According to The Guardian, the savings ratio has jumped from 3% in the first quarter to 5.6% in the second quarter of 2009 - the highest level for 16 years.
However, with building societies also reporting savings outflows, it looks like people are using their savings to pay down their debts rather than building up nest eggs - although personal borrowing has levelled off rather than fallen.This suggests that financial capability (see my previous post) is improving - spending less than you earn is a key criterion and those additional pounds are being channelled in the most logical and cost-effective direction.
Given low savings interest rates, that seems sensible - but I was interested to read David Smith's point in the Sunday Times this weekend that historically, even 3% is a good savings ratio - in the 1950s, for example, the savings ratio averaged 0%. I don't think it's unreasonable to suggest that marketers have had some influence on that, with a wide range of savings accounts tailored to different savings needs now available making saving easier, more convenient and often more rewarding than in the past.
At the height of the last recession, the savings ratio hit 12% - suggesting that there is potential for savings balances to rise yet. However, even that figure is some way off the recommended levels needed for people to fund their retirements. With final salary pension schemes closing, as marketers we should be considering what steps we can take to encourage people to continue to increase the percentage of their income they save - and to do so in good times as well as bad. Our old ages - and our economy - depends on it.
Showing posts with label financial crisis. Show all posts
Showing posts with label financial crisis. Show all posts
Thursday, 1 October 2009
Wednesday, 16 September 2009
EU commission may force Lloyds Banking Group to sell Halifax
It's a bad week for the black horse all right. After we discovered yesterday that Lloyds TSB's acquisition of Halifax had earned it the 'accolade' of most complained about bank with the Financial Ombudsman Service, today we find out that the EU might force it to sell Halifax as retribution for requiring state aid following it's acquisition of, er, HBOS.
Now I'm in no position to know but it seemed at the time, and still does, that there may have been a quite chat between gentlemen before that deal went through so it seems a shame that Lloyds might be forced to lose the Halifax brand, the only thing that may have sweetened what has turned out to be a quite disastrous deal for them.
The article suggests that Halifax would be a good acquisition target for either one of the companies looking at winning a UK banking licence or even Tesco - a strange choice if one of the reasons for ordering the divestment is to increase competition, given that Tesco already accounts for a huge proportion of consumer spending.
However, with 30 million customers Lloyds Banking Group accounts for almost half the UK population and very much fits the criteria for a bank that is too big to fail - or save - and so it's probably the right decision to break the group up. I suspect we'll see a lot more 'right-sizing' to come. Good news for marketers - more brands = more marketers - and hopefully also a new era of creativity as each seeks to carve out a distinctive niche.
Now I'm in no position to know but it seemed at the time, and still does, that there may have been a quite chat between gentlemen before that deal went through so it seems a shame that Lloyds might be forced to lose the Halifax brand, the only thing that may have sweetened what has turned out to be a quite disastrous deal for them.
The article suggests that Halifax would be a good acquisition target for either one of the companies looking at winning a UK banking licence or even Tesco - a strange choice if one of the reasons for ordering the divestment is to increase competition, given that Tesco already accounts for a huge proportion of consumer spending.
However, with 30 million customers Lloyds Banking Group accounts for almost half the UK population and very much fits the criteria for a bank that is too big to fail - or save - and so it's probably the right decision to break the group up. I suspect we'll see a lot more 'right-sizing' to come. Good news for marketers - more brands = more marketers - and hopefully also a new era of creativity as each seeks to carve out a distinctive niche.
Thursday, 10 September 2009
Marketing after Lehmans
One year on from the collapse of Lehmans, what should marketers have learned?
We have a difficult job to manage the reputations of our brands when the C-suite could be gearing the business by up to 44 times the total value of assets, as Lehmans did. And don't our customers know it.
Historically, savers have always been prepared to accept lower savings rates in exchange for retail deposit accounts being effectively risk free. Now, savings marketers are being hit by a triple whammy: the savings ratio is going down (hence banks started looking to the interbank markets in such volume in the first place), base rate is still at an historic low of just 0.5% and customers are now less prepared to accept low savings interest rates as they no longer perceive savings accounts as risk free.Indeed, some very senior people are speaking loudly about the need for banks to be allowed to fail 'for the greater good' - not much help if it's your life savings they fail with.
The Financial Services Compensation Scheme has had to increase its limit to £50,000 to maintain confidence. Liquidity markets are still not flowing as freely as before the crisis, capital adequacy requirements have increased and banks are having to implement huge amounts of complex regulations - causing great pressure on funds.
Lending criteria have been tightened due to the increased likelihood of default and insurance companies are experiencing higher levels of suspected frauds, with correspondingly higher administration costs.
However, the pressure on margins is not the biggest problem marketers have. Financial services has always been a prestige industry that has been hugely trusted by customers. Now, that view has changed and bankers are often seen as money grabbers, dishonest and incompetent.
This is where transaction cost economics (Williamson 1985) and resource dependency theories (Pfeffer & Salanik 1978, Heide 1994) come in. These theories cover long term buyer/seller relationships where the relationshipis perceived to involve risk - the position banks now find themselves in. Both parties seek to mitigate their risk by building in safeguards - Heide and John 1988 - (such as tightening lending criteria), to exert control over the relationship (such as offering higher rates of interest in return for locking funds away for long periods) and looking for incentives for risk taking behaviour (such as increasing interest rates on loans).
Banks have done a great job of managing the risk on their side of the equation. But as marketers, we should be asking ourselves: what will our customers be looking for to minimise their risks? They too will want to build in safeguards (by choosing strong brands with stable, conservative reputations), exert control (by demanding higher service standards and more convenient, easy access to their funds) and incentives to take risks (better rates of interest.
These points should be key marketing messages at the moment. And, because of the general cynicism and lack of trust around at the moment, they should be demonstrably true - backed by real evidence at every customer touchpoint and level of the business. The banks that manage to convince customers that they are able to offer them the most control will be the ones that succeed.
We have a difficult job to manage the reputations of our brands when the C-suite could be gearing the business by up to 44 times the total value of assets, as Lehmans did. And don't our customers know it.
Historically, savers have always been prepared to accept lower savings rates in exchange for retail deposit accounts being effectively risk free. Now, savings marketers are being hit by a triple whammy: the savings ratio is going down (hence banks started looking to the interbank markets in such volume in the first place), base rate is still at an historic low of just 0.5% and customers are now less prepared to accept low savings interest rates as they no longer perceive savings accounts as risk free.Indeed, some very senior people are speaking loudly about the need for banks to be allowed to fail 'for the greater good' - not much help if it's your life savings they fail with.
The Financial Services Compensation Scheme has had to increase its limit to £50,000 to maintain confidence. Liquidity markets are still not flowing as freely as before the crisis, capital adequacy requirements have increased and banks are having to implement huge amounts of complex regulations - causing great pressure on funds.
Lending criteria have been tightened due to the increased likelihood of default and insurance companies are experiencing higher levels of suspected frauds, with correspondingly higher administration costs.
However, the pressure on margins is not the biggest problem marketers have. Financial services has always been a prestige industry that has been hugely trusted by customers. Now, that view has changed and bankers are often seen as money grabbers, dishonest and incompetent.
This is where transaction cost economics (Williamson 1985) and resource dependency theories (Pfeffer & Salanik 1978, Heide 1994) come in. These theories cover long term buyer/seller relationships where the relationshipis perceived to involve risk - the position banks now find themselves in. Both parties seek to mitigate their risk by building in safeguards - Heide and John 1988 - (such as tightening lending criteria), to exert control over the relationship (such as offering higher rates of interest in return for locking funds away for long periods) and looking for incentives for risk taking behaviour (such as increasing interest rates on loans).
Banks have done a great job of managing the risk on their side of the equation. But as marketers, we should be asking ourselves: what will our customers be looking for to minimise their risks? They too will want to build in safeguards (by choosing strong brands with stable, conservative reputations), exert control (by demanding higher service standards and more convenient, easy access to their funds) and incentives to take risks (better rates of interest.
These points should be key marketing messages at the moment. And, because of the general cynicism and lack of trust around at the moment, they should be demonstrably true - backed by real evidence at every customer touchpoint and level of the business. The banks that manage to convince customers that they are able to offer them the most control will be the ones that succeed.
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