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Maintaining credit health during this pandemic is key

When borrowers honor their obligations, there’s no reason to see credit in a bad light, especially as it helps the economy grow faster this way. But how do you manage credit in the middle of a pandemic?

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Keeping your physical and mental health in check during the COVID-19 pandemic is crucial, but global information and insights provider TransUnion emphasizes that financial health must not be set aside. For most people, this generally entails having a steady flow of income, looking after any savings, and maintaining bill payments and other financial commitments.

But with the severe economic impact of COVID-19 globally, this isn’t always possible and it is vital that consumers truly understand how certain aspects of finance work to find or even create opportunities amid these difficult times.

There is no standard measure of financial health as each person’s circumstances are unique, but there is one aspect to finance that is often misunderstood, and that is credit. Credit is an important part of the economy because it allows entities and consumers to engage in transactions now that may not be possible if they only rely on their current capacity.

Anyone who has a credit card, loan, bank overdraft, or other similar credit agreements has a credit report – a record of how they manage their credit obligations, collected and aggregated by credit agencies like TransUnion. When borrowers honor their obligations, there’s no reason to see credit in a bad light, especially as it helps the economy grow faster this way. But how do you manage credit in the middle of a pandemic?

“A healthy credit history can help determine a consumer’s ability to access financial products and their ability to get competitive deals. At TransUnion, we are working with financial institutions to help them better understand consumers so they can continue to provide them with the financial services they need. TransUnion’s data quality assurance team stringently reviews credit data contributions and ensures that consumers are being accurately represented so their access to financial services remain unhampered during the challenges presented by COVID-19,” said Pia Arellano, TransUnion Philippines president and CEO.

Regulatory and institutional safeguards notwithstanding, there are a number of habits that consumers can practice to maintain good credit health even amid a pandemic.

1. Pay bills on time

Make it a point to not miss any payment deadlines, even if you can only pay the minimum amount. Automate it if possible or set alarms if you must. The purpose of a credit report is to help lenders see whether or not you miss payments and predict a behavior pattern for the future.

There are grace periods accorded to consumers during the pandemic, so it’s best to be aware of the policies implemented by your bank or financial institution for your convenience. Depending on your case, you may need to contact them directly to arrive at a repayment plan that suits your needs at present. However, if you can pay as soon as the bills come in, do so and you’ll have less to worry about.

2.  Set a budget and stick to it

The economic impact of COVID-19 is likely to extend over many years and having the discipline to stick to a budget and not over spend now will benefit you in the long run. In addition, do not apply for several new accounts at a time. Having a lot of simultaneous inquiries on your credit report worries lenders as it is a sign that you might be using credit and loans to supplement your income because you are spending beyond what you can actually afford.

3. Maintain low balances

Credit cards are considered “maxed-out” when you have spent 90% or more of the credit limit. When you maintain lower balances, lenders view you as someone who uses their credit responsibly. To achieve this, you should be able to pay your bills in full, on time, every time.

4. Build a strong relationship with lenders by being a responsible borrower

Lenders recognize that with higher credit limits comes increased responsibility. Credit limits tend to be reflective of both your wider financial standing as well as historic account conduct. A high credit limit reflected in your credit report can signal to lenders that you are a trustworthy candidate for new lines of credit. Should an unprecedented event such as this pandemic arise, you know that you’re in a position to access financial products at competitive interest rates if you need to.

5.  Beware of phishing and other scams that proliferate even during crises

A recent TransUnion report found that fraudsters are decreasing their schemes against businesses but increasing COVID-19 focused scams against consumers online. With the rise in digital transactions in banking, make sure you do not fall victim to fraud activities like account takeover or unauthorized account opening schemes that can taint your credit report. As a general rule, steer clear of offers that sound too good to be true. Legitimate financial institutions can never provide miraculous results in the short-term.

Other precautions include doing a regular review of your bank accounts for any suspicious activity, never providing sensitive information such as PINs and One-Time Passwords, and keeping your information secure against phishing attacks. It’s worth looking into password managers and updating your passwords on your bank accounts every so often. If you need to communicate with your bank, stick to its official channels.

6. Contribute to a savings fund

Building an emergency fund is generally considered good practice in your overall budgeting and serves to keep your credit health in check as well. Having enough funds on hand will help cover credit obligations, keeping you in good credit standing until you recover and things stabilize again.

Navigating the road to economic recovery

Build and keep the above-mentioned habits and you’ll maintain a good credit standing and overall financial health. Now, what should you do if you still cannot pay your bills at this time due to sudden loss of income or other extreme circumstances?

Consumers should coordinate with their bank or financial institution to explain their situation. Generally, consumers can request a payment holiday, lowering of monthly payments until they have fully recovered, or restructuring of a loan or credit facility for a smaller payment amount and longer tenure. Needless to say, it helps if you are in good credit standing to begin with.

As a seasoned and trusted global data steward, TransUnion recognizes its unique position to help consumers as they pursue economic recovery by helping financial institutions address current uncertainties using the power of information. Building on its database of 25 million account points that features a more holistic and insightful view into consumer behavior, TransUnion has started harnessing trended data that looks at richer information from a longer period of time (24 months payment history) to determine a consumer’s current and likely future financial situation. This, in turn, gives businesses quality information to continue supporting customers even in uncertain times such as the pandemic. When done right, everyone contributes to helping the economy bounce back stronger.

“We’ve been called to do bayanihan to recover as one, which essentially recognizes the need for us to work together to fully address current financial challenges. Our mission at TransUnion is to use the data that we have to help businesses and consumers make smarter finance decisions, especially during difficult times like this pandemic. We hope to continue creating a virtuous cycle of empowered businesses that empower consumers to gain access to financial services which can uplift their lives and financial health, as we believe this contributes a great deal to their physical and mental well-being too,” said Arellano.

Strategies

The market advantage of a feminine brand name

What do iconic brands Nike, Coca-Cola, and Disney have in common? They all have linguistically feminine names. In fact, the highest-ranking companies on Interbrand’s Global Top Brands list for the past twenty years have, on average, more feminine names than lower-ranked companies.

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Researchers from University of Calgary, University of Montana, HEC Paris, and University of Cincinnati published a new paper in the Journal of Marketing that explores the linguistic aspects of a name that can influence brand perceptions without people even realizing it.

The study, forthcoming in the Journal of Marketing, is titled “Is Nestlé a Lady? The Feminine Brand Name Advantage” and is authored by Ruth Pogacar, Justin Angle, Tina Lowrey, L. J. Shrum, and Frank Kardes.

What do iconic brands Nike, Coca-Cola, and Disney have in common? They all have linguistically feminine names. In fact, the highest-ranking companies on Interbrand’s Global Top Brands list for the past twenty years have, on average, more feminine names than lower-ranked companies. How can you tell if a name is linguistically feminine? Easy–does it have two or more syllables and stress on the second or later syllable? Does it end in a vowel? If so, then it is a feminine name. Linguistically feminine names convey “warmth” (good-natured sincerity), which makes people like them better than less feminine names.

A brand’s name is incredibly important. In most cases, the name is the first thing consumers learn about a brand. And a brand’s name does the work of communicating what the brand represents. For instance, Lean Cuisine conveys the product’s purpose. Others, like Reese’s’ Pieces, have rhyming names that promise whimsy and fun. Making a good first impression is critical, so it is not surprising that the market for brand naming services is booming. Boutique naming fees can run as much as $5,000 – $10,000 per letter for brand names in high-stakes product categories like automobiles and technology.

Specifically, the number of syllables in a name, which syllable is stressed, and the ending sound, all convey masculine or feminine gender. People automatically associate name length, stress, and ending sound with men’s or women’s names because most people’s names follow certain rules. Women’s names tend to be longer, have more syllables, have stress on the second or later syllable, and end with a vowel (e.g., Amánda). Men’s names tend to be shorter with one stressed syllable, or with stress on the first of two syllables, and end in a consonant (e.g., Éd or Édward).

We often relate to brands like people–we love them, we hate them, we are loyal to certain brands but sometimes we cheat. We associate brands with masculine or feminine traits based on the linguistic cues in the name. So, attributes associated with gender – like warmth – become attached to a brand because of its name. “Warmth” is the quality of being good-natured, tolerant, and sincere. Researchers believe that warmth is incredibly important because deep in our evolutionary past, primitive people had to make a quick, critical judgment whenever they encountered someone new–is this stranger a threat or not? In other words–is this stranger dangerous or warm? If the newcomer was not warm, then a fight or flight decision might be called for. People still rely on warmth judgments every day to decide whether someone will be a good partner, employee, or friend.

So, it is no surprise that warmth is an important characteristic of brand personality. And because linguistically feminine names convey warmth, features like ending in a vowel are advantageous for brand names. As Pogacar explains, “We find that linguistically feminine brand names are perceived as warmer and are therefore better liked and more frequently chosen, an effect we term the Feminine Brand Name Advantage.”

But does all this matter in terms of dollars and cents? Yes, according to the Interbrand Global Top Brand rankings, which is based on brand performance and strength. Angle says that “By analyzing the linguistic properties of each name on Interbrand’s lists for the past twenty years, we find that brands with linguistically feminine names are more likely to make the list. And even more, the higher ranked a brand is, the more likely it is to have a linguistically feminine name.”

After observing this feminine brand name advantage, the researchers conducted a series of experiments to better understand what is happening. Participants reported that brands with linguistically feminine names seemed warmer and this increased their purchase intentions. This pattern occurred with well-known brands and made-up brands that study participants had no prior experience with.

There are limitations to the feminine brand name advantage. When a product is specifically targeted to a male audience (e.g., men’s sneakers), masculine and feminine brand names are equally well-liked. Furthermore, people like linguistically feminine names for hedonic products, like chocolate, but may prefer masculine names for strictly functional products like bathroom scales.

It is important to note that results may vary based on the linguistic patterns of name gender in the target market country. Lowrey summarizes the study’s insights by saying “We suggest that brand managers consider linguistically feminine names when designing new brand names, particularly for hedonic products.”

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Strategies

How to get customers to talk about you

WOM is arguably the most influential means of persuasion and can be a critical driver of a company’s growth. For this reason, many companies offer consumers incentives to encourage them to generate WOM.

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Researchers from Arizona State University, New York University, and Northwestern University published a new paper in the Journal of Marketing that examines how marketers can fuel positive word of mouth (WOM) without using explicit incentives.

The study, appearing in the Journal of Marketing, is titled “How Marketing Perks Influence Word of Mouth” and is authored by Monika Lisjak, Andrea Bonezzi, and Derek Rucker.

WOM is arguably the most influential means of persuasion and can be a critical driver of a company’s growth. For this reason, many companies offer consumers incentives to encourage them to generate WOM.

Classic examples of WOM are referral and seeding programs, whereby a company literally “pays” current customers to generate positive WOM and attract new customers. Despite its intuitive appeal, however, this practice can backfire. Ironically, incentivizing WOM sometimes can hamper, rather than increase, consumers’ willingness to engage in WOM.

This research shows that commonly used marketing perks–e.g., gifts, benefits, and rewards–can effectively foster WOM without being used as explicit incentives. Their effectiveness at boosting WOM, however, depends on how they are framed and therefore perceived by consumers: Marketing perks are more effective at fostering WOM the less they are perceived to be given out of contractual obligation. The term “contractuality” refers to the degree to which a perk is perceived to be given to consumers in exchange for engaging in specific behaviors dictated by a company, such as filling out a survey or making a certain number of purchases.

Lisjak explains that “We demonstrate that marketers can influence the perceived contractuality of a perk with easily implementable pivots. Consumers can perceive the exact same perk, say a free coffee, as more or less contractual simply based on how it is framed.”

As one example, the perceived contractuality of a perk can be lowered by giving consumers a free item after a set number of purchases, but not making the number of purchases salient to the consumer. As another example, the same perk could be accompanied by a thank you note, as opposed to a note that highlights all the effort a customer had to put in to earn the perk. In both instances, companies do not have to change the offering, only how consumers perceive it.

Interestingly, however, perks lower in contractuality can sometimes backfire against companies. This is more likely to occur when a perk characterized by low contractuality comes from a disliked or distrusted company. Under such circumstances, consumers become wary of the company’s intentions and then interpret the perk as a manipulative act of persuasion driven by ulterior motives.

When this happens, perks lower in contractuality in fact hinder rather than fuel WOM. To illustrate, many consumers do not like utility providers or financial institutions. To the extent that such dislike prompts consumers to make hostile attributions of benevolent gestures, such companies might be better off using perks that are higher in contractuality.

Finally, contractuality can entail a trade-off. Despite being more effective at fostering WOM, low contractuality perks might be less effective than high contractuality perks at inducing compliance with a direct request. For example, if a company wants consumers to complete a customer satisfaction survey, offering a high contractuality perk can be more effective and efficient than offering a low contractuality perk.

Simply put, when brands have a specific action other than WOM that they would like consumers to take, perks higher in contractuality might serve as better incentives because they make behavior-reward contingencies clear and salient.

Bonezzi summarizes the study by saying “Our findings suggest that marketers could nudge consumers to generate positive WOM by providing them with perks that have fewer strings attached. Of note, this could be achieved at a similar cost to perks that come across as highly contractual.”

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Strategies

Consumers say compact logos signal product safety

The findings reveal that typography — specifically tracking, or the spacing between letters in a word — can influence consumers’ interpretations of brand logos.

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Compact logos can encourage favorable brand evaluations by signaling product safety, according to a new study by researchers at Boston College’s Carroll School of Management and Indian Institute of Management Udaipur, who reviewed the opinions of 17,000 consumers and conducted additional experiments with a variety of logos.

The findings reveal that typography — specifically tracking, or the spacing between letters in a word — can influence consumers’ interpretations of brand logos. Further, the interpretation is influenced by cultural factors, the researchers reported in a recent edition of the Journal of Consumer Research.

In addition to the survey data, the results were confirmed in experiments, even during the Covid-19 pandemic, when public health guidance on social or physical distancing put a new emphasis on space, Hagtvedt said.

“We found fairly consistent patterns in these responses, even during the pandemic, when some brands were experimenting with placing the letters of logos farther apart to emulate a social distancing signal,” said Boston College Associate Professor of Marketing Henrik Hagtvedt, who co-authored the paper with IIM’s Tanvi Gupta.

The researchers analyzed data from 17,000 consumers rating 629 brands. Hagtvedt and Gupta found compact logos, where tight tracking leaves less space, encouraged favorable brand attitudes when compared to loose logos, where loose tracking creates a more spacious appearance. According to consumers, compact logos signaled that the brand was reliable, secure, and trustworthy.

Logos are central to the ways brands communicate with consumers. Logos that appear physically robust imply a brand’s products are safe to use, Hagtvedt said. Compact logos were shown to send a message to consumers implying their products were sturdy and secure. This is particularly the case with textual logos, where consumers show sensitivity to the spacing between letters. Tight lettering equates to sturdiness in the minds of most consumers, whereas too much space may imply vulnerability, Hagtvedt said.

Cultural influences are also at play, according to the new report, titled “Safe Together, Vulnerable Apart: How Interstitial Space in Text Logos Impacts Brand Attitudes in Tight versus Loose Cultures.” Drawing on the work of anthropologists, the researchers focused on two groups of consumers: those considered culturally “tight” or “loose.” Tight cultures are a function of adapting to threats, such as violence or natural disasters. Individuals from this group are likely to favor the appearance of tight structure.

In the US, studies have shown southern states tend to display cultural tightness, while states in the west and northeast reveal looser structure. Factors such as religion, organization, or industry, can influence cultural tightness.

Gupta and Hagtvedt report that consumers tended to favor compact logos over spacious ones, regardless of cultural tightness, under ordinary circumstances. However, when the experiments involved contexts with potential safety concerns (such as products related to pharmaceuticals or mobile financial services), only culturally tight consumers responded more favorably to the compact logos.

The researchers suspect that the latter findings stem from culturally loose individuals associating space with freedom or autonomy, and being especially sensitive to that signal when safety is threatened. Among these individuals, the restrictive associations of compact logos can balance out the positive security signal.

The findings add to the understanding of how people draw meaning from visual communications, a key insight for brand managers and businesses of all sizes, said Hagtvedt. At the same time, they provide practical tips to organizations and individuals seeking to signal safety, depending on the context as well as the relevant culture.

Developing better quantitative standards can help organizations better assess how their designs may be perceived, rather than going on “gut” intuition about what makes a successful logo.

“It is important to know what kind of signal a logo sends,” said Hagtvedt. “Businesses spend millions on not just designing their logos, but on using their logos in brand communications. It is arguably the most prominent representation of a brand, wherever that brand operates. It has an enormous influence on consumers. To design and deploy a logo haphazardly is a questionable practice.”

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