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HBO Bank of Scotland Halifax

Will Lloyds Make Mince- meat of HBOS?

By The Drum, Administrator

October 2, 2008 | 14 min read

Since Lloyds TSB announced the £12.2 billion takeover of Halifax Bank of Scotland speculation has been rife about how the various marketing teams will be affected and which brands will survive.

It’s been the biggest story in UK business this year and has, or will, affect pretty much the whole of Britain, from the Prime Minister to the man on the street.

The news that Lloyds TSB had agreed to buy HBOS for £12.2billion came as a shock to even those who thought they were in the know. Just the night before the announcement, Robert Peston, business editor for the BBC, was on the Nine O’Clock news stating that HBOS was in the best state it had been in for more than a year, a clear indication that no one, not even the institution that is the BBC, really knew this was happening!

However, on hearing the news Richard Lambert, director general of the Confederation of British Industry, said: “It is sad to see HBOS lose its independence in this way but we needed a good market-driven solution to deal with these speculative attacks on the Bank.

“This looks like the right outcome. Lloyds TSB is a strong, well capitalised institution, and the new entity will be well placed to withstand the current turbulence. The Government and the financial authorities also deserve credit for making it possible in a timely way.”

In the fortnight that has passed since the announcement very little else has been revealed with speculation rife, and very few hard facts coming out of Lloyds TSB.

Fears for jobs as the two brands merge, especially at HBOS, have been confirmed. Questions as to how the brands will progress and operate as one company are likely to remain unanswered for some time yet, although the news that Lloyds TSB’s sponsorship of the London Olympic Games in 2012 will be rolled out across HBOS has indicated that the brands look likely to live on.

Scotland’s First Minister, Alex Salmond is to have personal talks with Lloyds TSB’s chairman Sir Victor Blank in a bid to maintain the company’s HQ in Edinburgh. If successful he is likely to minimise the impact felt by job losses in Scotland, although Lloyds TSB does already have offices in the city. However, Peter Nowell, who heads up Brand Vista, says that the ‘real issue’ the newly formed entity has yet to debate is how it can best use its resources in the interest of its customers.

Redundancies

“The debate thus far has focused on which brands may continue to exist, and which may disappear, and which group of employees will bear the brunt of the anticipated redundancies,” says Nowell, who believes that more attention should be focused on what the consumer wants from the bank, how it can differ from its competitors and the brand’s critical processes and behaviours which will be required in order for it to deliver.

“Then, and only then, would I consider how to rationalise the current brand portfolio. By aligning the brands with the markets they serve, what to do with the brands will become self evident and informed.”

As for the future of the marketing services agencies that work with HBOS, Lloyds or any of their associated brands, well, that is yet to be seen.

Certainly none have been informed that they must repitch for any business, and if the brands such as Lloyds TSB, Halifax and Bank of Scotland continue to be steered as they are currently, then there is hope that the current ‘business as usual’ response can be maintained.

Certainly, The Drum understands that when HBOS was looking for a Scottish agency to work on Bank of Scotland’s Scotland-only campaign, the brief sent out to pitching agencies explained that the move was to appease its BOS staff and customers as it was felt that the brand was being eroded through the use of rebadged Halifax adverts starring Howard.

Meanwhile, it was also stated in the brief that Royal Bank of Scotland was strengthening its brand position and that the company would need to deliver outside of London to counter this. Perhaps a lesson has been learned here, which may ensure that agencies are retained due to their understanding of the individual brands.

Fergus McCallum, chief operating office for TBWA\Manchester, says that “on paper” the merger of Halifax and BOS “looked great” but in the end has not worked.

“Halifax had a market-leading position as a mortgage provider and geographical strength in England and Wales; Bank of Scotland was primarily focussed on Scotland and brought expertise in both personal and business banking. However they never really seemed to find the right fit together. Howard clearly didn’t resonate with the Scottish consumer and the two brands always felt like they were making compromises for each other.”

Kevin Scott, MD of TeamSpirit in Edinburgh, agrees that the BOS brand lost a little bit of ground in Scotland, but also points out that in recent months some ‘de-Halifaxing’ has strengthened the BOS presence in its heartland. “Still,” he continues, “it’s all ifs, buts and maybes at the moment. We’ve seen the proposed post-merger name of ‘Lloyds Halifax’ which, on the face of it, raises questions about the future of Scotland’s oldest banking brand. But, if the most recent HBOS experience is considered and the new management team see that Lloyds TSB appeals to a very different type of customers than Halifax and again The Bank of Scotland, then I think we could see each brand flexing their respective marketing muscles into distinct niches, sectors or channels.”

Current Confusion

Steve Clode, former head of marketing at Nationwide and now marketing director for Aegon UK, says that the HBOS brand is only truly recognised within the corporate market and believes that extending the number of brands within the merged stable will increase confusion.

“HBOS, in particular, already has multiple brand identities so the merger with Lloyds will mean the brand stable will become too confused with multiple brands playing in the same space. They are more likely to choose the strongest brand in each case and put their marketing efforts behind that. I can’t envisage going into a Lloyds branch and seeing both C&G and Halifax mortgage sections. The Bank of Scotland name could be retained, for example as the corporate banking brand.”

Gus Chalmers, managing director of Union Direct, claims that the danger for the merged Lloyds TSB/HBOS business is that such a large, dominant concern will mean consumers equate large with impersonal. “Lloyds need to ensure that doesn’t happen,” he says, “And rivals will attempt to exploit that perception. At the end of the day it’s down to individual experience and service at every consumer touch point.”

Following the move there is no doubt this will open the door to other competitors to market themselves against the merged company, as it is unlikely that Lloyds, Halifax and Bank of Scotland will compete against one another.

According to McCallum: “NatWest and RBS are probably already polishing up the creative, which reflects an ongoing commitment to strengthen their branch network.”

However, TeamSpirit’s Scott says that the big issue facing the banks at the moment is the lack of liquidity, which in turn is inhibiting their marketing strategies.

“They are focusing on savings propositions and not lending to gain market share, however this territory is very competitive already and dominated by online brands, so they may want to look at very different propositions to attract new customers – such as the soon to be launched Metro Bank, the new venture from Commerce Bank’s founder Vernon Hill debuting with a seven days a week, service-focused proposition.”

If the new financial entity is to decide to consolidate its marketing business, this would, of course, have some wide-reaching implications for its agencies.

The agencies involved mainly herald from London with Lloyds TSB currently using Rainey Kelly Campbell and ZenithOptimedia employed to handle its media.

Following a much criticised pitch recently, HBOS retained Delaney Lund Knox Warren on its £18m advertising account, while Vizeum is its media agency. Rapier handles Lloyds TSB’s £40m DM account while the Halifax DM is held by Ogilvy One.

However, the financial giants also work with numerous Scottish and regional agencies across a range of disciplines. Newhaven in Edinburgh won the Scottish BOS ad account in 2007, while Elmwood has worked on both the HBOS annual report and website. Also working with the Bank of Scotland is Mightysmall, which has been brought in to work on a sponsorship campaign.

Glasgow-based Pointsize Wolffe and Co has designed the Lloyds TSB Scotland annual report for the last two years; and Proteous in Bristol has also recently worked with Lloyds and HBOS on communications materials.

JDA Group; Teamspirit; Altogether Digital, Feather Brooksbank and Tangible also work with HBOS, with Wallace Barnaby & Associates, JDA Group, Avian and Factor 3 Communications working with Lloyds TSB.

So far these agencies have not seen any change in their working methods following the news, as Julie Allan, head of Tangible Scotland, says that the agency – and other marketing agencies working with HBOS – had been informed that things would continue as normal.

“As far as we are concerned everything has continued on as business as usual and we are discussing the marketing strategy as planned.”

With all that is going on including Bradford and Bingley’s nationalisation, the US Government fighting for a $700 billion bailout of the market by the treasury and rumours of further banking collapses on the horizon – it could be decades before banks are able to fully re-establish confidence with consumers again. Certainly the marketing departments are going to be working overtime in an effort to minimise the damage in the meantime.

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DON’T DUMP THE HALIFAX

Katrina Michel,

Co-Founder,

Planning Express

That Halifax ad with the cheeky chappie Chinese bloke singing “I’m in to something good” came on whilst I was watching TV on Saturday. My husband grunted: “I don’t think so mate. You’re toast”

But is he? A poll on the Marketing Week website shows that 69% of their readers felt that Lloyds TSB would be bonkers to axe the Halifax brand. And they are right. I’ll tell you why.

The thing that always depresses newcomers to research into financial services is that a so-called strong brand in financial services is relatively weak compared to a strong brand in other sectors. How do I know this? Well if you look at the % of shoppers who say Tesco is “the only brand for them” it is probably around 30% which explains why over 10% of all spend in UK retail heads into their coffers. They are clearly doing something right. And there are many other correlations between ultimate brand preference and market share – Nokia, McDonalds, Nike, Coke, Apple.

However when we ask consumers about “the only financial services brand for them” there isn’t a single brand that gets double figures. There could be many reasons for this – consumers too savvy to want to put all their financial eggs in one basket or too much regional sentiment for any brand to really stand out. In 2007 the top five financial services brands based on consumer affinity were, in reverse order, Lloyds, NatWest, Nationwide, HSBC and Halifax. It may be that in the kingdom of the blind the one-eyed man is king, but in financial services Halifax has achieved something special – people actually like it!

There are two reasons why Halifax sits on top of the pile. First up its product promise is relatively simple and consistently delivered. It always gives you Xtra. It is effectively the Tesco of the banking world and delivers a banking equivalent of “every little helps” via good value products which are relevant to the vast majority of people in the UK.

Secondly its style of marketing whether you like it or loathe it is populist, upbeat and has a light touch in a sector where that is not the norm and is very unlikely to be the victim of brand confusion or misattribution which means every pound spent generates awareness for Halifax.

The $64,000 question for Halifax, in light of what has happened to it over the past few weeks, is about trust. Until HBOS’s fall from grace Halifax was the second most trusted financial services brand in the UK after the Nationwide. Maybe the innate conservatism and respectability of Lloyds TSB will reassure customers and prospects that the wayward child has been got quickly back onto the straight and narrow? Or maybe the reserves of goodwill the brand clearly has will give it the time it needs to regain some traction? I think that like M&S, people will give it a second chance.

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ALL BANKS NEED TO REBUILD CONSUMER TRUST

Ken Symon,

Director, McGarvie Morrison Media

& Former Business Editor, The Sunday Herald

Banks in the UK and in the US face the biggest challenge to their reputation for decades.

Prestigious names with proud histories, which were apparently impregnable, have already been swallowed up by others.

The speed and suddenness of the unions have taken the breath away but when it comes to it the possibility of extinction really concentrates the mind.

Shotgun weddings are always preferable to be being shot.

There are huge lessons to be learned from these troubled times for all parties, the banks, regulators, government and, dare I say it, the media.

It is too early to draw the big picture lessons but the credit crunch has already underlined the importance of companies getting their communication right. In the case of Northern Rock that certainly did not happen. The company and the Financial Services Authority need to look carefully at what they did or failed to do there.

And one of the big ironies of the whole credit crunch is the role of Lloyds TSB. A year ago the bank was being described as unadventurous and dull. It is now proving a safe haven to take HBOS in its arms.

Getting your strategy right is not enough. You need to communicate well and be prepared for all eventualities including worst-case scenarios.

As with any crisis you need to hit the issue before it hits you. There was no sign of a clear, concerted message and getting that message out early in the right places to prevent what became a run on the bank that became unstoppable.

In the early days of the credit crunch affair how many media interviews were there with senior figures form the boards of UK banks? The answer is one, and that was Lord Stevenson, chairman of HBOS.

But it was too little too late for many of the banks getting their message across that their capital base was secure.

Trust needs to be regained with customers and the relationships improved or better still built anew. There is much work to be done there by banks and other financial institutions.

This is particularly true for a merged HBoS/Lloyds TSB if, as is expected, that does go ahead.

It is interesting to note that AIG, the American insurance giant took a full page advert in last Friday’s Financial Times - not a cheap move - for a letter from chairman and chief executive Edward Liddy to its customers and business partners.

It is short and the messages are simple and reassuring: “Thank you for sticking with us”, our companies remain strong and I’ll be communicating with you in future.

Have we seen the same, simple reassuring messages from UK banks as they have been under the cosh? No. Banks that are reeling in the storm need to get their message straight and get back on the front foot.

HBO Bank of Scotland Halifax

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