The brands are coming
While banks and building societies battle it out on price, the supermarkets are moving in. Jill Treanor reports
Wednesday 22 January 1997
However, research by Interbrand, experts in branding, with Dresdner Kleinwort Benson, a City investment bank, concludes that supermarket chains could pose a very real challenge to the traditional financial services provider.
Why? It's all about brand names, according to Karen Hack, branding consultant at Interbrand.
She said that while banks and building societies are busy competing over savings products and the price at which they sell mortgages, they are eroding the brand-recognition of their institutions.
"If the banks don't wake up and realise that the messages on price are not enough, they could lose out to brands," she said.
"It makes sense that supermarkets are moving into financial services. If they play the brands very carefully it could be 'watch out, banks'."
This is because financial services firms generally have a reputation for letting their customers down. So customers stay with their bank or building society, believing it to be the best of a bad bunch.
However, the new entrants have strong brand names and have succeeded in areas where financial firms are traditionally seen to be lacking - value for money, quality and trust of expertise.
"Two of the most obvious examples (and in the case of the former probably the most successful) are Marks & Spencer and Virgin," Dresdner Kleinwort Benson says.
The would-be entrants - led by Sainsbury's - also have branding and distribution clout. Take two examples: within two years of selling petrol, retailers had a 25 per cent market share, and within six months of launching its loyalty card, Tesco had almost as many card holders as Barclaycard had established over 30 years.
The research pointed out that there is a risk for the supermarkets that their brands could be contaminated simply by being involved in banking. So far, M&S does not seem to have suffered from its drive into financial services although the research said it may be too early to reach any conclusions on this risk. Simon Samuels, banking analyst at Dresdner Kleinwort Benson, also believes that all is not lost for the banks and building societies. They can develop their brands by moving away from price battles to concentrate on other areas such as customer service.
"If you present yourself as the cheapest then one thing's for sure - you're not going to develop brand value," he said.
Barclaycard, which has kept away from pricing issues and developed a strong brand over the past 30 years, has the highest brand value of any financial services group, of pounds 1.334bn. This is well ahead of its nearest rival, Halifax Building Society, whose brand is valued at pounds 956m by the research, but well behind some of the world's top brands, such as McDonald's.
Whereas the world's top brands are valued at more than 10 times annual profits, the best mortgage and deposit-taking brands are valued at one times profits. Barclaycard's brand is valued at more than five times annual profits.
Towards the bottom end of the brand-value scale is Direct Line, the low- cost insurance firm, which, while radically altering the insurance market, has developed a brand worth only pounds 24m.
"Clearly Direct Line needs to encourage its customers to think of it as a value-for-money organisation with high-quality services - rather than simply cheap," said the research.
Mark Dampier: How to get an income now that savings are past the 'use by' date
Thousands of UK investors could lose out following collapse of Secured Energy Bonds
Bargain Hunter: Fly off for a winter break in France or Portugal for well under £100
Millions in line for compensation after being sold unnecessary credit card cover
Weekly Money: Round-up of the personal finance stories you may have missed 26-30 January
- 1 Three-year-old boy shoots pregnant mother and father in New Mexico
- 2 Stephen Fry explains what he would say if he was 'confronted by God'
- 4 Benedict Cumberbatch's Alan Turing gay-rights campaign snubbed by Prince William and Kate Middleton
- 5 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Stephen Fry explains what he would say if he was 'confronted by God'
The open loathing between Barack Obama and Benjamin Netanyahu just got worse
9 reasons Greece's experiment with the radical left is doomed to failure
President Putin is a dangerous psychopath - reason is not going to work with him
Have we reached 'peak food'? Shortages loom as global production rates slow
Britain's widening poverty gap should be causing outrage at the start of the election campaign
iJobs Money & Business
£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...
£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
Day In a Page
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion