My wife comes from Tasmania, a weird and wonderful island off the southern tip of Australia. It has some of the slackest planning provisions in the Southern Hemisphere. As a result, when her friends there build their houses, they invariably do so without the input of an architect or interior designer.
The results inevitably suck. You have staircases in the wrong places, and, in one drastic case, a downstairs lavatory off the main dining room. This house has had a lot of money spent on it; both the bathroom and dining room have been beautifully done. It's just hard to enjoy dinner when you know someone only a thin layer of plasterboard away is on the crapper. An architect would have ensured that these lovely rooms would stay far enough apart to avoid either impinging on the other.
This is why brand architecture is such an important topic for marketers. It is not related to the strength or weakness of individual brands in a portfolio, it's about how they can be best combined, or kept apart, to ensure maximum impact on the market and maximum value to the organisation.
With all the shenanigans in banking at the moment, brand architecture is set to become an even more important topic. If the cavalcade of distressed banks are not nationalised, they are absorbed by rivals. As brand acquires brand, the challenge of maintaining a strategically sensible brand architecture becomes more difficult. Santander, for example, now has to find a place for Bradford & Bingley's savings business and branches next to Abbey and Alliance & Leicester within its group. Meanwhile, Barclays has to absorb the bits of Lehman Brothers it picked up in the garage sale caused by the US investment bank's collapse last month.
However, the mother of all brand architecture case studies is brewing at Lloyds TSB. Its very name tells you how advanced it is at brand architecture. It is about to merge with HBOS, that other maestro of branding. The result? Well, nobody knows. These deals are done by the finance chiefs and the government; only later do the marketers get to try to make some branding sense out of it all.
The less bold option would be to run the banks as separate entities in a house of brands structure. In this scenario, Lloyds TSB's relatively tight brand portfolio would balloon to include Halifax, Bank of Scotland, Birmingham Midshires and Intelligent Finance, plus licensed relationships with Saga, the AA and Sainsbury's. While this kind of structure protects brand equity, employer brand and corporate culture, it makes for very expensive overheads and the kind of super-complexity that got HBOS into trouble in the first place.
A more brutal approach, exemplified by HSBC, is to bundle all the banks into a new entity - one brand offers better strategic focus and more appealing profits. Lloyds TSB's problem is the relative lack of synergy in its portfolio. HSBC spent years acquiring the right banks and building a common culture before merging them, but the shotgun marriage of Lloyds TSB and HBOS is a sudden, incongruous cocktail of different customer segments, contradictory brand positions and contrasting organisational cultures.
Even if Lloyds TSB can come up with an architecture that works, there is still the question of what to call the new organisation. Based on its previous approach, it looks likely that it will follow the model beloved of most UK ad agencies: just keep adding names. We might soon see a bank with a brand based on the ridiculous conflation of Lloyds TSB Halifax Bank of Scotland.
Or LTSBHBOS for short.
- Mark Ritson is an associate professor of marketing and consultant to some of the world's leading brands
30 SECONDS ON ... BANK MERGERS
- The biggest UK high-street banking brands are the product of years of mergers, takeovers and repositionings.
- NatWest, now part of the Royal Bank of Scotland Group (itself an agglomeration of more than 200 banks), came into being in 1970 as National Westminster Bank Limited - the result of the merger of the two biggest high-street banks, the National Provincial Bank, its subsidiary District Bank, and Westminster Bank.
- Lloyds TSB was formed in 1995 by the merger of Lloyds Bank and the Trustee Savings Bank. Its subsidiaries include Scottish Widows.
- Barclays & Co was formed by several banks in London and the provinces in 1896 as a joint stock company. It grew significantly during the early 20th century, and adopted its present structure following a reorganisation in 1985. Its brands include the Woolwich.
- The Hong Kong and Shanghai Banking Corporation gained ownership of Midland Bank in 1992. The HSBC brand was adopted across the group in 1999. Its acquired brands include HFC Bank.