool the financials have a long hard road ahead to work their brands back to the place of esteem they held back in 2001, when over 60% felt that financial institutions were trustworthy. Now you might ask why  these institutions care about returning to 2001 trust levels. In the intervening years they’ve never been more profitable, influential and generated so much wealth. There’s the rub and I’ll answer that question at the end of this piece. In the meantime have a look at some of the interesting changes in brand perception that we picked up over the past few months.

The slide below shows the that Goldman Sachs was the only financial institution who gained in INTEGRITY and interestingly enough, Goldman had been the one institution to aggressively pursue paying back the government. A corollary example of the brand benefits of financial independence is Ford who in remaining independent of the government bailout has gained significantly in terms of brand integrity.

Here are the factors we use to compose the Integrity value: straightforward, helpful, socially responsible, cares for customers and trustworthy. For Goldman and Ford to continue to build value they must keep these values in mind across their business and their communications. In the age of transparency, confidence is gained not only from performance but from honesty, openness and innovation.

To that end it seems that there is a continued movement, in terms of brand perceptions, to root for the little guy. One of the striking trends we saw in our study was the success of smaller institutions as leaders in innovation. Institutions like Sun Trust far outperformed successful large institutions like JPMorgan Chase in our INGENUITY metric. The factors that went into the composition of the ingenuity value are: Intelligence, Progressive, Up-To-Date, Leader and Innovative.

While I’ve already mentioned clarity and simplicity as triggers for this perception, another might be the relative decoupling from global risk. Local innovators create loyal, geo-centric customers, allowing the company to focus their message on a tighter group. As has been noted elsewhere, working within constraints is a great way to generate innovation.

In conclusion financial institutions may have gotten through the Treasury’s stress test, but the stress on their brands is unrelenting and they need to think differently than they have for the past decade (or three decades) if they want to regain the trust of the customer. The same trust that they rely upon in their lending models, must be applied to their branding models. Trust in the 21st century is generated by exposing the process, not just outputting the product. Your customers want to know you, not just your sanitized soundbite. The institutions that succeed will be local thinkers who are transparent in their sales and reporting. No trust, no confidence, no business - time to start rebuilding.

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Tagged as: Brand, confidence, Goldman Sachs, lending, stress test, trust, US Treasury