Friday, October 16, 2015

Brand Matters

All of us can be tempted to walk in the direction of a “big” brand.
Imagine, if you landed in a foreign country and were suddenly hungry. A man walks up to us and offers two candy bars. One is an easily-recognizable Snickers bar. The second is less recognizable. It may be wrapped in bright yellow and red, colors you don't associate with candy bars. The name is unfamiliar. You can really only do two things. If you speak the language, ask for a recommendation. But you might be suspicious if the vendor suggests the foreign candy, since you don't know him or his palate. His recommendation may be based on his perception of you. For example, if he thinks you cant afford the Snickers bar, he may be swaying you in the direction of a low quality product.  The longer he sizes you up, the more uncomfortable you may feel. Perhaps you skip the snack all together. Or, if you are very hungry, you go with the Snickers, knowing that you are probably overpaying for this expensive and unhealthy treat.

Brand matters, and it matters in particular in communities with relatively little exposure to products.  Financial services are no different, and low-income populations may be especially brand sensitive as making the right choice can be just as much about finding a good fit as it is about not losing face with a bad choice. Big banks get this. Chase and Citibank both have their airtime on Spanish language television in the US, where they are often a first contact between Hispanic immigrants and the financial sector. In a study of Immigrant Financial Services we implemented for the City of New York’s Office of Financial Empowerment, we found that when banked Hispanic respondents were asked how they learned about the bank they used, they said that family or friends (40 percent) were their major source of information, followed by a street or subway advertisement (27 percent). Another significant “push” factor was their employers’ method of payment, where the reason they selected the bank they did was because they received checks from employers from that bank. It seems that advertisements and employer referrals are a starting point, which are then reinforced with referrals in the community.  These factors led to a prevalence of usage of more costly “brand-named” banks rather than credit unions or second-tier banks.  The conclusion is that particularly when information is limitedBrand matters!