Choosing a naming strategy for an acquired brand and business

On Wednesday, Canadians woke to the news that the Bank of Nova Scotia had agreed to buy ING Bank of Canada from ING Groep for $3.1 billion.This deal adds $30 billion of deposits to Scotiabanks’s operations and will mean that Scotiabank will be Canada’s third-largest bank by the end of this year based on deposits of $175 billion in hand. This purchase goes a long way to dispel market concerns about the perceived weakness of Scotiabank’s deposit base versus its key Canadian competitors.

The positioning and value proposition for ING DIRECT is The Unbank.  At the time of its conception this dovetailed with the stated purpose and ambition of the ING brand “to make it easier for our customers to manage their finances” and the specific role of ING DIRECT within this brand portfolio to help customers save.

This positioning was captured in ING DIRECT’s famous slogan: “Save Your Money.” This value proposition was founded on an organizational strategy and business model that bolstered the ability of ING DIRECT to compete effectively against other banks using a high volume, limited service, low margin strategy which their industry counterparts cannot easily replicate because of their more traditional strategies and business models. The result of this strategy is that ING DIRECT customers earn higher interest rates on savings deposits and pay lower interest rates on loans, such as mortgages, than they might otherwise.

Scotiabank’s singular challenge will be to maintain ING’s 1.8 million customers and their deposits. This is because many Canadians chose to bank with ING Direct precisely because it was The Unbank that offered a clear alternative to traditional banks through its unique value proposition and business model. Many of them may have actually left Scotiabank, or one of its traditional competitors, to go to ING Direct.

That’s why the decision by Scotiabank to operate ING Direct as a separate operating entity, even though it will be renamed in 18 months, should be welcomed by investors and its customers alike. That’s assuming, of course, that it maintains the value proposition that attracted these customers in the first place.

So, how should Scotiabank go about naming this new business unit in support of its strategy for maintaining the current base of customers and deposits?

David Aaker’s “Brand Relationship Spectrum” is one leading contemporary management tool for assessing the impact of various naming strategies for corporate entities.

At least four possible naming strategies can be conceived of:

  1. A master brand strategy where the parent Scotiabank brand plays the primary driver role in anchoring the core associations and meaning of the name in the minds of customers because of its established equity, and the second part of its name modifies this meaning in some generic manner: i.e. “Scotia Virtual”
  2. A sub-brand strategy where the parent Scotiabank brand plays an equal driver role with a new brand, because this new brand is intended to modify the meaning of the parent brand and become a new source of the identity and meaning for the name as a whole: i.e. “Scotia New Brand”
  3. An endorsed brand strategy where a new brand is conceived of for the entity to play a primary driver role in anchoring the identity and meaning of the name but is linked to the parent brand in some minor way so that the parent brand acts as a source of credibility for the new brand: i.e., “New Brand by Scotia”
  4. A new brand strategy where the new entity takes on a name that is distinct from the current Scotiabank brand and which is intended to maintain a similar identity and meaning to ING Direct: one that replaces “ING DIRECT” with a completely new standalone brand name.

What’s the optimal naming strategy to replace ING DIRECT?

The answer must be based on the ability of the parent brand to enhance the value proposition of the new entity in its market and improve the ability of this entity to compete and win. If the parent brand has a strong ability to enhance the value proposition of the entity in its market then it should play a primary or equal driver role in the naming strategy. (Number one or two above.)

Alternatively, if the parent brand cannot enhance the value proposition of the entity in its market, or worse, if it would have a negative impact on the value proposition of this entity, then it should consider developing a new brand name as part of the naming strategy. (Number four above.) An important consideration for using a parent brand in the naming strategy for a new entity (Numbers one, two, or three above) is whether this may adversely affect its ability to compete in its current market. A key concern for Scotiabank in this regard will be the possible migration of current customers to this new lower margin business unit and the resulting negative impact on the profit of the business as a whole.

Given the distinctive positioning and value proposition of ING DIRECT in the Canadian banking landscape it is doubtful whether current customers would embrace a naming strategy that associates their financial institution with one of the more traditional banks. It seems reasonable, therefore, to assume that the most effective naming strategy for ING DIRECT will be to create a new brand name, one that can be associated with and helps to maintain its distinctiveness and difference in the marketplace.

This branding strategy would also mitigate a potential dilution of margins or brand equity that might occur if the Scotiabank brand was stretched from its traditional market into the direct banking market.

I know what I would do. The only thing left to do now is to wait and see what they do.

About ashleykonson

STRATEGY CONSULTING | EXECUTIVE COACHING | CORPORATE TRAINING | KEYNOTE SPEAKING | Ashley Konson is the Managing Partner of Global Brand Leaders Inc., a new kind of brand consulting company dedicated to making brands and their teams leaders across the globe. He is a Brand Leader, Business Consultant and Award-Winning Educator, and a recognized thought leader and fervent advocate of the premise that strong brands and businesses achieve and sustain their market positions because they are strong Inside out™.
This entry was posted in Brand Naming, Brand Portfolio Strategy, Brand Strategy and tagged , , , , , , , . Bookmark the permalink.

2 Responses to Choosing a naming strategy for an acquired brand and business

  1. Pat Henaire says:

    At first, if Scotia want to make this multi billions $ deal profitable, they need to keep their customers and not scare them by sending a signal that they will be integrated under the mother ship. Like you said ING customers are the anti-bank type (I know, I am one!). Totally 2 different value propositions to 2 different customer segments at each end of the spectrum. Keep ING customers separate, manage them separate, BRAND them seperate. Scotia will find its ROI by the business volume they add to the current one and economy of scale it can generate…Great subject, I love it Ashley.

  2. Dear Sir,

    In my opinion, ING Direct should be branded separately and its name should be kept intact. Its like a fighting strategy and ‘Scotia Bank + ING Direct’ combined can take on the competition. Scotia bank will continue to target the traditional bankers and ING Direct will target anti-bank users.

    Regards,
    Ankit

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s