Consumer targeting
Profitable hits and costly misses

Retail challengers are “not yet a real threat” to established providers in the banking sector, claims Louise Walker – but they’re gaining ground on the traditional brands.

As bankers everywhere focus relentlessly on rebuilding the consumer trust that’s been so seriously undermined by the global economic maelstrom, it’s more important than ever for the sector’s marketers to be absolutely precise about both the targeting and the style of their retail communications.

This is true at two levels: externally, few things irritate individual buyers of financial services more than sales approaches which make false or flat-footed assumptions about their status or circumstances; and, internally, few things dismay banking strategists and budget-holders more than precious pounds being misdirected with campaigns which literally knock on the wrong doors.

This much – plus some surprises – is clear from research we’ve just completed into consumer attitudes to financial service providers. Encouragingly, the survey* shows that, while consumer perceptions of the sector have unquestionably been damaged, green shoots are appearing and that, by making simple changes to the way they communicate to consumers, financial services brands stand the best chance of repairing the damage.

It’s pretty obvious that the days of “lifetime customers” are gone. With trust in the sector at an all-time low, British consumers are now scrutinising everything they spend and looking afresh at how they select the providers with whom they’ll do business. And, for their part, bankers themselves are having to work harder than ever to win business back from up-and-coming brands and the new entrants, such as retailers.
 
And, as the sector’s survivors hunker down, it’s understandable that banks’ CEOs and strategists are examining every aspect of their marketing spend to avoid being the next victims. Their scrutiny starts with a cool assessment of how the market has changed.

Top of the class

After serial blows to the pension market and the near collapse of the US mortgage market with global ramifications, it’s not really surprising that pension, mortgage, investment, loan and income replacement products are the least popular with consumers. By contrast, our research confirms that 87 per cent of consumers have bank accounts, and PayPal is the second most popular financial product in the category with a whopping 68 per cent of consumers holding an account.

The most likely explanation for the increasing popularity of PayPal is the unprecedented rise in e-commerce during the last decade. And, with “free” banking coming under threat following a High Court test case on unauthorised overdraft charges, consumers may also be more open to new or alternative banking and transacting models proposed by PayPal and Virgin Bank.

Rising stars
 
According to the report, high street banking giants Lloyds TSB, Halifax, Santander, NatWest and Barclays are the most popular financial services consumer brands. They’re closely followed by the credit card Barclaycard and Nationwide Building Society.

The report also seeks to identify rising stars challenging the status quo. Out of 42 brands, Tesco, the UK’s biggest retailer with a brand value of $25.7bn, is the eighth most popular financial services provider, fast fulfilling its promise to become the “people’s bank”.

However, while financial providers with retail backgrounds are gaining ground on traditional brands, the survey shows they don’t yet pose any real threat: Sainsbury’s is ranked only 18th, Asda comes 31st, and John Lewis’ Green Bee comes second from bottom at 41st with only 1 per cent of the sample claiming a relationship with the brand.

Data disasters

Consumer confidence has been further dented by a dramatic increase in data losses in the sector. In August 2010, the Financial Services Authority (FSA) hit Zurich Insurance with a £2.3m fine following its loss of 46,000 customer records. With unprecedented access to highly sensitive data, including customers’ intimate identity details and information on their bank, loan and credit accounts, Zurich and other insurers now face mounting pressure to heighten security and improve their internal reporting systems.

A year earlier, HSBC divisions (HSBC Life UK, HSBC Actuaries and Consultants, and HSBC Insurance Brokers) came under fire for failing adequately to protect customers’ confidential details from being lost or stolen and were fined £3m by the FSA.

Most trusted

Consumers were asked to rank organisations by how much they’re trusted with their personal data. Interestingly, banks and building societies come out on top, with 28 per cent of consumers saying they’re most trusted. But when the scores are aggregated, financial advisors take first place, banks and building societies come second while supermarkets are ranked third. The least trusted organisations overall are lenders, closely followed by credit card companies and then comparison sites.

But, despite all the press stories about catastrophic data losses, it’s not always the big issues that cause problems. Often simple, careless errors in the way that data is captured or maintained can lead to highly distressing situations for individuals, not to mention the money that’s wasted on mailing obsolete records – sending marketing material to the deceased, using incorrect address details, getting your customer’s name wrong and other forms of badly targeted marketing.

Brand damage

For businesses hoping to improve brand image and rebuild consumer trust in a fragile economic climate, rolling out a poorly targeted campaign could have serious financial implications, as well as causing brand damage.

Some 43 per cent of consumers say, helpfully, that they’d make direct contact with providers to let them know about receiving badly targeted communications. On the other hand, 18 per cent admit it would negatively affect their opinion of the brand; 13 per cent say they’d be less likely to use the brand’s products and services in future, while 4 per cent say they’d never use the brand’s services again.

These negatives may seem comparatively small, but they equate to more than 15 million adult consumers with a potential harmful impression of a brand. The FSA tops the list of official bodies consumers would complain to about a provider’s marketing practice, with 20 per cent stating they’d take their concerns to the Financial Ombudsman Service.

Squeaky clean

To start building bridges with consumers, it’s vital that financial services marketers ensure all their communications are hitting the right note. It might seem blindingly obvious, but a squeaky-clean database and well-targeted campaigns that deliver ageappropriate messages show you understand your audience.

The research indicates that a staggering 29 per cent of consumers have been sent irrelevant or inappropriate marketing for loan products. And credit cards don’t fare much better, with 26 per cent of consumers receiving unsuitable marketing. By contrast, only 9 per cent of consumers say they have received inappropriate marketing for banking or pension products, indicating perhaps that those providers have a better knowledge of their customer and prospect base.

Given the different channels available to marketers, it can be difficult to know how to allocate precious budgets or how consumers want to be communicated to. Although the percentage differences are marginal, the research shows that 39 per cent of consumers would rather receive marketing communications by e-mail from providers they have a relationship with, and prefer direct mail if they don’t have an existing relationship. Overall, consumers prefer direct mail to any other marketing channel, with e-mail coming in a close second, followed by telephone and SMS.

*Financial Services: REaD Report surveyed over 2,000 adult consumers in the UK in May 2011.

Louise Walker is Head of Group Marketing at the REaD Group plc, a leading UK supplier of data suppression and enhancement services to the direct marketing sector.

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