There is a saying: ‘Put not your trust in money but put your money in trust’.
Which means put your money in an institution you trust. But as a company, it is a huge challenge to create trustworthy brands, especially in the financial services sector.
Mutual funds are all over the media, advertising various investment options — so much so that an investment portfolio is considered incomplete if it doesn’t include at least a couple of them.
Despite the organisations’ warnings — ‘Mutual Funds are subject to market risks. Please read the offer document carefully before signing’— not many people actually go through these documents. Information on an MF’s performance and history are available so freely that each MF has become a well-known brand in itself.
So what has really changed in the way we buy this financial service? The answer lies in the larger question: how have brand choices changed in the financial services sector — across MFs, loans, insurance, pension plans and others?
Brand choices
~ Information seeking : First is the step of seeking information. Thanks to the internet, consumers know a lot more about financial products even before seeking advice from financial advisors. They know the interest rates across products, documentation lead times, past history of the companies, and so on.
The advisors only need to help them analyse and interpret the options rather than share information. So the ability of the company to differentiate its products in this first step — through ‘in-depth varied information’ — is almost nil.
~ Intangible nature : Second, the intangible nature of financial services. If you buy a consumer product, say, a soap, there are many parameters across which you can measure the product, such as size, shape and fragrance.
But services are intangible in nature. There are no touch, see or feel parameters, across which you can explain your offering to customers. Therefore, the opportunity for companies to build brand differentiation in this sector is only through experience — that too, of other prior customers. Only word-of-mouth recommendations or brand referrals can give customers the confidence that they have chosen the right financial service brand.
Umbrella brand
Catering to different customer segments through a single brand is another challenge in this sector. The same organisation may have varying portfolios of products such as loans — home, commercial vehicle, three-wheeler, insurance, loan against property and pension plans, among others.
This means the same brand has to appeal to people of different age groups, different income levels, different social conditionings and other characteristics. This is not easy. The key brand message, the core brand values and the brand personality, all need to appeal to all target groups.
The pricing issue
Pricing is a key aspect in brand-building. The regulatory environment in this sector poses a challenge in terms of consistency of costs. Factors such as fluctuating lending rates and inconsistent stock market performance are bound to have a bearing on the pricing of financial instruments such as loans, MFs and stocks.