Superbrands 2004 - Brand Autopsy
Superbrands 2004 - Brand Autopsy
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