Superbrands 2004 - Brand Autopsy

FINANCIAL SERVICES
Economic Factors Portend
Shift Away from Consumers
By Todd Wasserman
In one respect, it was a quiet year for financial services marketers
as Citibank, J.P. Morgan Chase, Merrill Lynch, Washington
Mutual and others stuck with ongoing campaigns. At the same
time, however, a big story was brewing in the category: the fouryear
love affair with consumers began to sour.
Many observers are bullish that firms will continue opening
banks at a torrid pace, requiring bigger ad spends, but those predictions
come with a galaxy of asterisks. In its 2003 year-end report,
Merrill Lynch said increased competition among regional banks
would lead bigger players to up spending to defend their turf. It
also speculated that rising network TV costs would force banks to
spend 15-20% more to maintain their 2003 awareness levels.
Rodrigo Quintanilla, the report’s author, noted that rising interest
rates could chill the influx of cash that went to mortgage ads.
There is evidence that the mortgage sector has in fact hit its apex
and is now leveling off. Refinancing, which
accounted for 66% of all mortgage loan applications
last year, per the Mortgage Bankers
Association, is no longer so hot now that 30year
rates are approaching 6%. Freddie Mac,
the nation’s No. 2 buyer of mortgages, predicted
refinancing will continue to decline. The
slowed refinancing market should have an
effect on the finance and mortgage category,
whose ad spending rose 32% to $543 million
in 2003, per TNS/CMR.
Though mortgages only represent about
a tenth of the $5 billion financial services category,
the rise in mortgage ad spending
accounted for about a third of the overall 8.5% rise in the segment.
That disproportionate income on the way up could have
a similar effect on the way down.
Another cause for concern, voiced by the Federal Deposit
Insurance Corp., among others, is that the housing bubble may
burst, which, in combination with rising consumer debt, could
result in defaults on loans. Even if that doesn’t happen, the FDIC
warns that high credit-risk households have loaded up on debt,
potentially leading to more loan defaults. In which case, banks
will lose revenue and will likely think advertising to woo consumers
isn’t such a hot idea.
Those caveats aside, however, there is ample support for Quintanilla’s
claim that the financial services sector is getting more
BRAND
COMPANY NAME,
LOCATION
All the way to the bank: In WaMu spot,
cheery mom ignores son-induced whiplash.
LEAD AGENCY,
LOCATION
Superbrands
competitive and banks are spending more on advertising just to
keep up. Bank of America, for instance, increased its marketing
costs by $232 million, per its annual report, though $105 million
of that went to direct marketing for B of A’s credit card business.
Gordon Goetzmann, managing vp of First Manhattan, New
York, said the traditional measure of marketing spending for the
category is 1.8% of revenues, but some, like Charter
One, have surpassed 4%. “I expect to see some of
the marketing reined in,” Goetzmann said.
Richard Bove, managing director at Hoefer and
Arnett, a San Francisco-based financial analyst firm,
said he believes that in about six months, banks will
realize that the market is oversaturated and then
cut back on opening new branches and, by extension,
on advertising. “If things stay as they are, there
will be a new bank opening every three and a half
hours,” said Bove. “That’s unsustainable.”
Since 2000, banks have set their sights
on consumers as many businesses defaulted
on loans. Bove said financial services is a
highly cyclical industry and at some point,
banks will go back to targeting businesses
rather than consumers. When that happens,
he said, banks will begin spending less on
wooing consumers, so Sunday hours will be
gone and nuisance fees will return.
So much for banks, but what about ads for
stock trading? With the Dow around 10,000
and the Nasdaq flirting with 2,000, can we
look forward to a return of Ameritrade’s
mohawk-wearing Stuart or E*Trade’s monkey?
Ameritrade, which swallowed up Datek in 2002, continues
to “aggressively advertise” its services, per the company’s 2003
annual report. Indeed, Ameritrade boosted its spend from $72.4
million to $90.4 million from fiscal 2002 to 2003, per the report.
E*Trade, however, cut its spend 15%, from $45.6 million in 2002
to $31.8 million in 2003.
As for the zany ads of yore, Jerry Gramaglia, former CMO
of E*Trade, who is now entrepreneur-in-residence at ArrowPath
Venture Capital in Menlo Park, Calif., said he’d like to see a
return of such efforts. But he suspects that times have changed.
“There’s been a direction that says [online trading] is moving
from adolescence to maturity and becoming more traditional,
more conventional,” he said. B
1. Citigroup Citigroup, NY Fallon, Minneapolis $1,264.0 $226.0 6.23 56% 5.68 44.9
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
3. Bank of America Bank of America, Charlotte, NC Interpublic, NY 736.5 165.0 6.35 74% 6.06 50.6
4. Morgan Stanley Morgan Stanley, NY Leo Burnett, Chicago 602.8 129.0 6.39 31% 5.72 44.8
5. Merrill Lynch Merrill Lynch, NY Boathouse Grp., Needham, MA 494.5 36.0 6.21 46% 5.23 41.8
Sources: Brandweek research (assets); TNS/CMR (media); Harris Interactive/EquiTrend: QxFxPI=E (see key, page S18)
www.brandweek.com JUNE 21, 2004 S43
TOTAL
ASSETS
(billions)
MEDIA
EXPENDITURES
(millions)
QUALITY
FAMILIARITY
PURCHASE
INTENT
EQUITY