What happens when one of Britain’s most iconic banking brands faces an uncertain future? Our Head of Strategy, John Clark, speaks with The Financial Services Forum about Lloyds’ reported plans to potentially retire the Halifax brand and what it means for brand heritage, customer trust and the future of financial services.
When asking around the office about the review, and potential axing of, the Halifax brand by the Lloyds Banking Group, most people’s first reaction was mild perplexity. While recognising there are commercial and operational reasons for considering such a move, on the face of it, it seems odd to consider getting rid of one of the UK’s most wellknown banking brands. Complementary brands? Looking at brand data from WPP’s BAV database, the world’s largest brand equity study, there is a degree of complementarity between the two brands. Halifax owns the approachable, value-conscious, human end of banking, ranking significantly higher on helpful, good value, simple and caring about customers (with a spirited, accessible personality). Conversely, Lloyds holds the authoritative, trustworthy, institutional end, scoring higher on trustworthy, authentic and established (as well as being a little more distant).
While both brands have a similar usage funnel, if we look at different sub-segments, we see more significant divergence. Perhaps somewhat counter-intuitively, among the under-29s, Lloyds has a remarkable 45.4% regular to occasional use rate against Halifax’s 31.3% – some 14 percentage points behind. At the older end, looking at Boomers, Halifax is ahead of Lloyds in usage at 31.3% to 21.7%, a clear 10 percentage points ahead. Interestingly, neither brand scores well with Gen X, with low usage scores (around 20-22%) and high ‘never used’ proportions. And while it’s hard to get up-to-date data for the split of business (as figures are now only reported at group level), historically, Halifax has had a greater proportion of savings and mortgage account holders; Lloyds has a greater proportion of current account holders. So different brand territories, skews towards different customer bases and potentially different business mixes all might suggest a combination made in brand portfolio heaven.
So why the review? A healthy dose of reality While BAV data indicates some very real differences between the brands and tells us that both are well known and held in high esteem, there is a red flag. Neither brand scores highly on differentiation. So while there are some distinctions in their imagery, these distinctions are fragile, not deeply entrenched. None of the things that make them different from each other drives real differentiation in the marketplace. Ultimately, beneath the surface, the brands are interchangeable. In addition, the market suffers high inertia.
Aside from a small bump in 2023/4, when banks were offering ever higher cash incentives to move your accounts, switching is still in single figures. And while mortgage switching is higher than current account switching, it’s still not huge – and rate or deal often plays a much larger role in choosing your new mortgage supplier than brand. And history points to many divestments and acquisitions in the banking sector – with little ill effect. In 2013, Lloyds TSB Scotland and Cheltenham & Gloucester were divested and relaunched as TSB. Fast forward 13 years, and Santander has just completed its acquisition of TSB Bank. Last month, Nationwide completed its acquisition of Virgin Money.
So, taken together, we see that the two brands have little real differentiation, the market suffers inertia (effectively it takes a lot to lose a customer who views most banks as the same anyway), and history has shown losing, switching or merging brands is not necessarily fraught with risk. If you were the board of the Lloyds Banking Group, perhaps the risk of losing one of Britain’s best-known brands may now seem relatively lower in comparison to the potential efficiencies of running one brand, not two?
It’s a sad fact that 80% of the world’s leading brands have seen declines in differentiation in recent years. This isn’t just an inconvenience for brand owners. Differentiation, along with relevance, is a leading indicator of a brand’s fortunes – and one of the first to be lost as a brand fades. If you combine that with, say, either unengaged consumers or inertia, an undifferentiated position becomes even more perilous. Perhaps a question not only for Lloyd’s Banking Group, but for all brand owners is, if customers don’t see you as more than superficially different, what justifies your place in the world?
