Too many Unions?

A merger with Norwich Union spells the end of the CGU brand – only two years after it was last rebranded. Will the resulting confusion damage public trust in the company? Charles McKelvey reports

This week, a new financial services brand will attempt to take the UK market by storm with a nationwide advertising blitz under the caring, sharing strapline “Together we’re stronger”.

But this “new” brand is not simply another global giant looking to tap into the lucrative

UK pensions market. It is none other than the very old – and very British – Norwich Union, whose brand has emerged as the dominant force from February’s &£19bn merger with CGU.

CGU, which was itself only created two years ago from the &£14bn merger of Commercial Union and General Accident, has spent millions of pounds promoting its brand. Yet the new holding company, CGNU, believes the brand is simply not strong enough to convince UK consumers to hand over their hard-earned cash to invest in its life assurance policies.

The new advertising campaign through McCann-Erickson, estimated to be costing more than &£11m, deliberately avoids any mention of the merger – or of the CGNU or CGU brands.

McCann London chief executive Ben Langdon explains: “There have been numerous ‘merger’ campaigns, but we wanted to steer clear of that. The new ads build on the ‘heroic’ theme of our CGU strategy. The financial services industry is often associated with the negative things in life – erroneously, in my opinion.

“We have tried to promote the positive side of the business – to show that investing in these products can bring families together and make them stronger. The ads highlight the universal truth that although people are diverse, we all share the desire to make plans for loved ones.”

But only last year, we were being told that CGU was the brand that could fulfil all our financial dreams.

Strategy switch

The original CGU strategy was devised by Publicis in 1998. The resulting &£9m campaign launched the new entity, with the strapline

“CGU and You”. Yet only a few months later, the account was switched to McCann, which then ploughed another &£9m into a fresh press, poster and TV offensive.

These ads, which turned the strapline on its head to proclaim “You and CGU”, aimed to make the consumer the “hero” by showing people using CGU products to provide financial security for their families or for the future.

The company also spent an additional tranche – estimated at up to &£10m – on building the brand through sponsorship deals, including backing UK Athletics, the sports governing body, and the England & Wales Cricket Board’s national cricket league.

All this investment – nearly &£30m – now appears to have been poured down the drain. How can a company that portrays itself as a responsible financial services business justify such huge expenditure for no return? Was it all a waste?

CGNU insists it wasn’t. A spokesman says: “When the Norwich Union deal was announced, we said we would play to the strongest brand in each territory. Although the CGU branding was very successful, we felt that Norwich Union was a much stronger brand in the UK.”

Brand evolution

NU Life sales and marketing director Peter Hales adds: “The familiarity of the Norwich Union name in people’s minds is a tremendous asset for us to take forward.

“Brands do not stand still but inevitably evolve over time to respond to changes in the market. Post-merger, our objective is to redefine the Norwich Union brand to reflect the larger, powerful business we have become.”

Some believe he has a point. Simon Jones, a partner at branding consultancy Interbrand Newell & Sorrell, says: “CGU should not be criticised for spending money promoting its brand, because it would not have known that further consolidation was on the cards and it could not stand still. It would be a bit like saying ‘I’m not going to polish my car today, because it could rain tomorrow’.

“The group has obviously done its homework and realised CGU was not strong enough – at least Norwich Union has some consumer recognition.” Hales, incidentally, claims the company’s research shows Norwich Union enjoys 100 per cent recognition, compared with 78 per cent for CGU.

But the group will still operate under a host of different brands, including CGU and NU, in most of its overseas markets; in the Netherlands, it is branded Delta Lloyd. Many believe this strategy could ultimately undermine its ambitions to be a truly global player.

International rivals, such as French giant Axa and German group Allianz, maintain the same branding through all their markets. One of the few brands Axa still retains, for instance, is PPP Healthcare, but it has now decided that this, too, will be rebranded Axa Healthcare (MW July 20).

But the whole sector’s rapid consolidation – and the massive costs involved in branding and rebranding activity – raises doubts about whether it is possible to build strong brands in this market. And, specifically for CGNU, there is a risk that consumers will be completely confused about what is going on – one day they are with CGU, the next Norwich Union.

Impact on customers

One insider admits this could affect existing CGU policy-holders, although the company has launched a major relationship marketing programme to its customer base to explain the reasons behind the new branding strategy. He adds: “It will not affect general consumers because it is a completely new proposition.”

But one source suggests that the Norwich Union brand is itself only an interim measure and that the next round of consolidation will bring with it a new name.

The CGNU spokesman strongly denies this. “There are no further plans for consolidation,” he says, although many analysts believe it is almost inevitable.

One City analyst says: “Consolidation of the financial services industry is being driven by the desire to grab market share – not by how that might affect the brands. Brands take a back seat in these companies – the whole sector is driven by the urge to make a return for the shareholders and be the biggest in the market.”

For ad agencies, sponsorship agencies, branding specialists, designers and all the other marketing services providers, this brand confusion is good news. They are becoming rich, as companies rebrand every time there is another round of consolidation. But with new deals emerging almost by the week, is the sector turning into a branding nightmare?

More to brands than TV ads

David Gray, a partner at branding consulting Creative Leap, says: “The bigger the organisation, the more faceless it becomes. Far too many companies think they can build a brand by spending millions of pounds on marketing campaigns. Yet brands are not built on TV alone.

“It’s all about getting consumers to connect with your brand. You could question what CGU stood for in the first place: did anyone really understand it? At least Norwich Union actually stands for something in the UK, where it has heritage. But whether it will have any resonance on a global scale is another matter.”

And it would appear that all the negative publicity the sector has attracted in recent years – from the pensions mis-selling scandal to the endowment fiasco, and even Barclays’ insensitive “We’re a big bank” ads – have made it difficult to overcome the poor image.

Interbrand’s Jones says: “Years ago, banks and financial services companies were popular. The bank manager was a respected member of the community, rather like Captain Manwairing in Dad’s Army. But now, they are universally loathed. And that is a massive challenge for anyone trying to build a brand.

“That’s why the likes of Direct Line, Egg and First Direct have been so successful – they have managed to distance themselves from the image of greedy banks.”

“Yet no one really wants to buy financial products – they are a forced purchase. People take out an insurance policy because they have to, not because they want to. It’s not like consumer goods marketing, where you can say ‘this product does x, y and z, now buy and try it’. It can take years to see any tangible benefit from a finance product.”

Gray pinpoints another problem for the sector: “Branding has never been at the top of the agenda for the finance industry. Most companies have just sat back and waited for the money to come in. They haven’t had to go out and find customers.

“Most consumers would like to switch banks but can’t be bothered. Finance houses have made the most of this inertia. But with new entrants eating into their market, suddenly they’ve realised that they need to overturn the negatives and are just throwing money at it.”

All of which will line the pockets of advertising agency executives – not to mention the branding consultancies – in the near future. But in a few years’ time, when the sector has consolidated to three or four global players – as most agree it will – ad agencies are likely to lose out as big budget rebranding campaigns will disappear and be replaced by low-cost price promotions and relationship marketing programmes.

Advertising chiefs would be wise to take heed of the small print which they are legally required to run on all finance ads: “Past performance is no guarantee of future returns.”

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