Invisible Brand

CCHM MD Paul Gordon considers the intriguing inferences of a recent CCHM research study.

If you’re in the mortgage business (or, indeed, if you are responsible for the marketing of other retail financial products) the diagram above could be worth a few minutes’ study. It’s an encapsulation of the findings of some toe-in-the- water research we carried out at the end of 2003 to establish whether strong financial services brands have any real edge in a market as cut-throat and cost-conscious as mortgages. The litmus test, we felt, was whether financial consumers would be prepared to pay any kind of premium at all for the reassurance of having their mortgage with a major brand.

It is far too early to state with any certainty that we have found a seam of gold or that we are being seduced by the glitter of iron pyrites but, fascinatingly, the initial indication is ‘yes’ – 68% would be prepared to pay a premium, and on average, 7.34% would be acceptable.

The work was carried out by Omnibus Survey and the sample, although national and demographically representative, was not huge. I am, therefore, a little cautious about the findings, but unquestionably intrigued. In the course of analysing the stats, our planners were able to identify four broad attitudinal groups, which we have incorporated into our diagram.The groups are defined as:

• Cautious – they represent 30% of the sample and are risk-averse planners.
• Ostriches – at 37%, the largest segment. Not interested in taking risks, nor in planning ahead.
• I know what I’m doing – at just 10%, the smallest segment, they’re prepared to take risks, but on the basis of a clear plan.
• Go for its – the remaining 23%, who are prepared to take risks without worrying about planning ahead.

What can we learn?
At this stage, I’d be more inclined to say ‘What can we surmise?’ But overlaying these attitudinal segments with their demographics and their propensity to pay a premium for a brand makes interesting reading. Arguably, the ‘Go for its’ are the most interesting segment since their less structured approach to financial planning Propensity of each attitudinal group to pay a brand premium and relative lack of caution makes them prime candidates to secure some kind of reassurance from brands. This is endorsed by the fact that they have by far the highest propensity to pay a premium (if not the highest level of premium) for a brand.

The ‘Ostriches’, too, have an above-average propensity to pay a premium and this, too, could be attributed to their disengagement with financial planning and the resultant need for some emotional security. It follows in reasonably convincing fashion that those who are most comfortable about taking risks (because they believe they have a clear plan) have the lowest propensity to pay a brand premium.This is the ‘I know what I’m doing’ segment.
Does it stand up?

Inevitably, there are some hard questions left unanswered by this small study.
For example: we all know about propensities, but how do you accurately target the people who exhibit them? (We may have indications of demographic bias, but how reliable are they and how cost efficient would it be to reach a niche within this profile?)

And: how do you deal with the fact that, in this market, there are quite a number of strong brands operating in cut-throat price competition, so why, in such circumstances, would you need to pay any more? (Or is it that all the major brands already enjoy some real, or unrealised, price premium potential over other operators? If this is the case then the real opportunity lies with the unbranded, or poorly branded second tier.)

Another consideration: does the real-life mortgage purchasing behaviour of respondents accord with their answers? Is there any empirical evidence of consumers actually choosing to pay more for a mortgage, simply because being with Halifax gives them the warm feeling of ‘a little Xtra’?
Further exploration required

We do not have answers to the hard questions yet but, like the lure of gold, the idea that a defined investment in brand might generate a defined premium in revenue is something too tantalising to let go of easily. We hope to probe a little deeper into our attitudinal mine, perhaps in partnership with a like-minded client, in the months ahead.