Admirable Bank Brands

By Chris Nichols

It has been said that community banks are not doing enough to differentiate themselves and that banking has become a commodity.

Another common lament is that while most community banks claim to compete on service, the reality is that most banks do not measure their service delivery, do not reward employees on the service delivered, and are providing about the same level of service as most of their competitors. For banks that fall into these categories, service is not a strategic differentiator.

However, despite the above criticism of our industry, many community banks are effectively branding their products and service.

On advantage we have is that, compared to other segments of corporate America, community banks usually have a tightly defined geographic focus. Given a finite area, community banks can brand themselves effectively by focusing on to their local market—whether that is a town, county or portion of a state.

Once a community bank defines its specific territory, the job of branding becomes much easier, as tactics such as product differentiation and segmentation become cost effective.

What is branding?

The great adman David Ogilvy defined brand as “the intangible sum of a product’s attributes: its name, packaging and price, its history, its reputation and the way it’s advertised.” We will further define brand as not what you say about yourself, but what your customers say about you. Thus, a brand can also show the purchasing experience, ease of use, after-sales support and lasting value.

Community banks must create brands that resonates in the specific market where that bank competes. By limiting the bank’s geographic focus, branding becomes easier—it is much harder to establish an effective brand on a national scale.

While every community bank faces competition for most of its products and service in every market, most community banks compete against only a few financial institutions in most of their geographies.

In a nutshell, branding for community banks is an exercise in choosing the right type of customers, intimately getting to know them, imparting a desired emotion on them, helping them on their journey of financial solution discovery and, lastly, delivering exactly that promised product or service.

Branding effectiveness: vision and attributes

For banks that want to revisit their branding efforts, here is a primer. There are five important steps that every management team must undertake to assess the bank’s branding effectiveness.

First, every bank needs to assess the essence of its business.   The intent of this first step is to identify the real reason management is motivated to succeed. If management’s sole goal is simply to earn a paycheck or to sell the bank, the bank will not be able to create a lasting, real and differentiated brand. If the original vision for the bank no longer makes sense based on new market forces, new competition or new technology, management must create a new vision for the bank.

Further, every bank management team needs to ask what do they want their bank to be known for? Are you the low cost bank, the value-added bank, the hard working bank, the smarter bank or do you understand the customer better?

The biggest problem that community banks make when it comes to branding is that they unconsciously try to be all things to all customers. This strategy often results in being meaningless to most. Knowing who your customer is (and isn’t) is a good first step, followed by figuring out what you want your customers to think of when they hear the bank’s name?

Customers develop feelings and attitudes towards the bank that are influenced by word of mouth, by advertising, media and dealings with the bank. The intent here is to make sure that there is alignment between how customers perceive the bank and the way management wants the bank perceived.

Many management teams are surprised to learn how the customer base perceives the bank. If you doubt this, poll your management team on the three things they want to be known for and then survey your customers about the first three words that come to their mind when they think of the bank. The answers are rarely the same.

Desired customer perception

Second, management needs to understand why customers buy its product or service and why they do not buy from your competitors. This is different than the emotions your brand evokes and gets to the heart of why you might win or lose business. Maybe it is location, maybe it’s a relationship with a banker (the two top reasons that we usually see), but it is probably not for your service or expertise in a certain area.

Similar to what attributes you want to be known for, figuring out why your customers do business with you (this can also be your value proposition) is important to laying the foundation to building an enduring brand.




Third, management needs to understand why noncustomers do not use the bank and why they use the competing bank. This is the flipside of the question above, but answering why target customers don’t do business with you yields an equally valuable set of data and may help management refine the brand in addition to helping identify some  repair work.


Fourth, and this is most important, management must understand how it wants its employees to perceive the bank’s brand. It is crucial that employees’ perception of the brand aligns with management.  Nothing conveys a bank’s brand more than the efforts of your employees in their discretionary day-to-day activities.

We often see misalignment between management’s and employees’ view of the bank’s brand. Hire an external consultant and ask your employees both in an open session and anonymous survey about their perception of the bank’s brand. If your employees do not believe and embody the brand, then your brand cannot survive.


Finally, brand effort doesn’t happen without investment. Obviously there is no hard or fast rule on what to spend and the level of investment is different for every bank, product set and market. The more competition you have, the more you are likely going to have to spend. It is also difficult to identify brand investment dollars because expenses like training, branch design and marketing serve several purposes.

However, as a rule of thumb, banks normally have to spend around 1.5 percent of revenues just to maintain their brand and closer to 10 percent to grow their brand in a competitive metro market.

Another way to look at it is that any marketing spend that is not specifically for a location or a product can be considered an investment in the brand, this normally composes 20 percent to 50 percent of a bank’s total marketing budget. Of course, a portion of location or product marketing expense can also be allocated toward brand expense, but this is only a rule of thumb.

For adjustments, banks going after a mass retail client base will have to spend more, while purely commercial focus banks can get away with less. The more you are trying to change (as opposed just to build) your brand, the more you will have to spend and the higher growth you desire above your general service area’s growth rate, the more you will have to spend.

The value of a good brand

A good bank brand helps acquire customers, shorten the sales cycle, limit the impact of downturns, protect margins and help make the whole franchise more valuable (mostly by helping to stabilize cash flow).

If done right, your return can easily reach into the triple digits. Citizens Bank of Edmond ($252 million in assets, Oklahoma), for example, recently broke down just a portion of their event, social media and branding investment and easily could substantiate a return of three times that amount.

Community banks can effectively differentiate themselves from national banks, other community banks and nontraditional financial institutions. To differentiate and compete,  each community bank needs to create and invest in its unique brand. Limited geographic and product focus provide community banks an advantage for defining their brand against larger entities, b ut management needs to be diligent in setting and continually nurturing the bank’s brand.

Chris Nichols, who is located in San Francisco, is the chief strategy officer of CenterState Bank, which has its headquarters in Winter Haven, Fla.