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As Westpac builds multiple brands here, in New Zealand, ANZ is consolidating to just one.
Across the Tasman, ANZ operates two brands: ANZ, and The National Bank. The National Bank’s black and green branding is on licence from British bank Lloyds. That licence is due to expire in 2014, and ANZ is taking the opportunity to reunite the two brands, which for the past decade have operated separately.
ANZ will spend just under $80 million merging the brands, adopting the National Bank’s back-end systems and most of its products.
The move starkly contrasts with that of rival bank Westpac. Under the ‘multi-brand’ strategy pushed by chief executive Gail Kelly, Westpac operates five high-profile retail-banking brands. Three of these are the result of recent acquisitions. In addition to its red ‘Westpac’ brand, it also owns St George (acquired in 2008) , BankSA (bought by St George in 2002), and RAMS (2007). Westpac also operates the Bank of Melbourne in Victoria, a brand it bought in 1997 and rebranded as Westpac in 2004 after staff started wearing Westpac uniforms (they wanted to be part of the parent company) and customer surveys showed confusion about the multiple brands. The Bank of Melbourne brand was relaunched by Kelly last year.
But the multi-branding strategy hasn’t been embraced by others in the sector. Commonwealth Bank CEO, Ian Narev, recently rubbished the strategy at an investor briefing, saying he had no intention of pursuing a retail banking strategy built around the ''differentiation of a whole lot of different brands.” His comments, together with ANZ’s recent decision to consolidate, show Westpac is swimming against the tide.
Operating multiple brands can help companies tap new customer bases and spread risk, but it comes with its own dangers. Should leading companies learn from Westpac, or are there warning signs in the words and actions of its rivals?
Why companies maintain multiple brands
Companies pursue multiple brands for three key reasons.
The first is to do with risk, explains Dr Simon Bell, a professor marketing at Melbourne University.
“When one brand suffers a reputational hit, having other brands can mean the rest of the products aren’t damaged or affected,” Bell says. “Take the reputational damage to BP with the oil spill. They wouldn’t have suffered as badly across their whole chain if they had multiple brands.”
There’s another way multiple brands reduce risk, according to David Gollop, an executive creative director at marketing agency Huddle Partners.
“You don’t want to put all your money in one place,” he says. “Multiple brands let you spread your bets.
“You’ll always have some brands in decline, others that are growing, and others with potential. If you have an arsenal of different brands, you can manage some down over time.”
The second reason companies turn to different brands is about customers.
When it comes to multi-brand strategies, the masters are fast-moving consumer goods, says Gollop.
“Cosmetics, pharmaceuticals, [vehicle] sales; those sorts of things have succeeded really well with multiple brands.
“It allows them to segment the market across different types of audiences.”
When brands want to extend into new products, sometimes they need a new brand, says Bell. “For example, it’d be impossible to take Coca-Cola into a line of premium watches.”
The third reason isn’t to do with customers, but about internal competition, says Gollop.
“It can keep internal brand managers on their toes, providing that internal competition. They might not be directly competing externally, but if another company’s brand is going really well, that’s pressure to deliver.”
However, multiple brands come at a cost.
Branding expert Michel Hogan says developing new brands can be a way companies distract themselves from dealing with the difficult parts of brand legacy. Sometimes, what should be considered a product line ends up morphing into a new brand, because building a brand, Hogan says, is fun.
“It’s shiny-object stuff. Coming up with the name, with campaigns, thinking of all the marketing trappings… It’s a lot more fun than the hard grind of making sure all your promises and the like are being met to build your existing brand. I do think a lot of it comes out of distraction and boredom, and isn’t always in the best interests of customers.”
Not to mention, Hogan adds, it’s more expensive than maintaining the one brand.
For this reason, she rarely advises it. “Unless there’s a really good reason – for example, if it’s a completely different customer set, and there are few benefits to leveraging the one brand, or if there’s no benefit from previous brand legacies – I frankly discourage people from it.”
Bell adds another danger of multiple brands: too many priorities can lead to companies neglecting to update their brands over time.
He gives the example of Pacific Brands, which owns classic Australian labels such as Hard Yakka and Bonds.
“I think [new Pacific Brands CEO John Pollaers] has a challenge ahead of him.
“Pacific Brands has suffered over recent years, with a probably reason being that they haven’t invested in their portfolio.” Things like product innovation, as well as marketing and communications, have fallen by the wayside for some of Pacific Brands’ most iconic brands.
The bottom line: Westpac says it’s working
Hogan says Westpac’s situation is unique, because most of its brands came about as a result of its mergers and acquisitions.
“To me that’s a little different than an organisation embarking on a deliberate building of new brand entity that is in direct competition to the core of the rest of the business.
“Their choice is whether to integrate the brands, or build on what they bought: a loyal customer-base, which is perhaps already wedded to a particular brand.”
A 2010 KPMG report outlined some of the difficulties banks face maintaining multiple brands in the long-term. As market conditions change for the worse, as they always do from time to time, cost-cutting drives lead to consolidation of back-end systems, and greater sharing of resources between the different brands. Over time, this can lead to a ‘hollowing out’ of the brands, where their unique value proposition isn’t clear.
Sustaining a multiple-brand strategy over time, the report argues, requires explicit targeting of particular customer niches, giving the brands a clear purpose and reason to differentiate themselves from each other. For example, The Royal Bank of Scotland maintains a brand for personal and small business customers, one for high net-worth individuals, and one for insurance services.
Westpac says its multiple-brand strategy has reaped it significant dividends. Kelly recently said it allowed it to target customers that it otherwise wouldn’t be able to.
''There are a range of customers, as we know, that choose St George over Westpac,” she says. “If we didn't have a St George, they wouldn't choose to bank with us.”
Answering her critics, Kelly said she’s bemused by those who say multi-branding is high-cost. “You just can't see that in the numbers.''
But as the KPMG report shows, multi-branding is a long-term haul. Westpac’s experiment has some way to run.