How brand attitudes can help improve profits

by Nigel Hollis | March 02, 2016

Recently, I have been involved in a discussion about what the concept of Premium means in the context of banks. Some believe the idea is irrelevant because the nature of pricing for a bank is complex; does a premium refer to lower interest rates on a savings account, higher fees charged, or something else?

It is true that banks offer a wide variety of services designed to meet a variety of financial needs and budgets. However, it seems to me that people do understand that some banks cost more and some cost less. They will also have a perception on whether it is worth paying for a more costly service or not. For marketers, however, the critical question is, do brand attitudes like these have a systematic impact on operating results beyond higher revenues?

The good news is that when it comes to publicly-traded companies like banks where the brand name is the same as the company name we can look at the annual report to identify operating margins. To explore the potential impact of brand attitudes on financial performance, I paired data from BrandZ with data from annual reports for 101 companies, across 10 different categories, including banks.

Bank building

What I found was that high Premium brands (as defined by Millward Brown’s Premium metric) managed to generate higher revenues even though they were perceived to be more expensive than their competition. This might imply that high Premium brands are better able to attract new users but the difference appears to extend beyond an impact on revenues.

The high Premium brands generated 14 percent more revenue than the average for their category. However, their operating margin is 37 percent higher than the average. This suggests that positive brand attitudes are having an influence on the efficiency of the company not just its size. Why would brand attitudes affect operating margin? It seems likely that various customer-driven benefits accrue to a strong brand in addition to stronger pricing power:

  1.  Lower acquisition costs (a complement to the faster growth we saw in the earlier analysis);
  2. Lower churn as a result of higher customer satisfaction and affinity;
  3. And potentially lower customer service costs, due to higher willingness to forgive poor experiences.

The combination of higher revenues and better margins yields profits that are nearly 50 percent higher than the average for their category. By contrast, low Premium brands make 18 percent less than the average for their category.

Central to our discussion about banks, I found the relationship between brand attitudes and profit to be stronger for banks than for other companies like retailers. Why would this be? Because people believe that it is more important to choose the right bank than the right retailer. Almost 60 percent of people think it is important to choose the right bank brand compared to only 30 percent for retailers.

So what do you think? Does the idea of a Premium bank make sense to you? Please share your thoughts. 


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  1. Nigel, March 22, 2016

    Thanks for the comments.

    Eyad, you are right context always matters! This study was a proof of concept that we plan to blow out to a bigger pool of companies following this year's BrandZ ranking. So banks were US, UK and Australian largely confined to the geography in which they were measured on BrandZ and consumer-oriented. To Dave's point the relationship is likely two way. Better managed banks should provide a better customer experience...but then, brands are a sum of all their parts and either way the relationship has positive implications for the brand.

  2. Dave, March 08, 2016
    Could also be the other way round, I suppose - banks with higher margins are likely to be better run.  So more efficient, making fewer mistakes, doing things faster, probably with happier staff and able to reward them better.  Customers will notice this - hence better attitudes.  (Hence less churn, hence better performing financials, etc).
  3. Amitesh Chauhan, March 05, 2016
    It is definitely true. Adding to this, attitude would also create brand pull and hence lowering the acquisition cost as you mentioned.
  4. Eyad, March 03, 2016

    Hi Nigel - interesting blog. I wonder which geography your bank study was based on? It would be interesting also if you could share also the list of banks you've mentioned in your study.

    I buy this to some extent with a few caveats. Different banks business mix will affect their cost base in particular and margins so may not be an apples to apples comparison. For example, consumer banks who have to sustain a physical store network will have a different cost and margin profile to a more commercial bank focussed on SMEs and larger corporates. This can skew the operating margin calculation making some banks look better than others due to their business mix.

    Also, I do think it is highly dependent on the demographics in the geography where the bank operates. For example, in a country where there is a reasonably affluent  middle class with lower income disparity between the rich and the poor a premium positioning might be more appropriate and lead to the outcomes you suggest.

    But I wonder whether a premium positioning in a market where the middle class is being hollowed out and greater income disparity (eg US) would be as successful with this approach. Particularly if they are a full service bank and have to support an extensive store and ATM network resulting in a higher fixed cost base. In that scenario you would need the critical mass to support that cost base and if you are premium positioned in a lower income environment then you will lose share to others with a more "appropriate" positioning. 

    So in my view the context does matter. That is why I think it would be interesting to see the specific banks and geographies you've analysed.



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