Two powerful brands with strong ties to the Philadelphia region have been front and center in the news last week: The Hershey Co. (NYSE: HSY) and Commerce Bank (NYSE: CPH). Both events have important marketing implications.
Last Monday it was announced that Hershey’s CEO Richard H. Lenny would be retiring at the end of this year. That story was eclipsed when TD Bank Financial Group the following day announced it was acquiring South Jersey-based Commerce Bancorp. The first story was a mild surprise; the second was not, given the departure of founder Vernon Hill this summer, although the identity of the acquirer was somewhat of a surprise.
Lenny is leaving Hershey’s after being rebuffed by the trust that controls Hershey’s in his efforts to bring about a consolidation of Hershey’s with London-based Cadbury Schweppes’s candy unit (now being spun off, story here). Hershey’s is still the largest candy maker in the U.S. and a strong brand name. However, it is the leader in a mature, or perhaps more accurately, declining product category. With demand for more nutritious food and healthier snacks growing, chocolate sales in the U.S. are down. And Hershey's -- unlike some snack food marketers, such as Pepsi -- has done little to adapt to the changes in consumers’ needs and preferences. The company is also facing stiffer competition from Mars Inc., maker of M&M’s, Snickers, and many other treats I can no longer eat. What’s more, the decline of the dollar has driven up the company’s ingredient costs. Given these circumstances, consolidating with Cadbury would make a lot of sense for Hershey’s. Not only would it help the company lower its costs, but it would also give the company access to growing international markets. But either way, the Hershey’s brand will continue to live on.
The same cannot be said for the Commerce Bank brand name, which is one of the best positioned brands in the banking industry. As "America’s Most Convenient Bank," Commerce has forged a unique, compelling image in the public’s mind. Compare this positioning to Wachovia’s "Uncommon Wisdom" (snobby) or PNC's "Leading the Way" (generic). Where would you rather bank? Many consumers in the Greater Philadelphia region opted for Commerce, judging from its deposit growth over the years. The acquisition of Commerce was inevitable. Between the change at the top and the expansion of banking giants Citibank and Bank of America in the Philly market, Commerce couldn't stand pat. It was a "tweener," not a giant, but not a community bank either, and companies in the tweener category are often the most vulnerable to competition.
But what will become of the Commerce Bank name, and more importantly, its legendary convenience? TD Bank has stated that once it finishes merging the back-office operations, it's going to change the name of its TD Banknorth locations in the area to Commerce Bank. Don’t count on it. Economies of scale don’t just apply to the operations side. Marketing offers plenty of opportunities for economies of scale. So look for the Commerce Bank name to disappear within the next 12 to 18 months. But as long as TD Bank doesn’t change the service that made Commerce so popular, the acquisition and subsequent dropping of the Commerce name will not cause customers to leave in droves.
So to all you marketing types at area banks large and small: Forget about marketing campaigns designed to convert Commerce’s customers for the time-being. Besides, you have image and other problems of your own. Of course, if TD Bank -- whose only sign of marketing chutzpah was using Law & Order’s Sam Waterston, a.k.a. Jack McCoy, as the pitchman for its TD Waterhouse brokerage firm -- makes wholesale changes, look out.
But to me, all of the questions and comments about TD Bank’s acquisition of Commerce miss one important point: Why didn’t Commerce make a major acquisition itself? I’m a marketing expert, not an M&A expert. Perhaps Commerce didn’t have the financial resources needed to pull off a big deal. However, a company with the hubris to call itself "America’s Most Convenient Bank" ought to have the drive and the vision to make it happen. After all, Commerce didn’t claim to be the "Delaware Valley’s Most Convenient Bank." or the "The Mid-Atlantic's Most Convenient Bank." Commerce management says the bank's unique corporate culture and customer service strategy made it necessary to rely on internal growth rather than growth through acquisitions. But I suspect that the bank's problems with federal regulators and the single-mindedness -- some would say, stubbornness -- of Vernon Hill had much more to do with it.
Regardless, once again, the Philadelphia region has lost a substantial, locally owned bank. For years, area businesses have complained that loan decisions aren’t made here; they’re made in Pittsburgh, Charlotte, New York, and now New England (where TD Banknorth is headquartered). But take comfort Philadelphians, there’s always Sovereign Bank, which now bills itself as "America’s Neighborhood Bank."
- Bill Madway teaches marketing and entrepreneurship at the Villanova School of Business. He has no financial stake in Hershey or Commerce.
