viewpoint_issue_6

Keeping you connected to today’s UK financial services market

Welcome to the sixth edition ofviewpoint, Harris Interactive’sUK financial services newsletter.

In this edition of viewpoint we discussmanaging stakeholder relationships.

With a focus on consumers, we discusscustomer needs and how well thebanking sector manages the differentdimensions of customer relationships,making comparisons with the rest ofthe industry and other service basedsectors.

Within financial services we tradeupon the relationships that wehold with our customers orclients. We all know these relationships are formed and re-evaluated on a constant basisdepending on how well we service customer needs.

However, what do consumersreally want from a financial services provider? How well is thebanking sector performing? Andhow well does it compare to othersectors within the industry andbeyond?

Understanding Customer NeedsIt’s no surprise that consumerswant to deal with financial

institutions they can trust andwhich provide good value, as canbe seen in the table below.

What may be more of a revelationis that after providing an excellentservice it is the softer moreemotional characteristics thatdominate. For example,consumers are also looking forfinancial institutions that treatcustomers fairly, act responsiblyand have friendly staff. Given thatthese ‘emotional’ needs are soprevalent it leads me to ask thequestion, how many financial organisations are actually focusingon such needs, when designingtheir products, services orcommunications?

For more information on our financial services research practice visit:| www.harrisinteractive.co.uk PAGE 1

ISSUE 6 - May 2012

viewpoint

This edition was researched and written byPhilip Brooks, Senior Associate Director,

Financial Services Research [email protected]

Consumer needs when selecting afinancial services organisation

All bankaccountholders

They are trustworthyThey provide good value

They provide excellent serviceThey treat their customers fairly

They really care about their customers

They act responsibly

They staff are friendly

Offer a wide range of products & services

They are ethical

They are relevant to you personally

They are up-to-dateThey have a large branch network

They have a strong online presenceThey are a leading company

Impo

rtan

ce w

hen

sele

ctin

g a

finan

cial

ser

vice

s or

gani

sati

on

74%

67%

52%

48%

32%

30%

27%

19%

67%

74%

55%

38%

36%

21%

Base: All those with a bank account (1,918) - Respondents could select up to ten attributes from a list of 19

Consumer needs do vary bank by bank,examples of which are listed below:

They provide good value- First Direct 86%

Treat customers fairly- the Co-operative 84%

Really care about customers- the Co-operative 73%

Wide range of products / services- HSBC 49%

Ethical- the Co-operative 65%

Strong online presence- First Direct 36%

Issue 6 | May 2012

For more information on our financial services research practice visit: www.harrisinteractive.co.uk | PAGE 2

viewpointContinued from page 1...

What stands out and signals theimportance of these ‘softer’ traits tome is that offering a wide range ofproducts and services is only slightlymore important than being ethical.

In fact being ethical and relevant toyou personally is more importantthat being up to date, having a largebranch network or having a strongonline presence.

There was a time when being big,having a large retail branch networkand large number of cash machineswas particularly attractive; in factthat is how I chose my bank. Todaythose needs are less prevalent andconsumers are now looking forsomething different, and needs dovary bank by bank.

Some are looking for a deeperemotional relationship with theirbank, one that goes beyond trustand fits with their lifestyle and priorities. Some others simply wanta bank that delivers good productsand services, the channels of delivery are far less important.

When analysing consumer needs bytheir main bank, it is clear to seethat the communication strategies ofboth the Co-operative and FirstDirect are working. Both have eithermanaged to attract customersaligned to their strategy or haveeffectively communicated what theystand for to their customer base andmake it an important point of differentiation.

Interestingly, within the credit cardand general insurance markets,

similar differences by brand exist. In particular the AA, Tesco and LV=stand out from the crowd withinmotor insurance.

So even on the most basic level wecan see the power of brand andcommunications and how they havea role to play managing thecustomer relationship.

They help set customer expectationseven within those categories thatmany see as a commodity product.Of course, we have to accept thatthere may be a bit of post rationalisation here. Despite this,clearly some banks are attractingcustomers who have distinctiverational and emotional needs.

Managing Customer Relationships Many organisations talk about howthey have ‘consumer centric’processes, some even shout abouthow they have recently integratedtheir legacy systems into a singlecustomer voice or have developed acustomer segmentation to helpthem effectively target profitablecustomers.

Managing customer relationshipseffectively is not simply about integrating the latest technology orsoftware, nor is it just about datamining and finding out who yourmost profitable customers are. Nor dare I say it, is it about a marketresearch project. All of the aboveare simply enablers.

When you actually sit back andconsider what you are trying tomanage, i.e. what customers think,how they feel and how they will actin the future you begin to see theenormity of the task. Most businesses can target effectively anddesign products to meet rationalneeds, but unless a business trulyunderstands what makes theircustomers tick, it will struggle toconnect emotionally.

Effective customer relationshipmanagement is not a process, it’s aculture. That’s why alongsidewelcoming innovation and change,having customer centric values suchas fairness, trust and respectengrained into the ethos of anorganisation are so important for a

Engagement is just one ingredient of Employee Performance andOrganisational Success

Selection Direction Engagement Effort Enablement

Attract, select,on-board,promote

those thatbest fit yourculture and

values

You knowexactly what

the organisation

is out toachieve and

what part youplay

You want todo it becauseyou are fully

bought inrationally andemotionally

You’re tryingyour absolute

hardest todeliver for

success

Work systemsand support

maximiseyour effi-

ciency

Issue 6 | May 2012



financial services company thesedays.

It’s only when customer centricvalues become part of the organisation’s DNA that we cantruly begin to see throughcustomers’ eyes, design productsand services around their holisticneeds and begin to understand andimprove the third dimension of the relationship which is how theyintend to behave.

It’s not just the sales, marketing andoperational teams that have a roleto play here. The HR departmentalongside Finance (both often overlooked) have critical roles too.

The HR department not only needsto carefully develop the desiredbusiness culture, it also needs tomaintain it by recruiting and trainingindividuals that share the samevalues and behaviours. Both tasksare a lot more difficult than theysound. Finance needs to ensure allfinancial information is up to date,accessible and most importantly in aformat that people understand.

It’s the collaboration of all thesefunctions that helps an organisationmaximise its success. A businessthat works in silos is mortallydoomed.

So how well does the bankingsector perform?Historically, the banking sectorcannot claim to have a strong reputation for service and puttingcustomer interests first. We wereone of the first sectors to embrace

overseas call centres and generaloutsourcing of back office administration.

The media has also had a field dayas the big banks cut back on theirretail branch networks, leaving sometowns without a bank alongside pastscandals of irresponsible lending,PPI, overdraft charges and ATMcharges.

But how do consumers think, feeland act towards their main bank

today? Using our StakeholderRelationship Framework, we placedsome questions on our Harris Poll.

Despite the current negative perceptions of the industry, whencomparing to other service basedsectors the banks certainly holdtheir own.

Rationally, apart from the muchmaligned energy sector, there is verylittle difference across the board.Banks are particularly strong

OverallPerformance

Likelihood toRecommend

RationalIndex

Customer Relationship Score

Likelihood to Continue

Using

Vendor ofChoice

CompetitiveAdvantage

Unique benefit

IntentionalIndex

Value Me asa Customer

EmotionalIndex Ensures a

Trustworthy Relationship

Rational %

Emotional%

Intentional %

Relationship Score %

Banks

Credit Cards

TV Subscription Companies

Mobile Networks

Home Insurance

Car Insurance

Energy

52 49 54

49 50 46 50

48 47 43 53

48 49 44 51

45 46 45

43 47 44

38 37 38 39

51

43

41

Harris Interactive Stakeholder Relationship Framework

How the Financial Services Sector Performs

Issue 6 | May 2012



emotionally, and outscore both themobile and TV subscription sectors, which may be deemed more engaging. Regardless of thebaggage that the banking sectorhas, it is clear customers still havefaith in their own bank which isperhaps something the industryshould use in some way. Clearlyenticing customers with cinema tickets, film downloads and givingpriority to concerts is not assuccessful as general day to dayinteractions at building anemotional connection, even if theyare delivered at an arm’s length.

So who is leading the way withinthe banking sector? The Co-operative, alongside bothFirst Direct and Nationwide areperforming much stronger than therest of the sector (as can be seenopposite).

All have succeeded in targetingcustomers who have particularrational and emotional needs. Theyhave also effectively communicatedwhat they stand for and have delivered against it. Interestingly,the Co-operative, First Direct andNationwide are the only banks whocan really claim to provide a uniquebenefit to customers.

Having something distinctive aboutyou is obviously beneficial from abrand and acquisition point of view,but it also helps in terms of maintaining customer relationships.It can act as a permanent reminderas to why a customer joined you inthe first place and therefore help toreduce churn.

When looking at the performancedata above and comparing it to theoverall relationship scores above, itleads me to ask the questions?

• Why is the Co-operative leadingthe market when First Direct clearly

performs best on the majority ofattributes?

• Why is the relationship score forNationwide so close to First Direct?

First Direct has clearly created a

Overall Relationship Score

How would you rate your bank in each of the following areas?

The Co-operative

76%First Direct

67%Nationwide

66%All Banks

52%

Rational - 73%- Satisfaction 81%- Recommend 65%




Emotional - 77%- Values me 80%- Trustworthy 74%




Intentional - 78%- Provider of Choice 81%- Continue Using 86%- Unique benefit 69%

Intentional -70%- Provider of Choice 84%- Continue Using 73%- Unique benefit 54%



All Banks

The Co-operative

First Direct

Nationwide

The service they provide

Treating you as an individual

Ability to solve problems

Value for money

Clarity of communication

Responsiveness

Understanding, empathy of staff

Staff knowledge

Relevance of communications received

Staff professionalism

Offer new/innovative products & servic es

Ease of communicating with them

Amount of communications received

% Excellent/Very Good

30 40 50 60 70 80

Range of products/services they offer

Com

pone

nts

Issue 6 | May 2012



whole proposition based aroundbeing transparent and delivering astrong service. However, theemotional bond it has with itscustomers is not as strong, perhapsdue to its ties to its bigger parentcompany, and its route/channel tomarket. Interestingly the levels oftrust for both HSBC and First Directare pretty much identical.

Conversely Nationwide, perhapsdue to its mutuality, has created astrong emotional bond with itslevels of trust and although itsservice is not at the same level asFirst Direct and the Co-operative itis still well ahead of the industryaverage. If the Nationwide canbuild on its current performanceand get more customers to recommend it, it will be in a verystrong position indeed.

The Co-operative has created acompelling proposition around itsethical and sustainable behaviour,developing a culture that is embedded into its DNA. It has donean excellent job bonding withcustomers on all three dimensionsrationally, emotionally and intentionally.

There is no doubt the Co-operative’spositioning has helped to create astrong emotional bond with itscustomers. The Co-operative doesthings differently, it provides aunique benefit to being a customerand its service is also perceived tobe very strong.

Role of CommunicationsHowever, we must not underplaythe role of communications withinthe financial services sector.

Communications play a massive rolenot only in acquiring new businessbut also in helping to reinforce thekey reasons why a customerselected the organisation in the firstplace.

NatWest through its customercharter and its ‘Helpful Banking’campaign, clearly is using communications to help reinforcekey brand messages amongst itscustomer base and it appears to beworking.

NatWest has started to pull awayfrom the other major players onboth rational and intentional dimensions. Its communicationshave also been supported by higherperformance scores for responsiveness, relevance ofcommunications and

professionalism of staff. Despitethis, NatWest is yet to prove thatthere is anything unique abouthaving a relationship with it.

Customer relationships areconstantly re-evaluated based onwhat they see, hear and experience.As the industry reduces 'facetime'with its customers and as directinteraction reduces, service perceptions will become more andmore the reality. Companies needto be as consistent and memorableas possible when they are deliveringpeople based service as its importance is likely to be heightened for consumers.

As the ‘human touch’ reduces, service failures will be rememberedfor longer as the next staff interaction could be a year or moreaway. Ask yourself, when was thelast time you went into your localbranch or contacted your bankby phone? Therefore, more thanever before, to ensure healthy

All Banks

52%Rational - 49%- Satisfaction 56%- Recommend 43%



RelationshipScore:

57%

Rational: 55%

Emotional: 54%

Intentional: 61%

Satisfaction

61

Likelihood torecommend

48

Values me

56

Trustworthy

52

Provider of choice

72

Continueusing

75

Unique benefit

36

viewpointIssue 6 | May 2012

For further information related to this article, such as the background data, or to suggest new topics for inclusion please email [email protected] or call +44 (0)161 242 1360

customer relationships are maintained it’s important that financial organisations deal withcustomer complaints well, throughmultiple channels.

Social MediaWhilst you can control what you sayabout yourself, it is important tounderstand and manage whatpeople are saying about you.

Who remembers in 2007 HSBChaving to abandon its plan to scrapinterest-free overdrafts for studentsleaving university due to a facebookcampaign – I think this was the firstinstance of social media changingthe policy of a financial organisation.

However, negative interactions withcustomers via social media can leadto a positive final outcome.Recently, I wasted a day sitting athome waiting for a BT engineer toturn up and I was struggling to getthe situation resolved. Born of frustration, and to be quite honestwanting some sort of revenge, Itweeted about the negative experience I was having.

Donna from the @BTCare teamcontacted me and handled the situation superbly, taking totalcontrol, and resolved it to my satisfaction. Despite what hadhappened, I actually think morehighly of them now than I didbefore. I now feel reassured that

there is the support available ifsomething goes wrong.

That’s a prime example of how youcan successfully manage relationships in a service basedindustry following a negative experience. From a very quick scanof Twitter I noticed First Direct,NatWest, Virgin Money and the Co-op all actively doing the samething. I only managed to find ahandful of insurers, which isdisappointing, and even fewer creditcard companies.

A poignant tweet by@MarketforceRB about a paperdelivered by @rodbutcher at arecent conference really drove thishome to me “Gone are the dayswhen we can choose when and howwe receive customer feedback.”

So how can we improve the relationships we have with ourcustomers? Clearly we need toensure products and services meetcustomer needs and expectations,but relationships are more holisticand complex than that. Organisationsalso need to behave how they wouldlike to be perceived.

Ultimately it is how we makecustomers feel, think and act uponall three dimensions (rationally,emotionally and intentionally) viaour products, services and brandand communications that drive

growth. As such customer relationships certainly cannot beexplained by a single metric.

Researched and written by PhilipBrooks, Senior Associate Director,Financial Services Research [email protected]: @MrResearcher

To find out how we can help yourorganisation measure itsStakeholder Relationships contact:

Debbie SeniorSenior Consultant, [email protected]

John BackhouseSenior Associate Director,Employee Insight and [email protected]

Links to further information:

Stakeholder Relationship Researchfor Financial Services Organisations

Harris Interactive StakeholderRelationship Model

http://www.harrisinteractive.com/vault/HI_UK_Solutions-Stakeholder-Research-Consulting-FS.pdf

http://www.harrisinteractive.com/uk/Solutions/StakeholderResearch/RelationshipMeasurement.aspx

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