At an otherwise terrifically boring conference in Charleston, S.C., many years ago, I attended a session on marketing that was conducted by Madison Avenue veteran Al Reis, who, along with his then-partner Jack Trout, had pushed forth the then-radical concept of "mind-positioning" to explain why certain brands achieved phenomenal success, while others floundered.For 90 minutes I was enthralled as he explained how advertisers competed for a "share of mind," and the strategies they deployed to keep their brand in your consciousness.
He also explained the concept of line extension, which in basic terms means that a company with a well-known product line broadens it out a bit to include others.
In some cases, the strategy proved wildly successful, while other cases proved to be unmitigated flops. Case in point: Did you know that Xerox once attempted to branch into personal computers, which at that time were the unquestioned domain of IBM? How many of you still own a Xerox PC? I rest my case.
Okay, what brand comes to your mind when you think tax preparation? For me, at least, it's H&R Block.
Regardless of your perception of the company, its sheer number of locations and massive advertising efforts mean both convenience and brand exposure to millions of potential 1040 customers.
But at its annual meeting last month, the Kansas City-based company said that it would begin offering bank accounts to customers to facilitate direct deposit of tax refunds. Block chief executive Mark Ernst estimated that many clients don't have accounts, which forces them to pay the higher fees associated with check-cashing services.
In what may be a rosy projection, Ernst said that the company hopes to open some 1 million bank accounts during next year's tax season - made somewhat easier by the fact that the company secured its own thrift charter and opened a savings bank in May, making the accounts eligible for FDIC insurance.
Historically, line extension - or even add-on services - hasn't been one of Block's strengths.
The company faced a spate of lawsuits over its refund anticipation loans, and earlier this year its Express IRAs were the subject of a $250 million suit filed by New York State Attorney General Eliot Spitzer, who accused the tax-prep giant of steering more than 500,000 customers, including 30,000 New Yorkers, to that investment vehicle, which had exorbitantly high set-up and maintenance charges.
Not a great springboard into a highly competitive line extension such as banking, where over the past several years an influx of customer-friendly regional banking brands such as Commerce and Washington Mutual have begun sprouting on what seems to be every corner with ridiculously low barriers to entry for opening accounts - no matter the income level.
H&R Block is the unquestioned brand leader in tax preparation, but it will never operate the country's largest bank, or even the 25th largest bank. And if they need a reminder of the dangers of line extension, I'm sure Xerox would be happy to sell them a truckload of discounted PCs.
