Bank of America recently announced that it was killing US Trust, a brand it acquired from Charles Schwab Corporation in 2007 for over $3 billion. The US Trust brand, targeting ultra high net worth families and investors, will be folded into the parent brand and renamed Bank of America Private Bank.
For anyone who follows and appreciates brands, it was a sad piece of news; US Trust has a proud history dating back to its founding in 1853. Still, at times getting rid of a brand is the best way to provide focus and drive growth.
So was this a good decision?
The Benefits of Pruning
Simplifying a brand portfolio can provide significant benefits. The most obvious is that it can increase efficiency. Every brand requires significant support; you have to tend to the website, monitor social media, and respond to customer complaints. You can save a lot of money by getting rid of brands.
Another benefit to narrowing a portfolio is that it makes cross-selling easier. If someone likes your brand, they will likely respond well to new product offerings under the same name. An athlete who likes Nike shoes will probably like Nike socks.
A simple portfolio is easy for people to understand, too, both internally and externally. United Airlines is pretty simple; it has just one brand. AirFranceKLM corporation is much more complex, with the Air France, KLM, Transavia, Joon, Martinair and Hop! brands.
There is no question that Bank of America is saving money and reducing complexity by getting rid of US Trust.
Unfortunately, narrowing a portfolio is not always a good idea. One issue is that it can weaken your differentiation. The strongest brands have a distinct meaning. BMW, one of the world's great brands, stands for German engineering, performance and luxury. It is not childish or friendly or funny. A brand that lacks specific meaning has little value. If you narrow your portfolio too much, you can end up with general brands that are not distinctive or special.
Another issue is that you can lose customers in the process. When you fold one brand into another, there is no guarantee that customers will stay with you; they presumably had loyalty to the old brand, not the new one.
Narrowing a portfolio can also be costly, and if you aren't careful, when you abandon a brand a competitor can pick it up and start using it.
For Bank of America, the question is whether this move is too far a stretch. Can Bank of America really serve both ultra high net worth investors and people just managing to keep up with the car payments?
There are three questions to consider when evaluating your brand portfolio.
How important is the business?
If a business isn't important, there is no need to support a dedicated brand. There are significant fixed costs to managing even the simplest brand. The only way to justify this spending is if the business actually matters. For Bank of America, the high net worth business is clearly important.
How many brands can you manage?
Some organizations can manage multiple brands; they have the structure and systems to do it. LVMH, the luxury giant, has dozens of brands and supports them well. Other organizations are simply not capable of handling the complexity. Bank of America isn't dealing with a complex portfolio and presumably could manage an extra brand.
How similar are the brands?
Overlap is often a problem when it comes to brands--the greater the overlap the more risk of confusion, cannibalization and in-fighting. In general, if you have brands with similar positioning statements, you will be better of combining them. When United Airlines and Continental merged, for example, it was a smart move to embrace just one brand, United, since the two brands were very similar. This is the key question for Bank of America.
I think the answer is that US Trust and Bank of America are very different brands with different positioning statements. Ultra high net worth customers want to feel special; they have distinct needs and goals. The typical Bank of America customer with $700 in a checking account has very little in common with a family managing a $100 million trust. Bank of America wants to be approachable and friendly. These are not necessarily positives for the wealthy crowd.
Bank of America's decision will certainly save money and build efficiency, but in the long run wealthy families may gravitate to more targeted brands.