· Nationwide Building Society outperforming big high street banks with highest reputation rating (7.3)
· Retail-connected banks M&S, Sainsbury and Tesco show UK customers seeking alternatives to traditional providers
· Despite customer dissatisfaction, switching banks still seen as difficult
View the full Reputation Banking UK report here
Nationwide Building Society’s reputation rating of 7.3 out of 10 is dovetailed by extremely high recommendation among customers (8.1), making it the UK’s most compelling banking brand. According to research by Brand Finance, the world’s leading independent brand valuation and strategy consultancy, only 2% of Nationwide customers would consider a switch to another bank. Nationwide, which has revitalised its building society heritage, is also the brand that customers of other banks are more likely to switch to.
Banking brands like RBS, Barclays, and Natwest continue making efforts in repairing their reputations and balance sheets– but still have much more work to do. UK customers, in the post-crisis environment, have greater expectations of the banking sector and there is a high degree of dissatisfaction in the performance of the banks, undoubtedly connected to the taxpayer bail-out that followed the crisis, along with constant negative publicity around the banks themselves.
In a move towards online banking, most of the major banking brands have announced UK-wide branch closure programmes, which also plays a role in affecting the brand reputation. Brand Finance research proved that UK customers are eager to embrace alternative providers. Retail-connected bank brands such as M&S Bank, Sainsbury and Tesco all perform relatively well in terms of reputation, suggesting customers are looking to embrace brands seen more as consumer champions. But being ‘new’ may not always be sufficient – brands such as Metro and Virgin Money have only a moderate reputation and are not quite the game-changers they may have aspired to be.
As a result, customer discontent is not entirely reflected in the appetite to switch providers. Big factors are general inertia and the belief that switching banks is not easy in the UK and entails multiple hurdles. Efforts from brands to deliver a seamless seven-day-switching service when changing providers has not always been a success and the lack of a truly exciting alternative may also be a factor.
David Haigh, CEO of Brand Finance, commented:
“The UK banking sector as a whole has perception problems to confront and is clearly in a delicate state of transition. UK banking brands are also confronted with ongoing digitalisation and challenger banks providing new, and often dynamic, competition. Some banking brands are adapting well to market evolution, but the future depends on combining new technologies with enhanced customer service, in order to build reputations, strengthen brands and generate greater levels of customer loyalty.”
Note to Editors
Every year, leading valuation and strategy consultancy Brand Finance values the world’s biggest brands. Brand value is equal to a net economic benefit that a brand owner would achieve by licensing the brand. Brand strength is used to determine what proportion of a business’s revenue is contributed by the brand. Data compiled for the Brand Finance league tables and reports are provided for the benefit of the media and are not to be used for any commercial or technical purpose without written permission from Brand Finance.
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About Brand Finance
Brand Finance is the world’s leading brand valuation and strategy consultancy, with offices in over 20 countries. Brand Finance bridges the gap between marketing and finance by quantifying the financial value of brands. Drawing on expertise in strategy, branding, market research, visual identity, finance, tax, and intellectual property, Brand Finance helps brand owners and investors make the right decisions to maximise brand and business value.
Definition of Brand
Brand Finance helped to craft the internationally recognised standard on Brand Valuation – ISO 10668. It defines a brand as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.
Brand Strength is the efficacy of a brand’s performance on intangible measures, relative to its competitors. In order to determine the strength of a brand, we look at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance.
Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding rating up to AAA+ in a format similar to a credit rating.
Brand Valuation Approach
Brand Finance calculates the values of the brands in its league tables using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.
The steps in this process are as follows:
1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.
2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.
3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.
4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.
5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.
6 Apply the royalty rate to the forecast revenues to derive brand revenues.
7 Brand revenues are discounted post-tax to a net present value which equals the brand value.