The president of Standard and Poor's has today outlined the changes S&P will be making to restore confidence in credit ratings.
Transparency will be a key theme for financial services for the foreseeable future and S&P are responding to this by providing much more detailed information about the assumptions, stress tests and scenario analysis underpinning their ratings.
About time too.
Fund managers will find it easier to understand the ratings in the light of their own assumptions, peer review will be richer and marketers will be able to better communicate the risks involved in complex products.
However, we must remember that a demand for transparency is just another way of saying that trust and confidence has disappeared. This additional data is a really way of meeting the first two of the conditions for trust I discussed in yesterday's post - keeping promises and acting competently.
Although institutional investors may find some of the information transparency demands useful, realistically much of it is already available to them in one form or another. As for retail clients - their classification means that we have to assume the data is of no practical value to them - after all, we have the same duty of care to explain the underlying risks and ensure suitability as we ever had.
The way this information is presented is therefore potentially as important as what it says. When we incorporate it into marketing collateral, we need to remember that a major role is to communicate the underlying competence and reliability of our institutions - to the people that can't critique it as much as to those who can. After all, that's one of the reasons S&P is providing it in the first place.
Showing posts with label brand reputation. Show all posts
Showing posts with label brand reputation. Show all posts
Saturday, 3 October 2009
Thursday, 1 October 2009
What kind of relationship do you have with your customers?
As marketers, we are always looking for ways to build the relationship between our brand and our customers. It's more profitable to maintain a relationship with an existing customer than to recruit a new one and our loyal customers are the ones that can tell us what we are doing well - and badly.
That's why it's important to understand what kind of relationship we have with our customers and segment our customer base accordingly.
According to Ehrenberg et al, most customers exhibit 'polygamous loyalty' - in other words, they have a shortlist of trusted brands they do business with. Donaldson and O'Toole have suggested that there are four types of relationship we can have with our customers:
Close relationships are most likely in corporate or private banking, where the proposition is bespoke to each individual customer and switching costs are high. These days, we should probably add those customers most keen to interact with our brand: the ones that write to us with suggestions, set up fan pages, blog and tweet about our brands. These customers can become 'lighthouse customers' (Prokesch 1993) who are willing to be actively involved in focus groups, new product development and so on.
Dominant partner relationships are those where one party has (or perhaps is perceived to have) all the power - these relationships have low levels of trust and the subordinate party is probably keen to find a better relationship with another partner.
Recurrent relationships are those where the customer tends to choose the same brand but would find it easy to change to another - for example instant access savings account customers.
Discrete relationships are those where the customer makes each purchase decision individually and won't favour the existing provider - for example 'rate tarts'.
We can move customers from one category to another and increase their loyalty by increasing their trust in our brand - according to Sako, we do this by keeping our promises, performing competently, and exceeding expectations through 'goodwill' actions - the warm and fuzzy stuff that makes customers likeand identify with your brand as opposed to seeing their product as a commodity.
I think it is this final element that is most important - keeping promises and being competent are, surely, hygiene factors - it's expected and therefore will go unnoticed and unrewarded.
However, demonstrating a willingness to treat our customers as people will encourage customers to invest in a relationship with us that moves beyond the products they hold now. The better we do this, the more likely we are to be prioritised among the brands to which our customers are 'polygamously loyal'.
That's why it's important to understand what kind of relationship we have with our customers and segment our customer base accordingly.
According to Ehrenberg et al, most customers exhibit 'polygamous loyalty' - in other words, they have a shortlist of trusted brands they do business with. Donaldson and O'Toole have suggested that there are four types of relationship we can have with our customers:
| ACTION COMPONENT | |||
| High | Low | ||
| BELIEF COMPONENT | High | Close | Recurrent |
| Low | Dominant partner (hierarchical) | Discrete | |
Close relationships are most likely in corporate or private banking, where the proposition is bespoke to each individual customer and switching costs are high. These days, we should probably add those customers most keen to interact with our brand: the ones that write to us with suggestions, set up fan pages, blog and tweet about our brands. These customers can become 'lighthouse customers' (Prokesch 1993) who are willing to be actively involved in focus groups, new product development and so on.
Dominant partner relationships are those where one party has (or perhaps is perceived to have) all the power - these relationships have low levels of trust and the subordinate party is probably keen to find a better relationship with another partner.
Recurrent relationships are those where the customer tends to choose the same brand but would find it easy to change to another - for example instant access savings account customers.
Discrete relationships are those where the customer makes each purchase decision individually and won't favour the existing provider - for example 'rate tarts'.
We can move customers from one category to another and increase their loyalty by increasing their trust in our brand - according to Sako, we do this by keeping our promises, performing competently, and exceeding expectations through 'goodwill' actions - the warm and fuzzy stuff that makes customers likeand identify with your brand as opposed to seeing their product as a commodity.
I think it is this final element that is most important - keeping promises and being competent are, surely, hygiene factors - it's expected and therefore will go unnoticed and unrewarded.
However, demonstrating a willingness to treat our customers as people will encourage customers to invest in a relationship with us that moves beyond the products they hold now. The better we do this, the more likely we are to be prioritised among the brands to which our customers are 'polygamously loyal'.
Tuesday, 29 September 2009
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?
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?
Saturday, 26 September 2009
When sponsorships attack
After the Renault F1 cheating scandal, ING has had no choice but to end its association with the team, which it has managed to do commendably quickly.
There is always a question mark over the value brands actually get from sponsorships and similar partnerships - a lot of marketing managers see it as an opportunity to get 'money can't buy' tickets to keep key clients sweet, but too often they are just handed out to anyone who wants to go with no thought to long term relationship building. My fiance has a story of working for a bank a couple of decades ago, where the company had sponsored some terribly high brow acting troupe - he had to bribe clients to come with cheaper loan deals. Hardly value for money.
But ING has bigger problems than making the sponsorship deliver measurable benefits, as big a challenge as that always is. It has probably had more publicity from withdrawing from the deal than it would have had had the relationship continue. What is the impact of that publicity?
At a time when bank expenditure is being scrutinised and bankers' ability to make good decisions is being questioned, people will be looking at the due diligence aroundinto the type of people banks jump into bed with. Also, unless ING had negotiated a watertight integrity clause into the contract, they will have had to write off a chunk of sponsorship money - but will have lost the benefits they were expecting. They may also now have disappointed clients with F1 tickets they can no longer use.
As financial services marketers we need to ask harder questions of the companies we allow to share our brands. Now more than ever, our customers are looking for transparency, for reassurance that we are looking beyond the brand to the detail and the personalities underneath when assessing the risk of the partnerships we choose. That goes as much for sponsorship contracts as for third party product offers such as the Lehman, AIG, Kaupthing etc deals that rattled our customers' confidence in us a year ago.
We can't just rely on the legal and compliance departments to check the contracts we sign. Ultimately, the integrity of our brands is our responsibility. ING has done the hard job of breaking the contract - now it needs to examine the lessons it has learned from this to work out what it could have done to avoid the situation arising in the first place.
Had it done enough to impress on Renault the need to protect the integrity of both brands? Were the consequences of a reputational scandal sufficiently onerous? What did they do to examine the moral compass of the team bosses?
There is always a question mark over the value brands actually get from sponsorships and similar partnerships - a lot of marketing managers see it as an opportunity to get 'money can't buy' tickets to keep key clients sweet, but too often they are just handed out to anyone who wants to go with no thought to long term relationship building. My fiance has a story of working for a bank a couple of decades ago, where the company had sponsored some terribly high brow acting troupe - he had to bribe clients to come with cheaper loan deals. Hardly value for money.
But ING has bigger problems than making the sponsorship deliver measurable benefits, as big a challenge as that always is. It has probably had more publicity from withdrawing from the deal than it would have had had the relationship continue. What is the impact of that publicity?
At a time when bank expenditure is being scrutinised and bankers' ability to make good decisions is being questioned, people will be looking at the due diligence aroundinto the type of people banks jump into bed with. Also, unless ING had negotiated a watertight integrity clause into the contract, they will have had to write off a chunk of sponsorship money - but will have lost the benefits they were expecting. They may also now have disappointed clients with F1 tickets they can no longer use.
As financial services marketers we need to ask harder questions of the companies we allow to share our brands. Now more than ever, our customers are looking for transparency, for reassurance that we are looking beyond the brand to the detail and the personalities underneath when assessing the risk of the partnerships we choose. That goes as much for sponsorship contracts as for third party product offers such as the Lehman, AIG, Kaupthing etc deals that rattled our customers' confidence in us a year ago.
We can't just rely on the legal and compliance departments to check the contracts we sign. Ultimately, the integrity of our brands is our responsibility. ING has done the hard job of breaking the contract - now it needs to examine the lessons it has learned from this to work out what it could have done to avoid the situation arising in the first place.
Had it done enough to impress on Renault the need to protect the integrity of both brands? Were the consequences of a reputational scandal sufficiently onerous? What did they do to examine the moral compass of the team bosses?
Wednesday, 23 September 2009
What banks can learn from booze
Lots of financial services adverts look the same. It's really easy to take the easy route, lead on the headline rate and stick another picture of a piggy bank on the top. But advertising needs to stand out to work.
Utalkmarketing.com has a great case study from ENS Brann, looking at a campaign for Fosters. The alcohol industry has some similar issues to financial services - it's heavily regulated, a very mature, saturated market and the products aren't massively differentiated within each category.
Fosters did a highly targeted DM campaign that aimed to show solidarity with their target audience - and the research they did after the campaign proves that even without a direct call to action, there was a big uplift in sales and share of market.
This is a great idea and definitely one we financial services marketers should look at spinning for our own brands. The better we can demonstrate that we are *like* our customers, the better reason they have to choose our products and seek out advice from us.
Utalkmarketing.com has a great case study from ENS Brann, looking at a campaign for Fosters. The alcohol industry has some similar issues to financial services - it's heavily regulated, a very mature, saturated market and the products aren't massively differentiated within each category.
Fosters did a highly targeted DM campaign that aimed to show solidarity with their target audience - and the research they did after the campaign proves that even without a direct call to action, there was a big uplift in sales and share of market.
This is a great idea and definitely one we financial services marketers should look at spinning for our own brands. The better we can demonstrate that we are *like* our customers, the better reason they have to choose our products and seek out advice from us.
Monday, 14 September 2009
More competition on the horizon?
According to the FT, 30 companies are in talks about gaining UK banking licences, mainly because they see deposit taking as a potential source of cheap finance. Although they haven't filed applications yet, it seems that they may be more likely to do so in a year's time.
This means that competition for savings deposits may be about to hot up - at a time when fewer people are saving less (the FSA has seen a reduction in the number of people saving, particularly since 1997 and the savings ratio is reducing).
It is likely that these new entrants will look to win investors by offering high initial savings deposit rates, as ING, ICICI etc all did. Yet yesterday we saw that most savings ads in this weekend's Sunday Times Money section are selling on the basis of headline interest rate.
We marketers need to be developing strategies to create sustainable competitive advantages for our institutions now, or we might find the new entrants will have things all their own way.
This means that competition for savings deposits may be about to hot up - at a time when fewer people are saving less (the FSA has seen a reduction in the number of people saving, particularly since 1997 and the savings ratio is reducing).
It is likely that these new entrants will look to win investors by offering high initial savings deposit rates, as ING, ICICI etc all did. Yet yesterday we saw that most savings ads in this weekend's Sunday Times Money section are selling on the basis of headline interest rate.
We marketers need to be developing strategies to create sustainable competitive advantages for our institutions now, or we might find the new entrants will have things all their own way.
Friday, 11 September 2009
Measuring reputation
Following yesterday's post on the importance of a strong brand and trusted corporate reputation to help customers feel comfortable developing a relationship with your brand, I thought a post on measuring reputation would be helpful.
This article from the Reputation Institute (a slightly dodgy scanned pdf) looks at the dimensions of corporate reputation and describes a method for measuring the Reputation Quotient (SM) for your brand. It suggests that the main elements of brand reputation are: emotional appeal; products and services; vision and leadership; workplace environment; social and environmental responsibility; and financial performance.
It then recommends surveying the widest possible cohort to gain a balanced view of your corporate reputation across all socio-economic groups, geographies etc.
While this is demonstrably statistically sound, this is a rather static measure and will only enable you to measure your reputation at a point in time and not, for example, measure the impact of a particular product launch or news story.
This post covers the ten most useful tools to measure your online reputation. These allow you to measure the visibility and buzz about your brand in real time - although the nature of the tools skews the results towards those cohorts that are actively engaged with Web 2.0 and the internet:
1) Addict-O-Matic - instantly create a custom page with the latest buzz on any topic
2) Boardtracker - track the buzz on any keywords within popular forums
3) Google Alerts - daily or real-time alerts delivered via email for your chosen keywords
4) HowSociable? - measure your brand's visability across the main social platforms
5) Social Mention - another multi-platform visability checker, including alerts
6) Twitter Search - Twitter's only search is great for tracking real-time conversations
7) Wiki Alarm - monitors Wikipedia and notifies when pages are edited
8) Yahoo! Sideline - A desktop application that monitors Twitter in real-time for your brand/keywords (Mark: I personally use this app and highly recommend it)
If we have learned anything from the financial crisis, it must be that the single biggest risk to a bank is a loss of reputation - and that reputation is alive and constantly shifting.
This article from the Reputation Institute (a slightly dodgy scanned pdf) looks at the dimensions of corporate reputation and describes a method for measuring the Reputation Quotient (SM) for your brand. It suggests that the main elements of brand reputation are: emotional appeal; products and services; vision and leadership; workplace environment; social and environmental responsibility; and financial performance.
It then recommends surveying the widest possible cohort to gain a balanced view of your corporate reputation across all socio-economic groups, geographies etc.
While this is demonstrably statistically sound, this is a rather static measure and will only enable you to measure your reputation at a point in time and not, for example, measure the impact of a particular product launch or news story.
This post covers the ten most useful tools to measure your online reputation. These allow you to measure the visibility and buzz about your brand in real time - although the nature of the tools skews the results towards those cohorts that are actively engaged with Web 2.0 and the internet:
1) Addict-O-Matic - instantly create a custom page with the latest buzz on any topic
2) Boardtracker - track the buzz on any keywords within popular forums
3) Google Alerts - daily or real-time alerts delivered via email for your chosen keywords
4) HowSociable? - measure your brand's visability across the main social platforms
5) Social Mention - another multi-platform visability checker, including alerts
6) Twitter Search - Twitter's only search is great for tracking real-time conversations
7) Wiki Alarm - monitors Wikipedia and notifies when pages are edited
8) Yahoo! Sideline - A desktop application that monitors Twitter in real-time for your brand/keywords (Mark: I personally use this app and highly recommend it)
If we have learned anything from the financial crisis, it must be that the single biggest risk to a bank is a loss of reputation - and that reputation is alive and constantly shifting.
Saturday, 5 September 2009
Not using social media? Don't think you have no brand presence
It is a truth universally acknowledged that a happy customer tells one friend and an unhappy customer tells 10. Social networking sites make that disparity even more acute as every posting is instantly visible throughout the poster's whole network - which averages 120 people.
So what are financial services marketers currently doing to manage their brand reputations on social networking sites? A quick check of Facebook found the following:
HSBC
Lloyds TSB
Social networks are a highly targeted way for engaged people to share trusted information, as this article from the FT shows. More and more people are spending more and more time on Facebook - and that's time they aren't spending watching your TV ads, looking at your posters and print ads and reading your marcomms.
So - just exactly what messages are your customers and prospects sharing about you?
So what are financial services marketers currently doing to manage their brand reputations on social networking sites? A quick check of Facebook found the following:
HSBC
- 4 pages, the most popular of which has over 6,000 fans
- 2,000 groups.
Lloyds TSB
- No pages
- 277 groups
- 37 pages, the most popular of which has 261 fans
- 1900 groups
- 1 page with 123 fans
- 351 groups
- 0 pages
- 157 groups
Social networks are a highly targeted way for engaged people to share trusted information, as this article from the FT shows. More and more people are spending more and more time on Facebook - and that's time they aren't spending watching your TV ads, looking at your posters and print ads and reading your marcomms.
So - just exactly what messages are your customers and prospects sharing about you?
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