NEWS that Clydesdale and Yorkshire Banking Group (CYBG) have agreed to buy Virgin Money for £1.7bn was generally welcomed in the City. The deal provides scale and greater national coverage for CYBG, ,access to enhanced computer systems and business banking opportunities for Virgin Money. It also offers benefits to Scotland with the group headquarters located in Glasgow.

As part of the deal, CYBG announced that the Clydesdale and Yorkshire brands will disappear and will be replaced nationally by the Virgin Money Brand. This relatively swift announcement about the future brand does raise some concerns, as rebranding of any organisation is not simply a name change and an exchange of logos.

Organisations build up their culture, heritage and reputation over many years. Customers develop their perceptions of brands through a variety of experiences and touch points with the physical branches, the internet, employees, the service that is provided and messages in advertising and the media.

That is why rebranding on its own does not change opinions. History is littered with examples of companies such as British Airways, Royal Mail and Gap spending large sums on failed rebranding exercises where little changed apart from the name and the signage.

There is a challenge for CYBG and its senior management team. Virgin’s values are communicated as heartfelt service; being delightfully surprising; red hot; straight up while maintaining an insatiable curiosity; and creating smart disruption.

It delivers its banking services through innovative lounges with free coffee, biscuits, newspapers and even pianos. These are are more akin to airline lounges than bank branches.

Those in Glasgow and Edinburgh are always busy with customers treating them as social hubs rather than places to deposit or withdraw cash. Clydesdale and Yorkshire have been around since the mid-1800s and still operate with a traditional bank branch format incorporating a counter, tellers and queuing systems. The values they espouse on their websites relate to being a bank that plays its part in the community and has a commitment to always being the local bank.

Yes, both CYBG and Virgin Money have a strong internet presence and more customers are doing their banking online but their positioning and cultures are very different. There is a danger that rebranding the Clydesdale and Yorkshire branches could damage the positioning of Virgin Money while, at the same time, challenging the notion that the new bank has a commitment to being a local one. Customers who have signed up to the lounge experience at Virgin Money may be disappointed when they pop into their local Clydesdale.

From a Yorkshire and Clydesdale perspective, their customers may be confused as to what the change will mean for them and whether that community-based relationship in their smaller branches will disappear.

Therefore, while there may be major benefits in relation to scale and national coverage, care must be taken in rushing headlong into a rebranding exercise that could destroy any goodwill built up for all three brands over many years.

Gradual changes need to be made across all of the customer facing activities of the banks to match the values the selected brand is going to promote and, more importantly, deliver.

Customers are not fooled by new logos and colour schemes. They judge a bank on the service that is delivered. Rebranding an organisation is a very expensive business; let’s hope CYBG takes its time and gets it right.