Financial Services Marketing in 2012 March 2012
Introduction
Martin Lewis of Moneysavingexpert.com says that loyalty doesn’t pay. However, customer inertia, especially in the area of switching current accounts, has so far meant that, even if customers do not ‘like’ or feel loyal to their financial services provider they are unlikely to switch to a competitor.
But that might be about to change with the ‘perfect storm’ conditions of Virgin Money taking over Northern Rock (following Metro Bank into the ‘new current account provider’ sector of the market) and the Independent Commission on Banking’s final report recommending that the following measures be introduced by all banks to simplify bank account switching:
1. 7 day transfer
2. Seamless redirection of direct debits and standing orders
3. More information on the overall costs of each account (so that a proper price comparison can be made)
Thus, current account customers might finally be given:
the guarantee that they can switch account provider painlessly
the motivation, as Sir Richard Branson’s consumer-friendly Virgin Money proposition finally enters the banking space (following the launch in 2010 of Metro Bank, which was the first new high street bank in more than a century)
the tools to do the job thoroughly, as the price comparison sites will be able to use the more detailed information on the costs of different current accounts to provide more accurate assessments of their relative merits for different customers
Will the trust that consumers have lost in the financial services industry following the credit crisis finally start to be restored by the new bank brands? And will the customer-centric communication for which Virgin is known elsewhere strike the right note with disillusioned current account holders?
Is switching bank in 2012 on everyone’s ‘to do’ list or will consumers be as apathetic about changing current account this year as they always are. In short, is 2012 a ‘tipping point’? Opinium’s quantitative consumer research sheds light on what might happen.
This article by Ian Giles, Opinium Research’s Head of Marketing & Insight, examines the UK financial services marketing landscape, based on quantitative research from 2011 and January 2012.
Opinium’s quantitative consumer research
Customers’ views of their banks - including their trustworthiness, honesty, reputation, good service and care for their customers – differ widely in the UK
According to research conducted by Opinium during 2011, opinion ratings given by customers to their present UK banks range from 91% favourable at best to 53% favourable at worst. At the same time, those customers who have an unfavourable opinion of their present UK bank range from 0% at best to 20% at worst. So, whereas some banks do not have any customers whose opinion of them is unfavourable, at other banks 1 in 5 customers describe their opinion of their bank as unfavourable.
Customers were asked to score their banks on a scale of 1 to 5 against a series of measures, including good value, reliable, responsible, honest, ‘known for good service’, ‘cares about its customers’, innovative, trustworthy, ‘understands my needs’, ‘better than other banks’ and ‘is for someone like me’. Again, a significant difference was seen between the highest rated bank, which scored an overall rating of nearly 4.25, and the lowest rated bank, which scored less than 3.50.
This wide range of customer ratings clearly demonstrates that not all banks are seen as the same by their customers and there is definitely scope for improving one’s banking service by switching provider.
The likelihood of a customer recommending their present bank to friends and family differs significantly between banks
Bank customers were also asked by Opinium in 2011 how likely they would be to recommend their present bank if they were advising friends, with 53% of all bank customers indicating they would be likely to recommend their bank and only 13% describing themselves as unlikely to recommend their
However, breaking these results down by individual bank shows that there is a big difference between the most and least recommended. 84% of one bank’s customers indicated that they would be likely to recommend their bank to friends or family, whereas only 44% of another bank’s customers would be likely to do the same thing.
More than one in ten bank customers plan to switch provider in the next two years. Introducing the recommendations of the Independent Commission on Banking would make 23% of respondents who have bank accounts more likely to switch their account provider.
Opinium conducted research in January 2012 amongst a nationally representative sample of UK adults, asking them about the likelihood of switching their current account and other financial services providers during the next two years.
Current account switching behaviour and intentions
Just over one in ten (12%) of people are likely to switch their current account provider in the next 2 years:
62% are unlikely
20% of 18-34 year olds are likely
7% of over 55’s are likely
43% of consumers have switched a current account provider but 56%
never have. Of those who have switched an account, 15% said it was difficult while 67% said it was easy (25% said ‘very easy’). 87% said they would switch again if necessary, showing that once a customer has switched once and realised that it is relatively painless, they will be far more likely to switch again. Of those that have never switched, 30% have considered switching but 70% have not.
Of those that considered and then did not switch, the most common reasons were:
too much hassle to move salary/payments etc (51%)
being with a bank for a long time/family always using that bank (31%)
didn’t have the time to spend switching account (14%)
fearful of the paperwork involved (13%)
hold other financial products at the present bank (11%)
Of those that have never considered switching provider, the most common reasons were:
being with the bank a long time/family always using the bank (44%)
too much hassle to move salary/payments etc (26%)
it never occurred to them (20%)
hold other financial products at the present bank (11%)
Push and pull factors in switching
Given that customers are either too loyal or can’t be bothered to switch their bank, Opinium asked consumers to indicate which three scenarios would make them most likely consider leaving their current bank.
The most selected ‘Push’ factors were:
Introducing additional bank charges – 42%
Rude and unhelpful staff – 35%
Not admitting to any mistakes made – 22%
Moving to an overseas call centre – 19%
Increased overdraft charges – 18%
Local branch to your home closing – 16%
Paying excessive bank bonuses – 16%
But what should banks be doing to attract and pull in customers? Opinium asked consumers to tell us exactly what prospective banks should offer to encourage them to switch.
The most selected ‘Pull’ factors were:
Good customer service – 41%
Clear fees and charges – 39%
A straight forward switching process – 38%
Friendly and helpful staff – 36%
UK based call centres – 35%
Good product rates – 32%
A local branch to my work or home – 26%
A brand I can trust – 26%
Joining offers / gifts – 25%
Good product benefits – 24%
Banking reforms
Introducing the recommendations of the Independent Commission on Banking would make 23% of respondents who have bank accounts more likely to switch their account provider. This is a significant change in the intentions of customers to switch their current account.
New entrants
Consumers were asked whether the fact that a bank is now owned by Virgin Money (as Northern Rock is) made them more or less likely to consider opening an account with that bank:
60% said that it would have no real impact
15% said it would make them more likely (19% of 18-34 year olds)
17% said it would make them less likely (22% of over 55’s)
8% didn’t know
Other financial services providers
When it comes to other service providers, consumers’ likelihood to switch is as follows:
Service % likely to switch in 2012
Motor insurance 36%
Building & contents insurance 32%
Investments (e.g. ISA) 17%
Deposit account 15%
Mortgage 8%
Pension 5%
Customer communication
Regarding how banks contact customers, for standard information the most popular methods of communication were as follows. Note that the way the customer likes to be contacted depends on the reason:
Face to face
Telephone
call Letter Email Text
Internet banking platform
None of these
Monthly account
balance 4% 2% 31% 27% 5% 22% 8%
Overdraft limit alerts 5% 7% 23% 27% 15% 10% 13%
Changes in policy 5% 3% 47% 26% 1% 11% 6%
Large debit/credit
alerts 6% 16% 20% 26% 11% 10% 11%
For general, non-urgent banking matters, the most popular methods of communication for a customer to use to contact the bank were as follows:
Face to face
Telephone
call Letter Email Text
Internet banking platform
None of these
Requests for
statements 14% 9% 8% 20% 1% 38% 10%
Checking your
balance 9% 6% 7% 17% 2% 46% 11%
Setting up new Direct Debits or Standing Orders
20% 9% 8% 16% 1% 40% 7%
Opening and closing
accounts 33% 8% 10% 14% 0% 26% 9%
For specific and urgent questions, the most popular methods of communication from customer to bank were:
Face to face
Telephone
call Letter Email Text
Internet banking platform
None of these
Being unexpectedly
charged bank fees 29% 42% 6% 9% 1% 8% 5%
Losing your card 17% 62% 3% 7% 1% 7% 4%
Forgetting your PIN 19% 41% 5% 12% 1% 16% 6%
Contact Devices
The most popular electronic devices for accessing current account information are:
Home PC (81%)
Mobile phone to access internet (17%)
Work PC (16%)
Tablet (iPad etc) (6%)
None of these (4%)
Not applicable – do not use internet banking (11%)
Tone of voice
37% prefer a formal tone when dealing with their current account provider, 22% prefer an informal tone while 38% say neither formal nor informal.
Perhaps surprisingly, younger respondents were more likely to prefer a formal tone (50%) then over 55’s who were more evenly split (30% formal, 29% informal)
Conclusion
Opinium’s quantitative consumer research shows the many challenges faced by Marketing, Insight and Communications Directors and Managers at UK financial services providers. 2012 may be the year that sees the beginning of a significant shift of consumers away from those providers who have relied on inertia to retain customers towards those providers who are communicating with consumers in the way that they want. Customer loyalty has been tested in the last few years and the proposed changes in banking practices, especially regarding the switching of current accounts, coupled with new entrants like Metro Bank and Virgin Money, may well cause a marked change in consumer behaviour.
There are many ways in which financial services communication can be improved. It appears that good customer service comes first. It all starts with listening to your own customers, which is why nationally-representative samples of UK adults can only go so far in explaining the likely behaviour of a specific institution’s customers. Research is still one of the most powerful implements in the marketing toolkit when used in the right way.
Ian Giles – Head of Marketing & Insight, Opinium Research www.opinium.co.uk
