Literature Review
The 3 areas covered by the literature review are Financial
Services Branding and Brand Equity, Human Relationships in Financial Services,
and how the Insurance Industry has been disrupted by technological
advancements.
Aaker (1991, 2002) and Keller (1993) have based their
traditional brand equity or value models largely on the study of fast-moving
consumer goods companies. However, Financial Services, like most other service
industries, are intangible and thus require different approaches toward brand
building (Moorthi, 2002, Padgett et al, 1997).
One of the most precious assets of any company is its brand
equity or value. It is defined by Keller (2012) as the additional premium over
and above another similar competitor’s product that is willingly paid by the
consumer. As the majority of consumers are unaware of or uninterested in ‘hard data’
(e.g. cash flow, profits, etc.) of their favourite brands, companies must
capitalise on this priceless asset to gain a competitive edge.
While branding is important for all businesses, it is
crucial for companies offering services as the business nature is intangible
(Devlin et al, 2004. Dibb et al, 1993). This is especially critical in
financial services where nearly every aspect of operations is heavily
regulated, leaving little room for creativity. Branding can become a way for
one company to differentiate itself from the competition (Grace et al, 2005).
Together with trust as a bond (Dall’Olmo et al, 2000), the brand image forms
the fulcrum of the relationship between consumers and their favourite brand
(Devlin et al, 2004).
Besides trust and image, brand salience, loyalty, financials
etc. contribute to a brand’s value (Aaker, 1996. Farquhar, 1989). Tangible
products tend to have brands of their own or ‘sub-brands’ of the company;
whereas for services the company itself is the primary brand (De Chernatony,
1999. Berry, 2000). Thus the importance of brand equity for a services company
cannot be overstated; Berry (2000) views services branding as the key to its
success while Bravo et al (2012) suggest that the branding of services is a
strategic tool that may be wielded to achieve success.
Thus a strong brand with sound reputation is especially
pertinent for the services; such as the insurance industry where there are no
tangible products and they are also not easily understood by laypersons
untrained in insurance (Devlin, 2001. Devlin et al, 2004. Petruzzellis et al,
2011). Customers’ perceived risk of the product/service may be mitigated by a
trustworthy and reputable brand and tend to decide more favourably towards it
(Berry, 2000. Bravo et al, 2012. Moin et al, 2016).
Besides external factors, intrinsic factors are equally
important for the services businesses (Devlin, 2001) as the first point of
interaction for many potential customers is usually the service staff. In the
insurance industry, the insurance agent or adviser is typically the person
taking the customer through the entire purchase process (prospecting,
fact-finding, advice, recommendations, etc.) and post-sale services. According
to Berry (2000) and Devlin et al (2004), tremendous brand equity may be derived
from building on and focusing on this client-agent relationship.
To build brand value in financial services by providing
top-level customer experience, insurance companies must invest in staff
training and communication (De Chernatony et al, 1999). As mentioned in the
previous paragraph, the insurance agent is the key to any brand-building
efforts (Kimpakorn et al, 2010) as he/she is often the sole contact point with
the customer. With this in mind, O’Loughlin et al (2005) such interactions between
the agent and the customer contribute more to brand salience than extrinsic
advertising. Word of mouth marketing has a much stronger resonance with
customers compared to external advertisements and/or publicity (Bravo et al,
2012).
Where purchases of ‘simpler’ general insurance products are
concerned, the functional values (e.g. features, price, etc.) are considered
above brand emotional values (Petruzzellis et al, 2011. O’Loughlin et al, 2005.
De Chernatony et al, 1999). However the brand’s emotional values are not
disregarded; Devlin et al (2004) and Bravo et al, 2012) suggest that focusing
on the relationship helps brands differentiate itself in a sea of homogeneous
offerings. This is especially relevant in countries with a developed and
heavily-regulated financial system. In such an environment, the brand
relationship could be the determining factor (Berry, 2000; Devlin et al, 2004)
in the consumers’ decision-making process.
Another factor that has gained prominence as a contributor
to brand equity is Corporate Social Responsibility (CSR) (Hsu, 2012.
Varadarajan et al, 1988). Companies have come to realise the value of CSR as a
key strategic investment (Luo et al, 2006) and even as a competitive advantage
(Smith 2003. Kramer 2001. Smith et al, 2000). When executed well, CSR
strategies can be the key branding component that is extremely difficult or
even impossible for competitors to imitate (Hsu, 2012). On the flip side, being
an irresponsible or socially ignorant company may cause precious loss of brand
equity (Orgrizek, 2001).
The most important outcome of brand building for an
insurance company is to increase consumers’ trust (Moin et al, 2016). In order
to do so, insurers must consistently deliver on their promises, brand messages
and provide top of class customer experiences (De Chernatony et al, 2006).