Sales v loyalty

The FSA today announced a range of measures to protect customers from PPI mis-selling.

Selling Payment Protection Insurance alongside loans sounds like a completely sensible thing to do - a low cost upsell that protects the institution and the customer simulaneously. How did it all go so wrong?

The first problem looks like a training issue - a combination of sales aids and targets seems to have led bank sales advisers to position the insurance as almost compulsory, or as a component of the cost of the loan. Which? found that 13% of people surveyed believed that PPI was a requirement for their credit card deal, for example. I have written before about the implications of agency theory on relationships - and this is the kind of 'mistake' that really erodes trust as it confirms people's worst suspicions.

The second problem is the lack of value people have received from the policies. According to the Competition Commission, only 11% of policies are successfully paid out. This figure may or may not be in line with other types of insurance - it doesn't matter. It's a low sounding number that has been widely reported alongside case studies of people who were never eligible for the policy in the first place - Which? claims that there are up to two million of them.

So here we are in a position where our customers tend to assume we're acting selfishly (agency theory) and where our sales practices seem to bear that out. Both the financial media and the regulators also behave as if the role of financial institutions is to swindle as much of people's money out of them as possible. It's in their best interests to peddle that line - it sells newspapers, encourages switching and adds to the perceived value of the regulator. But it's overwhelmingly in our best interests to clearly demonstrate the reverse - at every customer touchpoint and with every product.

Ranchhod and Gurau define marketing as 'the process of planning and executing activities that satisfy individual, ecological and social needs ethically and sincerely, while also satifying organisational objectives'.

Could the marketers responsible for PPI really say that their PPI product development and sales processes really met this challenge?