Teamspirit have written a blogpost challenging the FSA to create an innovative campaign to make saving cool.
We keep hearing about the pensions time bomb that's about to go off - so I don't think we should leave this to the FSA. All savings marketers should be trying to find innovative ways to encourage people to save throughout the economic cycle. With the savings ratio as high as it is at the moment, now is the time for us to start creating some innovative campaigns to embed the habit so that people continue saving even when the recovery begins.
I'd love to see a bank or building society - maybe one of the smaller ones that is less tied up dealing with the fallout from the credit crisis - make a real play to own savings. There's a great opportunity to run a relatively inexpensive campaign using social media, YouTube and blogs that could increase the savings ratio for good. The organisation that sets the agenda will be the winner.
Showing posts with label marketing challenges. Show all posts
Showing posts with label marketing challenges. Show all posts
Saturday, 31 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'.
Savings ratio at 16 year high - but still way off funding pensions
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.
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.
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.
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.
Tuesday, 15 September 2009
Abbey's integrated marketing campaign increases website traffic by 51%
Abbey used print and TV advertising to drive website traffic and encourage consideration of its new Super Saver account.
You can read about the results of this integrated marketing campaign to launch Super Saver at Utalkmarketing.com.
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.
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.
Tuesday, 8 September 2009
Challenges for financial services marketers
This post may be a year old but it's still got plenty for financial services marketers to think about.
It's an American interview with Bryan Stapp, former CMO of Quicken Loans and current Chief Marketer of Loud Amplifier Marketing, talking about the need for marketers to concentrate on building trust - and challenging us to think harder about how we build relationships with our clients.
It's an American interview with Bryan Stapp, former CMO of Quicken Loans and current Chief Marketer of Loud Amplifier Marketing, talking about the need for marketers to concentrate on building trust - and challenging us to think harder about how we build relationships with our clients.
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