Comprehensive Cases 793 Branding Metro Credit Union On 5 May 2000, Larry Gordon, vice-president of development of Metro Credit Union (MCU), sat in his office overlooking Brown’s Line in Etobicoke and won- dered how he could develop a break-through branding strategy for the company. Larry knew that MCU offered its members many benefits as a banking alternative; however, MCU had not clearly established what it stood for in the minds of its current or potential members. In the past, it had focused on marketing its specific products and services, and although it had its own brand symbol—a capital M inside a box (see Exhibit 1), Larry realized that MCU hadn’t developed a brand that communicated everything it stood for. In late 1999, the senior management team formally adopted a retail value proposition (RVP) on which to base its future development (see Exhibit 2). How- ever, even with this RVP, they didn’t know exactly how MCU should differentiate itself. While MCU was moving to restructure its operation to become more cus- tomer centred to improve service quality, Larry knew that its competitors were doing likewise. However, MCU’s additional focus on accountability to consumers and communities, which was anchored by its member-ownership and democratic control structure, was quite distinctive, as was MCU’s corporate commitment to social responsibility. He wondered if this aspect of the firm could be used as the foundation of the core brand message. Market research from 1999 appeared to reinforce this position. Members who had joined in the previous three years had been asked why they had considered MCU. Traditional consumer choice factors were evident: convenience (10%), rec- ommendations (14%), products or prices (18%). But, most interesting, 38 percent reported that “credit union philosophy” or “bank alternative” were their primary reasons for joining MCU. EXHIBIT 1 Metro Credit Union logo This case was prepared by Phil Connell under the supervision of Dr. Peggy Cunningham for use in the Inter-Collegiate Business Competition and is not intended to illustrate either effective or ineffec- tive handling of a management situation. Some information may have been disguised in the interest of confidentiality. We thank Larry Gordon of Metro Credit Union for his help and support in develop- ing this case. Copyright, Queen’s University School of Business, 2000 794 Appendix EXHIBIT 2 MCU’s Retail Value Proposition Retail Value Proposition (RVP) • The primary element in our RVP is the distinctive Metro customer experience, which is based on accountability (i.e., co-op membership) and high quality service. • While remaining anchored in financial services, we will move beyond banking to meet the needs of our members and their communities. Related Strategic Issues •We will ensure the delivery of quality service by developing a member-centric corporate structure and operation. •We will be a niche player focused on specific market segments (to be identified) where we are most likely to present a competitive advantage. •We will offer in-house and brokered products and services, as appropriate, to meet the needs of our target markets. • Our diversification program will take place through a combination of developing new inhouse offer- ings, incorporating subsidiaries, and/or forming strategic alliances that: 1) complement our core financial services, and/or 2) support our branding strategy, and/or 3) build on our internal expertise, and/or 4) generate revenue to support the overall corporate operation. Larry also thought that MCU’s commitment to providing helpful and objec- tive advice to members, through both direct consulting services and educational programs, could be part of the branding strategy. MCU advised both individuals and small businesses on a number of issues, from investment and insurance prod- ucts to automobile purchases. In addition, MCU had plans to launch a series of educational seminars for members on a variety of financial planning and other top- ics, particularly on issues or for groups that were not well served (e.g., socially responsible investment seminars, financial planning for single parents). While any of these facets of Metro’s services could be used as a foundation on which to build brand image, Larry wondered which would be the most powerful for a successful brand. He knew that MCU would have to assure consumers that a credit union was just as professional, secure, and able to offer state-of-the-art financial services, as a major bank. At the same time, he knew that MCU would have to offer benefits that were not available from large traditional banks. Before he could decide on a brand positioning strategy, Larry first had to decide whom to target. The MCU proposition, he realized, was not for everyone. MCU knew it would have to be a niche player. Larry was concerned that having multi- ple messages aimed at multiple targets would result in brand confusion. Tradi- tionally, MCU’s customers were older, educated individuals and small businesses. But Larry was aware that the non-profit sector was under-targeted by financial ser- vice providers. He believed that many non-profit organizations in Toronto, along with their employees and supporters, would welcome a committed financial insti- tution to support them. And this would be consistent with the credit union phi- losophy of serving the community. Finally, there was the question of how to communicate the new brand to cur- rent and potential members. Unfortunately, with a total marketing budget—for agencies, market research, advertising, and promotion—of only $450 000, Larry knew he couldn’t afford advertising on TV, radio, and daily newspaper ads in Toronto (see Exhibit 3). He knew MCU would have to rely on highly targeted pro- motional outreach, special offers and events, direct marketing, and word of mouth, supplemented by targeted advertising in weeklies or special interest publications. Comprehensive Cases 795 EXHIBIT 3 Media and Advertising Costs Prime Time Television Commercial Rates (30 seconds)1 Network Number of Stations Basic Average Cost Regional television ASN 1 $ 90 ATV 4 $ 650 CBC Regional Atlantic 5 $1000 Central 15 $6000 Western 12 $2500 Pacific 6 $1000 Global 1 $7000 MITV 2 $ 500 BBS Ontario 8 $5000 Newspaper Advertising2 Newspaper Cost of Advertisement Cost per 1000 People Reached (CPM) Toronto Star $11 340 $2438 Globe and Mail $16 938 $5314 Toronto Sun $5 463 $2366 Larry shook his head. How was he going to synthesize all of this information into a single brand positioning strategy and program that would clearly commu- nicate what MCU was all about? The Financial Services Industry Overview Canada was renowned for having an efficient, low-cost financial services industry. For many years, it was a relatively stable industry due to strict government regu- lation. Today, many believe it is entering an era of hypercompetition—an industry stage defined by economies of scale and the war for customers. The dominant force in the Canadian financial services industry is the Big Five banks—Royal Bank, CIBC, Bank of Montreal, TD Bank, and Bank of Nova Sco- tia, accounting for about 85 percent of the banking market in Canada. The Big Five along with a number of smaller banks employ 221 000 people, whereas credit unions employ about 20 000. In addition, banks operate 8211 branches and 15 481 automated teller machines (ATMs). Currently, there are about 750 credit unions in Canada. Many of these have multiple branches. Credit unions and caisses populaires, the Quebec version of credit unions, have a total membership of over 10 million people. However, while membership is increasing, the number of credit unions is decreasing: For example, in Ontario there are now only 350 credit unions; just a few years ago, there were 500. This is a result of an increased number of mergers and acquisitions among credit unions so that they can better compete with the large banks. Other competitors are mutual fund companies, which have been expanding aggressively: In 1999, close to 40 percent of Canadians made mutual fund invest- 796 Appendix ments compared with the 14.9 percent who did in 1991. Over 20 percent of Cana- dians also own stocks and bonds; 33 percent own GICs or term deposits, and 22 percent own Canada savings bonds or term deposits. With the new online stock trading, the percentage of people owning stocks is expected to increase. This is occurring at a time when the percentage of people having savings accounts is drop- ping. In 1999, 73.3 percent of people had a savings account compared with 76.6 percent only a year earlier. Finally, a number of non-traditional players are entering the financial services market to compete with both banks and credit unions. The Bank Act does not reg- ulate these organizations. For example, such large manufacturers as General Motors and General Electric and such retailers as Loblaws, Sears, and Canadian Tire are all offering a range of financial products. They compete for customers and members with loan and mortgage companies, life and health insurance firms, pen- sion funds, and mutual fund providers. Furthermore, a number of “category killers” are coming into the marketplace, including American credit card compa- nies MBNA and First USA. Industry Segmentation Canada’s financial service providers market to four broad categories of customers: retail, commercial and corporate, investment, and international. The Retail Market: The financial needs of consumers have been changing rapidly. Today, Canadians expect information, choice, and convenience from retail financial institutions. They are aware of the trends in the marketplace and are quick to adapt to them. For example, 87 percent of Canadian consumers believe that it is important to have a good understanding of how the economy functions for the purposes of financial planning. Furthermore, 67 percent believe that having a bet- ter understanding of how the economy functions could actually improve economic conditions.3 There are many financial services and products from which they can choose, and multiple channels in which they can perform their transactions.