Henderson Investors, the old school City investment house, which one year ago adopted a spanking new logo and a man-in-the-street attitude, has had to admit it cannot compete in the mass market financial services arena.
Marketing director Lindsay Firth-McGuckin’s abrupt exit last week brought an end to a period in which Henderson tried to persuade itself, and the outside world, that it was something other than a stuffy City house.
She was hired to create a consumer brand. Her departure can only be read as the company turning its back on that idea and it will add to the impression that price-driven financial service companies cannot develop brands. An accusation levelled at banks, building societies, investment houses and insurers in the past.
Talk 12 months ago was of “brand values”, whereas before it was all “net asset value” and “C-share issues”. In short, Henderson was trying to talk the language of the consumer. At the time, Firth-McGuckin admitted that she wanted to “do a Virgin” and replicate the performance of Virgin Direct, which took 200m in investment funds in its first 12 months.
The fulcrum of Henderson’s branding change was a catalogue containing descriptions of all the unit trusts and investment trusts which the company offered, along with idiot-proof explanations of what the funds invest in and how risky an investment they represent.
The official explanation for the departure of Firth-McGuckin was that her job has ceased to exist. James de Sausmarez, architect of the changes at Henderson and the person who appointed Firth-McGuc-kin, is also surplus to requirements and has left.
With Firth-McGuckin’s departure, Henderson’s marketing for retail customers has been merged with that for institutions. It has all been placed under the control of Mark Lund, currently director for group institutional and international investors. The catalogue will either be scrapped or completely redesigned.
Even the 3m sponsorship of the Williams Formula One racing team, a deal which Henderson used as much for corporate hospitality as for brand building, will be dropped when the contract expires at the end of the year.
So what lessons can be learned by others marketing financial services from Henderson’s experiment?
The first point is that trying to give a brand to a company which has previously been faceless, and which sells products which are perceived as being complex and boring is very expensive.
“The competition in this area means we cannot afford to compete,” admits Henderson group managing director Dugald Eadie, explaining the U-turn. He estimates that to launch a successful consumer financial brand takes a minimum investment of 5m a year.
But the Henderson management must have been aware of this when it embarked on the changes. And the company has already spent 5m this year, largely on the Williams deal, but also on an ad campaign through DMB&B Financial.
Peter Emms, group marketing and sales director of rival investment house M&G, says: “You also need a substantial existing customer base to launch an investment brand. The easiest way to sell financial products to people is if they know you already.”
Firth-McGuckin was one of the few marketing directors in the investment business from a marketing background – most move over from the operational side. Many fellow financial service marketers may see her departure as just reward for trying to buck the system.
Laurie Olsen, chairman of the specialist agency Publicis Financial, says the difficulty lies in the nature of the product. He illustrates this by citing Tesco, where the customer comes into physical contact with the Tesco branding and has immediate experience of what differentiates it from Sainsbury’s and Asda.
David Kyffin, managing director at Henderson’s media buyer The Media Business Direct, says: “There are a number of people who should and could invest money, rather than putting it on deposit. Henderson was starting to target these, but this has to be a longer-term strategy. Often for the less sophisticated client, brand values are more important than the performance of the product.”
Henderson is now moving in the opposite direction – focusing on the product and not the customer.
A recent Mintel report on marketing and financial services shows that Marks & Spencer is the most trusted financial services provider. It also showed the inadequacy of financial services advertising – in many cases customers remember straplines from financial services ads but cannot distinguish the characteristics of the companies.
Eadie says Firth-McGuckin’s initiative has not brought results. In the year to the end of March 1997, 7.7bn of consumer money was invested in Henderson funds, compared with 6.9bn to the end of March 1996. Eadie claims the bulk of that increase is due to three new funds, which have been launched over the past year, and estimates that about 65 per cent of the 800m increase is the result of stockmarket rises. The point being the branding campaign had played no visible part in this success.
However, other observers say it is impossible to judge the success or failure of the venture within only 12 months. Barclaycard has a strong brand, and the Rowan Atkinson advertising campaign has given it character. Direct Line has its red phone and First Direct has a slick, stylish image. These brands have been built using classic marketing techniques of differentiation and clever advertising – over time.
M&G, the company which created the unit trust, is half-way there. It was one of the first investment houses to advertise to the general public, with posters on railway and London Underground station platforms. However, as the Mintel survey quoted above shows, it is unlikely that the man in the street could talk about M&G as a brand.
Save & Prosper is now trying to take up where Henderson has left off. It has appointed the former Mars marketer John Humpish marketing director (MW October 8). However, it has the advantage over Henderson of already having a presence in the retail market through the Save & Prosper credit card and its previous sponsorship of English rugby.
Some observers believe that 18 months ago Henderson was being squeezed in the institutional market, and saw developing the consumer side as a way of easing its financial pains. But once the institutional side recovered, the argument goes, it then decided that it no longer needed branding. It might be the right decision. But it seems that there are companies like Virgin, M&G and Save & Prosper which disagree.