Tuesday, 10 September 2013 00:00
One of the highest spenders on advertising and promotions in Sri Lanka is the banking sector of Sri Lanka. Given the many issues we have seen globally and the stringent protection measures adopted in Sri Lanka, this sector has remained stable even though globally things have been rough. Let me take a case in point to discuss the implications of the need for balanced growth in organisations between financials and branding and how a business issue causes a hit to a brand.
Advertising spend 2013
The latest research reveals that the advertising investment in the first half of the year of 2013 is at Rs. 34 billion. The leading spenders are telecom companies, with 3.7 billion – Dialog is powering the industry with Rs. 1.3 billion – and then comes the banking industry at Rs. 3.01 billion, with the leader of the pack being HNB with Rs. 455 million.
There are no exact leaders on spending in the finance and leasing industry but on milk powder the Rs. 1.2 billion is interesting given the challenge the industry was up against in the last few months. Let me take the banking sector and do a deep dive of an organisation to understand the branding and finance engagement and implications to a brand when a business issue hits an organisation.
Seylan: Worth Rs. 3.8 billion
According to 2012 Brand Finance, Seylan Bank is worth Rs. 3.8 billion, where the brand value has spiked by 15.6% whilst revenue growth has been 2% and net profits have doubled to Rs. 2.1 billion, which is a strong performance.
The brand value going up in absolute terms by almost 0.5 million is a healthy situation on the premise of an overall balanced approach of growth. The performance link to the share price from Rs. 67/60 to Rs. 69/10 is also a strong performance on the confidence of the shareholders, though it must be noted that in Sri Lanka sentiments drive value rather than fundamentals.
Case study for Sri Lanka
The reason for the revenue hit in 2009 to 2011 was the holding company issue – the Ceylinco debacle. It’s a brilliant case study to explain the power of a brand in today’s economy, especially in Sri Lanka where such real life case studies do not get discussed due to an absence of information.
When it comes to a bank, the sales revenue/interest income is based on the portfolio that is carried by a bank in a given time period. When an unforeseen event like the Ceylinco debacle unfolded together with the overall trading issues in the country, it resulted in the portfolio mix changing and this impacted the overall top line, which is why year-on-year there was a decline during the said period.
The biggest drop was in 2010 at -13.48% and then with some prudent decision making the business turned around to -3.1% in 2011 and finally registered +2.4% in 2012. The good news is that the trend continued to be positive in financial year 2013.
A point to note is that in 2008, at the height of the problem, even when sales increased by 19.8%, net profit dropped by 83.2% to 155 million from the 923 million recorded in 2007. But thereafter with some strong decision making this was corrected and the 113.4% increase in 2012 to Rs. 2.1 billion profits was an excellent performance by any standard.
In 2009, the advertising expenditure was Rs. 135 million and then bolstered up to Rs. 255 million and now it has settled at Rs. 380 million as at 2012, which was a strategic decision that helped regain customer confidence. I guess that is the power of advertising and promotions. The 89% increase in 2010 helped steady the business and achieve a 3.8 billion dollar brand value.
Given that the overall brand and business is stable now, the bank needs to cut through branding across the service mix. What this means is at every touch point to ask if the organisation is delivering the promise at the branch end.
If we take the experience of strong multinational banks, the first step is to do a mystery customer audit across a representative cross sections of branches and the document very carefully the gap in experience on brand promise and current delivery. This must cut across the portfolio, starting from current account opening to cashing a cheque and issuing an LC, to name a few. Thereafter, a clear cut strategy must be chalked about where top down KPIs (Key Performance Indicators) are agreed. This is where training is targeted.
Cinnamon Grand is a case in point; it did this effectively when the rebranding happened and it was called the ‘Cinnamon Magic’. This same thing can be action by Seylan Bank as the process and knowledge is in the country with learning experiences. Maybe fine-tuning brand imagery elements is also required to give coherence and sharpness to the brand.
An important element in modern day banking is to how much technology is wrapped around the brand and how much one goes digital in communication given that Whatsapp has replaced SMS, YouTube is taking over DVD sales and Facebook is taking away life from a consumer.
(The thoughts are strictly the author’s views and do not reflect the organisations he serves in Sri Lanka or internationally. Rohantha is a Board Director on many private and public sector organisations and is a respected thought leader and sought-after speaker in Sri Lanka.)