Ameritrade
Differentiate or die
Ameritrade executives aren't afraid to go against the grain. In fact, the company is staking its survival on being different. Ignoring warnings to diversify, the company still provides only online stock trading services. And it continues to spend lots of money––up to $85 million this year––on advertising to make sure people understand how it's different.
The last two years haven't been kind to either Internet companies or Wall Street investment firms. And so it's been especially prickly for the world of online investing. In their bids for survival, most Internet trading outfits like E*Trade raced to expand into other financial services.
Not so for Ameritrade. The Omaha, Neb., company remains committed to its focus of online investing only. And, in another strategy that contrasts with competitors, the company is running a branding campaign for which its executives plan to spend up to $85 million in its current fiscal year.
When the going gets tough, the tough get advertising. Armed with that large a multimillion-dollar ad arsenal, Ameritrade CMO Anne Nelson clearly continues to believe strongly in brand building. In her mind, she and her team must differentiate Ameritrade from other Internet trading service providers, many of them established financial brands, or risk losing its fight to stay afloat. She's also charged with helping Ameritrade become the leader in online equity trading.
"We were looking at the competition, and we felt if we didn't break out and do something different, we wouldn't be able to distinguish ourselves," says Nelson, whose experience in the financial arena includes six years as evp of marketing for HSBC Bank USA. "Differentiation is important. That's one thing I found working in the banking industry."
Nelson sees the relatively slow advertising market as an important opportunity to cut through less clutter with clear messaging that makes the Ameritrade brand stand out against its competitors. So last February, as her peers faced slashed budgets, Nelson launched a new advertising campaign with the intention of spending between $70 million to $85 million in the fiscal year 2002, set to end Sept. 27. "If you look at the advertising for banks, it was hard to tell them apart. You could remember seeing an ad, but you wouldn't remember who it was for. I didn't want that to happen to us."
Since the latest ad effort launched, Ameritrade has seen solid gains in new accounts. Upon inspection, Ameritrade did fairly well in 2001. Sure, it's stock plummeted and at press time hovers far below its nadir at near $5 a share. Still, Ameritrade has accomplished a feat few Internet pure plays can claim. The company in April announced its fourth consecutive profitable quarter. For the quarter ending March 29, Ameritrade had net income of $1.9 million.
For that profitability, the company has to thank CEO Joe Moglia, who has led a major restructuring and focused the company on its technology, says Penny Gillespie, senior e-finance industry analyst with the Giga Information Group, Cambridge, Mass. A veteran of Merrill Lynch, Moglia took his post as CEO of Ameritrade in March 2001. He was instrumental in making the recent deal for the company to acquire competitor Datek Online Holdings happen.
The focus on technology and how it puts tools in the hands of customers forms a key part of Ameritrade's marketing message. The online tools that Ameritrade makes available to customers take a leading role, along with animated characters of a bear and bull, in a series of three TV spots. The point of all parts of the integrated campaign is the same: Ameritrade gives you the best tools to do whatever you want when it comes to online investing, no matter your view or approach to the stock markets.
"Certainly you do have to look at different market conditions, but we're not going to tell you what to do," says Nelson. "Regardless of what you think of the conditions, we will give you the tools to do what you need to do." The more straightforward print ads, for example, tout free trades, screening and charting tools, 24-hour customer service and a 10-second guarantee. (For more detailed information on Ameritrade's latest advertising campaign, see the Output section, titled "Building a 'bullish' brand" on p. 24.)
"We paid a lot of attention to what people's concerns were," says Nelson, who joined Ameritrade in 1999. "We thought it was very important in the marketplace to be viewed as an objective partner, and to offer a strong commitment to customer service. I think we've been consistent in that."
Such a message is meant to appeal to the company's core audience: advanced individual traders. "Those active traders aren't going to go out and look for lots of research and ask someone to hold their hand," says Richard Repetto, managing director of equity research at financial firm Putnam Lovell. "They're going to do that work on their own." He says Ameritrade is making the right move with its advertising, and notes that Ameritrade provides tools, not advice.
"The vast majority of financial services companies in the United States offer full-service options. They're in the wealth-management business. It's a very competitive landscape with high costs," Ameritrade CEO Moglia recently told CNet. "It's a model that may work with them, but that's not what we're trying to do. From an investment perspective, our customers make their decisions themselves. We allow them to do that at price that's a good value."
The campaign is resonating with investors, says Tim Smith, Ameritrade's director of advertising and branding. Since the ads debuted on Feb. 6, Ameritrade acquired 15,000 new accounts in February, 21,000 in March—the biggest number of new accounts since April 2000—and 18,000 new accounts in April 2002.
The emphasis of communications on tools and capabilities is the right move, agrees Bill Doyle, research director at Forrester Research. "Ameritrade scores well in site content and usability, and the quality of educational material. They do that better than anybody else out there."
Can the company succeed in its ambition to be the No. 1 online investing service? Some analysts believe they have a good shot. The merger with Datek puts a lot of pressure on Charles Schwab and E*Trade, and it puts Ameritrade at the top on a trading volume basis.
"I think they can make it," says Repetto, of Putnam Lovell. "They're certainly the largest player focused on the online investor, especially with the acquisition of Datek. E*Trade is about offering a suite of services, and Schwab is more focused on asset accumulation of the wealthy."
Other observers, however, wonder if Ameritrade can survive by stock trades alone. David Furlonger, vp and research director of financial services at Gartner, calls Ameritrade's business model "one- dimensional," pointing out that competitors offer numerous financial services to support their bottom line. E*Trade, for example, has quickly moved into many other financial services such as mortgage loans and checking accounts. "Clients wants a holistic approach to their financial services, and they don't want to have to think about going elsewhere," says Furlonger.
Forrester's Doyle, however, says consumer research shows that people don't want all their assets in one place. "That's a dream of the finance industry. And not only do [consumers] not want all their eggs in one basket, they don't believe one institution can do everything well." He credits Ameritrade for staying "true to its calling," and "the Datek purchase is part and parcel to that,"says Doyle. "They are out to be the low-cost, online investing leader. And [their advertising] is making the best of the fact that they are not in the advice business and don't intend to get into the advice business."
Repetto argues that the notion some people want just trading has yet to be proven. But he also says, pointing to the company's profitability feat, "[Ameritrade] has proven itself to be efficient, fast and cheap. And it's one of the most successful products on the Internet."
Continued success will be hard won. Online investing isn't as bad off as you might think. Investors still exist. Online investing was 35 percent of all trading on the NYSE and Nasdaq in Q4 2000, a figure that dropped a mere 3 percent by the same period a year later, says a report from financial firm Bear Stearns. And among active traders, Ameritrade's audience, accounts are up 12 percent from Q4 2000 to 2001.
Yet, among those active traders, actual trades are down 37 percent, the report says. As of April 2002, Ameritrade has nearly 1.9 million open accounts, more than it has ever had. But the number of average trades is down to 78,000 for April, one of the lowest levels in the past two years and a far cry from the high of 173,000 in March 2000. "We're not where we were a few years ago [in terms of trades], but we are still communicating the same values," says Ameritrade's Smith.
The company remains dedicated to advertising to achieve its goals. Still, Ameritrade is not spending as much as it has in the past on advertising. The top end of the company's estimated expenditures for its fiscal year 2002, $85 million, is a 47 percent increase over the $58 million the company spent in its fiscal year 2001 but a 48 percent decrease from the $164 million spent on advertising in its fiscal year 2000.
Nelson, Smith and others on their team have learned a thing or two about making the most of a media budget for its integrating campaign. The lower spending comes as a result of the hard work and heavy investment Ameritrade put into its brand development in the previous three years, Nelson says. The company has to spend less to maintain its brand, plus a company with a strong brand and attractive customer base typically has an easier time of negotiating contracts. Ameritrade, of course, also benefits from the sharply reduced media costs across all media channels.
Thanks to its belt-tightening and careful use of the funds it does expend, some analysts believe Ameritrade has what it takes to survive. The company is well positioned to weather that slump, says Putnam Lovell's Repetto.
A strong brand contributes to Ameritrade's overall strength. And so, despite the belt-tightening, the company is dedicated to advertising as one of the only ways to reach its customers and generate new business, says Nelson.
Ameritrade will stick with the current campaign for the foreseeable future, says Smith, as it is unveiling the second of three bull-and-bear TV commercials. "Not only does [the advertising] have to be distinctive, it also has to be relevant. Icons need to be recognizable, engaging and meaningful to the audience," says Barbara Jurgens, managing partner at Ogilvy, Chicago.
The dot-com implosion and market slump did not alter Ameritrade's message, but it certainly gave birth to the messengers—the animated bull and bear. "We know that people who are in the market are really engaged by what is going on. They follow the news and love talking about it. So we wanted to create characters that were engaging and distinctive," says Jurgens.
The bear and bull, created by Aardman of London—best known for "Wallace and Gromit" and "Chicken Run"—embody not just the current campaign but Ameritrade's overall brand messaging. "The key message of the campaign, market conditions what they are, is that regardless of the market conditions or what you think of them, we give our customers the tools to make the most of the market," says Nelson. "We have always been about the customer." And the company's executives aren't about to let its customers and prospects forget how Ameritrade is different from other online investing service providers.
"We don't have branches that customers can go to," says Nelson. "There is less emphasis on marketing in banking, because branches are everywhere. We are very into advertising. It's critical for us. We are a very marketing driven company. We have worked hard to establish a very strong, consistent and approachable brand, and we're not going to stop now." TM
Andrew Gordon, based in the Bay Area, is staff writer of this magazine. Email him at agordon@technologymarketing.com. |
