Why banks are sub-branding new customer offerings

Financial organizations have been dealing with a technology-driven shift in culture from the inside out. One way they're dealing: New sub-brands. Marcus by Goldman Sachs, for example, touts itself as the startup inside Goldman Sachs that built an entirely digital personal loan product for consumers — a new set of customers for the 148-year-old company. Two weeks ago JPMorgan Chase introduced Finn, an app for people who would rather skip the branches for completely mobile checking and savings accounts with personal finance tools. Last week, Wells Fargo announced a similar offering called Greenhouse, a standalone mobile banking app with digital-only accounts and personal finance features. One big reason for the shift is a focus on customer centricity. As financial brands strive to connect with customers in more specialized ways — because offerings have a more off-brand indication or target specific audiences — they’ve been looking for ways to stand for something different from the master brand. It doesn't hurt, especially, when the parent brand is mired in other issues. “In each one of these theres a recognition and opportunity to go after different type of customer,” said Michael D’Esopo, a senior partner and director of brand strategy at Lippincott. “In the past it was about leveraging a master brand and now with the advent of technology and digital marketing, companies are able to try a different approach to a different brand that speaks to customers more specifically.” For large legacy institutions, it’s hard to make changes and scale them both across the company and the consumer base. For banks, it’s much easier to create and brand an entirely new experience, which is partly why they’re launching things like Marcus, Finn and Greenhouse. Doing so also ends up being a sort of innovation showcase for their peers and prospective employees. Historically, consumers have viewed Goldman Sachs as a brand for large institutions and high net worth individuals, according to Dustin Cohn, head of brand and marketing communications at Marcus, citing research the company did as part of the development of the Goldman Sachs sub-brand. It became obvious that consumers had the sense Goldman Sachs isn’t a brand for Main Street and whatever consumer product it would be offering probably wasn't for them, he said. Differentiating Marcus from Goldman Sachs doesn't just give confidence to Marcus customers, it also helps avoid alienating long-time Goldman clients. “Banks’ brand names have been built over the years to stand for strength, gravitas and rigidity and that message is less relevant today in an agile, rapidly-changing market,” said Allen Adamson, founder of BrandSimple Consulting. “For younger consumers, that’s not what they're looking for in any brand, they want something simple and clear.” While sometimes it may seem easy to create a sub-brand, "they have to deal with creating something new in the shadow of something big," Adamson said. Millennials, who most companies focus their marketing on, aren't likely to forget the national scandals around Goldman Sachs in 2008 or Wells Fargo last year, for example. "It’s a tricky thing." Cohn said the company considered some 2,000 names before landing on Marcus -- after Marcus Goldman, the founder of the company. The list included simple names like “Goldman Sachs Lending” as well as things that sounded completely unrelated to the company. The problem with that, he explained, was it created doubts among potential customers, who responded negatively to names they didn't recognize, potentially couldn't trust with their money. Essentially, they doubted if a company with a new name would survive a year or even a month. “We knew that that would be an uphill climb to create awareness and trust and credibility in the marketplace with something brand new,” Cohn said. Adding “‘By Goldman Sachs’ was the perfect balance of incorporating what consumers liked about Goldman Sachs” — that it’s been around for a long time and has strong technology and financial experts — “but also signaled it was something new and different and something that may be relevant to these main street consumers.” Donna Vieira, chief marketing officer for Chase's consumer bank, agreed. "A sub-brand allows us a sandbox to rapidly innovate and learn from consumer preferences and behaviors, while maintaining the core Chase brand which our customers know and love," she said. Marcus is, at the end of the day, just another loan product. It’s a competitive offering — it promises no fees ever and allows borrowers to choose what day they pay their loan back. It’s also an innovative product — an personal loan built entirely digitally without any of the rusty infrastructure or other baggage that comes with legacy brands. But operating as a startup within Goldman Sachs is an innovation on its own that Goldman can showcase to its competitors as an example of how innovative it really is, as well as potential new tech-savvy talent. As of September, 46 percent of jobs at Goldman Sachs are in technology, mostly for core platform roles, followed by operations engineering and then equities technology. “There’s this pressure to grow and get into new areas … This is an important part of showing they can look outside the classic areas of where their brand is strongest.” D’Esopo said. However, he added, that only works if the bank actually has a good product or service offering that’s relevant to the customer. In some cases, banks will sub-brand because a product is different; in other cases, they’ll do it because an experience is different. Increasingly, it will be more about the latter because when companies have to be fast-moving in a slow industry like banking, it can be difficult to have sustained product innovation that doesn't get copied quickly. However, “the experience can feel different and if a sub-brand can promise that experience and then the parent company can come through and deliver it then I think you’d actually get something people connect with and remain loyal to,” D’Esopo said.