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Banks Face Image Crisis

If a withdrawal of public esteem were enough to leave banks insolvent, the financial system would be in even deeper trouble than it is these days. Americans have traditionally thought well of banks and bankers. Events of the past year have seriously weakened that tendency, though, presenting the industry with marketing challenges that can't be resolved by the old expedient of handing out toasters.

One glaring indication of this comes in the latest edition of a recurring Gallup survey that asks people to say whether they trust various institutions. Fielded earlier this month, the poll found just 22 percent saying they have "a great deal" or "quite a lot" of confidence in banks—"a record low," says Gallup in its analysis of the findings. The current tally is 10 percentage points lower than last June's figure, which was itself quite low by historical standards. Earlier in this decade, the "great deal"/"quite a lot" vote was above 50 percent.

Nor are Gallup's findings an outlier. Since the phrase "credit crunch" started to enter common parlance, surveys have shown consumers shedding their erstwhile respect for banks. And subsequent federal bailouts for the financial sector have served to sharpen public distrust of the industry. That was evident this spring in CBS News polling that found far more respondents disapproving than approving (53 percent vs. 37 percent) of federal bailouts for financial institutions. The 40 percent who were "mostly relieved" that bailouts could bring a resumption of lending were outnumbered by the 48 percent who felt "mostly resentful" that the federal help "could benefit irresponsible managers and bankers."

At a time when "people aren't happy with banks," the big ones are the most conspicuous target for consumer distaste, says Douglas Berlon, Gallup's global practice leader for financial services. "Overall, the small banks, which aren't in the news as much, are faring better than the big banks" in public opinion, he adds. Indeed, small banks routinely score better on measures of public trust because their customers know them up close, and vice versa, notes Berlon.

That observation is in sync with the findings of TNS polling. The most recent of a series of surveys on the subject, fielded in April and released last month, found 13 percent of respondents categorizing large banks as "an institution I can trust," while 35 percent said the same about smaller regional/local banks and 46 percent about credit unions. There was a similar split on whether each "makes me feel safe about my money," with 12 percent saying this about large banks, 33 percent about smaller regional/local banks and 40 percent about credit unions.

With big banks in the doghouse, small banks see a chance to grab some business. Mike O'Toole, president of Cambridge, Mass.-based PJA Advertising + Marketing, says his agency has been doing so in its work for local bank Cambridge Trust. And it's less a matter of doing something novel than emphasizing traditional small-bank strengths. "Our focus has always been on the relationship between individual customers and individual bankers," he says. In fact, he suggests that big banks have given such emphasis to their scale in post-meltdown advertising—boasting about numbers of employees and numbers of branches in an effort to convey an image of solidity—that they've left an opening small banks can exploit.

One way a small bank can do so is by emphasizing its links to the local community. "You can use those community roots in your advertising, showing real bankers with real names," says O'Toole. And you can talk about specific local businesses they've helped to finance. It doesn't hurt when a bank like Cambridge Trust can say it "kept to its knitting" while other institutions were embracing all sorts of exotic and (as we now know) risky financial instruments. "People are craving common sense and conservatism in their banking institutions," says O'Toole, and a small bank that fits this bill can turn it to good advantage now.

Gallup's Berlon agrees that big banks are going awry when they emphasize sheer bigness at a time when consumers associate big banks with bailouts and meltdowns. "Selling yourself as 'so big' could be a problem for the next six to eight months," he says. Anyhow, talking about the size of a company gets a bank away from what it should be talking about, Berlon adds: "What's in it for the customer? If you do all your work in Atlanta, do you really care that they have ATMs in Texas?" Meanwhile, an explicit emphasis on "trust"—another recurring theme of big-bank advertising since the meltdown—has its own pitfalls: "There's a huge cynicism about that," says Berlon. As O'Toole puts it, "You can't explicitly claim trust. I don't think that ever works."

Berlon also concurs in the view that small banks have an opportunity to capitalize on the current state of consumer opinion about big banks, but he cautions that they'd better move quickly to grab it before it fades. "I think small banks should be proactively, aggressively marketing now," he says. He also senses that the window is closing, though, as bigger banks get their balance sheets straightened out and pay back their bailout money to the federal government. "I think they have a great opportunity," Berlon says of the small banks, "but they're almost missing their chance." Part of the problem is that a small bank may not have a marketing executive whose role includes defending the ad budget when the institution is looking to control expenses in tough times, since the ad budget is always a tempting target for such cuts. "There may be no one at the table to say, 'Don't do it.'"

Actually, though, Berlon notes that big banks have been guilty of failing to keep in consumers' faces. Starting with last fall's financial meltdown and continuing into the first couple months of 2009, big banks were "appropriately quiet," he says—a sensible approach since "nobody knew what shoe was going to drop next." But in the past quarter, "a lot of things have stabilized. Banks are doing a good job of making sure they're ready for the future." But he feels they've done a lackluster job of letting consumers know about this. "I thought there'd be a lot more proactive advertising of that, but I haven't seen it. I think the industry has a chance to reinstill confidence, but they're letting the government and others define them."

Luckily for big banks, a general disdain for that category doesn't necessarily mean consumers en masse are ready to switch banks. Gallup polling last month found a mere 20 percent of respondents voicing "a great deal" or "quite a lot" of confidence in "today's U.S. financial institutions or banks." But 63 percent expressed that degree of confidence in their own bank. However consumers might feel about big banks in the abstract, notes Berlon: "If your local branch is treating you well, you're pretty happy with them." Some aspects of the economy have tended to increase consumer churn from bank to bank. If your bank forecloses your mortgage," notes Berlon, "you're probably going to close your checking account there."

On the whole, though, there's been less churn than one might expect. In part, that's because people have been taking their money out of riskier investments and stuffing it into their bank. After the volatility of the past year, the security of an FDIC-insured account may seem pretty attractive, even if the bank doesn't throw in a toaster.