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Superbrands 2004 - Brand Autopsy

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FINANCIAL SERVICES<br />

Economic Factors Portend<br />

Shift Away from Consumers<br />

By Todd Wasserman<br />

In one respect, it was a quiet year for financial services marketers<br />

as Citibank, J.P. Morgan Chase, Merrill Lynch, Washington<br />

Mutual and others stuck with ongoing campaigns. At the same<br />

time, however, a big story was brewing in the category: the fouryear<br />

love affair with consumers began to sour.<br />

Many observers are bullish that firms will continue opening<br />

banks at a torrid pace, requiring bigger ad spends, but those predictions<br />

come with a galaxy of asterisks. In its 2003 year-end report,<br />

Merrill Lynch said increased competition among regional banks<br />

would lead bigger players to up spending to defend their turf. It<br />

also speculated that rising network TV costs would force banks to<br />

spend 15-20% more to maintain their 2003 awareness levels.<br />

Rodrigo Quintanilla, the report’s author, noted that rising interest<br />

rates could chill the influx of cash that went to mortgage ads.<br />

There is evidence that the mortgage sector has in fact hit its apex<br />

and is now leveling off. Refinancing, which<br />

accounted for 66% of all mortgage loan applications<br />

last year, per the Mortgage Bankers<br />

Association, is no longer so hot now that 30year<br />

rates are approaching 6%. Freddie Mac,<br />

the nation’s No. 2 buyer of mortgages, predicted<br />

refinancing will continue to decline. The<br />

slowed refinancing market should have an<br />

effect on the finance and mortgage category,<br />

whose ad spending rose 32% to $543 million<br />

in 2003, per TNS/CMR.<br />

Though mortgages only represent about<br />

a tenth of the $5 billion financial services category,<br />

the rise in mortgage ad spending<br />

accounted for about a third of the overall 8.5% rise in the segment.<br />

That disproportionate income on the way up could have<br />

a similar effect on the way down.<br />

Another cause for concern, voiced by the Federal Deposit<br />

Insurance Corp., among others, is that the housing bubble may<br />

burst, which, in combination with rising consumer debt, could<br />

result in defaults on loans. Even if that doesn’t happen, the FDIC<br />

warns that high credit-risk households have loaded up on debt,<br />

potentially leading to more loan defaults. In which case, banks<br />

will lose revenue and will likely think advertising to woo consumers<br />

isn’t such a hot idea.<br />

Those caveats aside, however, there is ample support for Quintanilla’s<br />

claim that the financial services sector is getting more<br />

BRAND<br />

COMPANY NAME,<br />

LOCATION<br />

All the way to the bank: In WaMu spot,<br />

cheery mom ignores son-induced whiplash.<br />

LEAD AGENCY,<br />

LOCATION<br />

<strong>Superbrands</strong><br />

competitive and banks are spending more on advertising just to<br />

keep up. Bank of America, for instance, increased its marketing<br />

costs by $232 million, per its annual report, though $105 million<br />

of that went to direct marketing for B of A’s credit card business.<br />

Gordon Goetzmann, managing vp of First Manhattan, New<br />

York, said the traditional measure of marketing spending for the<br />

category is 1.8% of revenues, but some, like Charter<br />

One, have surpassed 4%. “I expect to see some of<br />

the marketing reined in,” Goetzmann said.<br />

Richard Bove, managing director at Hoefer and<br />

Arnett, a San Francisco-based financial analyst firm,<br />

said he believes that in about six months, banks will<br />

realize that the market is oversaturated and then<br />

cut back on opening new branches and, by extension,<br />

on advertising. “If things stay as they are, there<br />

will be a new bank opening every three and a half<br />

hours,” said Bove. “That’s unsustainable.”<br />

Since 2000, banks have set their sights<br />

on consumers as many businesses defaulted<br />

on loans. Bove said financial services is a<br />

highly cyclical industry and at some point,<br />

banks will go back to targeting businesses<br />

rather than consumers. When that happens,<br />

he said, banks will begin spending less on<br />

wooing consumers, so Sunday hours will be<br />

gone and nuisance fees will return.<br />

So much for banks, but what about ads for<br />

stock trading? With the Dow around 10,000<br />

and the Nasdaq flirting with 2,000, can we<br />

look forward to a return of Ameritrade’s<br />

mohawk-wearing Stuart or E*Trade’s monkey?<br />

Ameritrade, which swallowed up Datek in 2002, continues<br />

to “aggressively advertise” its services, per the company’s 2003<br />

annual report. Indeed, Ameritrade boosted its spend from $72.4<br />

million to $90.4 million from fiscal 2002 to 2003, per the report.<br />

E*Trade, however, cut its spend 15%, from $45.6 million in 2002<br />

to $31.8 million in 2003.<br />

As for the zany ads of yore, Jerry Gramaglia, former CMO<br />

of E*Trade, who is now entrepreneur-in-residence at ArrowPath<br />

Venture Capital in Menlo Park, Calif., said he’d like to see a<br />

return of such efforts. But he suspects that times have changed.<br />

“There’s been a direction that says [online trading] is moving<br />

from adolescence to maturity and becoming more traditional,<br />

more conventional,” he said. B<br />

1. Citigroup Citigroup, NY Fallon, Minneapolis $1,264.0 $226.0 6.23 56% 5.68 44.9<br />

2. J.P. Morgan Chase J.P. Morgan Chase, NY Foote, Cone & Belding, NY 770.9 43.0 6.30 35% 5.73 45.2<br />

3. Bank of America Bank of America, Charlotte, NC Interpublic, NY 736.5 165.0 6.35 74% 6.06 50.6<br />

4. Morgan Stanley Morgan Stanley, NY Leo Burnett, Chicago 602.8 129.0 6.39 31% 5.72 44.8<br />

5. Merrill Lynch Merrill Lynch, NY Boathouse Grp., Needham, MA 494.5 36.0 6.21 46% 5.23 41.8<br />

Sources: <strong>Brand</strong>week research (assets); TNS/CMR (media); Harris Interactive/EquiTrend: QxFxPI=E (see key, page S18)<br />

www.brandweek.com JUNE 21, <strong>2004</strong> S43<br />

TOTAL<br />

ASSETS<br />

(billions)<br />

MEDIA<br />

EXPENDITURES<br />

(millions)<br />

QUALITY<br />

FAMILIARITY<br />

PURCHASE<br />

INTENT<br />

EQUITY

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