18. 5 Πξσηόηππν θείκελν ηεο εξγαζίαο.
Customer-led innovation in a competitive
market An Abbey case study
5.1 Page 1: A competitive market
The UK financial services sector has become increasingly competitive as a
result of several changes. Successive UK governments have looked to
encourage competition in financial services so as to give customers a better
deal. An important development in this area was the so-called Big Bang in
1986. This opened up competition between firms on the London Stock
Exchange, and also developed competition for High Street banking services,
with new firms becoming eligible to apply for licences to carry out banking
activities. Thereafter, individual institutions could carry out a range of
functions such as personal banking, insurance, and offering mortgages, and
the traditional distinctions between banks, building societies and insurance
companies became blurred.
In particular, the Building Societies Act enabled (but did not require) building
societies that had previously concentrated on offering savings and investment
accounts and granting mortgages to provide a full range of banking services
(e.g. current accounts, overdrafts, loans, provision of credit cards).
Given this opportunity to become banks, many building societies changed
their legal status. Previously many had been mutual benefit societies run on
behalf of their members (people with investment accounts). Many became
public limited companies with shares quoted on the London Stock Exchange.
This enabled them to raise additional finance to compete in the rapidly
expanding financial services market. With increasing affluence, more and
more people were seeking mortgages through which to become homeowners.
They also bought other financial products e.g. private pension plans and new
savings accounts (for example to save for their children's university education)
etc.
18
19. In this new, competitive market the many providers of financial services are
seeking to sell a large number of different investment and savings accounts,
current and deposit accounts, mortgages, loans, insurance policies, cash
cards, credit cards, etc. These products are targeted at specific market
segments e.g. mortgages for home buyers, savings accounts for those with
surplus funds, equity release schemes for elderly home owners.
Unfortunately, from the consumer's viewpoint, sellers still tend to take
a product-led view: instead of discovering what customers want, they offer
whatever they find most convenient to provide.
Other changes in the market included the development of 24-hour telephone
and Internet banking. This provides a new platform for banks to deal directly
with customers and have a different relationship with them.
5.2 Page 2: Scanning the environment
Successful organisations understand their environment and provide products
and services that reflect changes within it. One important part of
environmental scanning is a SWOT analysis. A SWOT analysis carried out by
Abbey revealed the following:
19
20. Abbey | Customer-led innovation in a competitive market
5.3 Page 3: Research
Market research involves identifying what customers want and then meeting
their requirements. An important part of this is to anticipate customers'
requirements and be ahead of the competition. Often this involves a hunch or
theory that managers will test through research.
Abbey was aware of the high levels of misunderstanding among financial
services customers and was determined to provide simpler, more satisfying
solutions. It set up some qualitative research i.e. sitting down with small
groups of customers representative of the wider population and engaging in
frank, open discussion about the financial services market, desired
developments in general, and what Abbey in particular might usefully do.
20
21. The research confirmed that many banks are too product-led: the financial
services they provide are based on well-tried, profitable recipes rather than
on customer-led solutions that prioritise emerging customer needs and
requirements.
Weighing up the research evidence, Abbey decided to remove much of
banking's mystique and place itself firmly within the real world of its
customers.
5.4 Page 4: Communicating with customers
Good communication involves transmitting clear messages, as is
demonstrated by the interaction between Abbey and its customers. Abbey
uses a range of methods to communicate with its customers, including:
Letters to all customers written in a simple, intelligible language. Prior
to its relaunch, Abbey used 2000 different types of standard letters to
customers. These have been simplified and rationalised.
New literature, cheque books and cards. For example: Abbey's 50page Winter Warmer Catalogue for 2003-2004 sets out in simple detail
all the financial products Abbey provides for personal customers.
New advertising built around the theme 'turning banking on its head'
and a national campaign was developed around different media
channels, including TV, Press, Outdoor and Branch. Abbey has spent
£11 million on this campaign.
Abbey has also engaged in dynamic new promotional techniques as
part of "turning banking on its head" including placing over 16,000
wallets containing fake £50 bank notes in major city locations such as
shopping malls, bars etc. in Birmingham, Leeds, Manchester and
Glasgow. Each wallet contained exciting promotional material
encouraging the finder to contact Abbey to find out more. This
approach was considered a break with the traditional communication
methods used by banks in general.
Abbey is committed to eliminating complex financial jargon, and to
communicating with customers in terms they can understand.
Part of the simplification process involved reducing the number of Abbey
current accounts from six to just one and simplifying the range of mortgages
21
22. and savings accounts. Research highlighted that customers have become
baffled by the vast array of mortgages and savings accounts available and
simply do not know where to start to find the right solution for their needs. So
Abbey set about reclassifying its range of mortgages and savings accounts
into 3 simple types, clearly demonstrating which mortgages or savings would
be right for the customer, depending on their individual needs.
Abbey has also reduced the number of its brands to concentrate on core
brands such as Cahoot, (Abbey's Internet bank) and a few other major
brands.
Abbey has developed an effective website and recognises the importance of
clear, direct communications with customers through this medium. It has also
developed astate-of-the-art intranet system for communications within Abbey.
22
23. 5.5 Page 5: Communicating with the internal audience
In service organisations such as Abbey, employees are the most important
organisational resource. In financial services a high proportion of employees
are regularly involved in face-to-face and other forms of direct
communications with customers (e.g. in call centres). So it was vital that all
employees fully understood Abbey's new approach.
Because Abbey is a large organisation made up of branches, many of which
are geographically distanced from Head Office, Abbey's culture (typical way of
working) could not be changed overnight. Abbey set aside 60,000 extra
training days to ensure that the new way of communicating with customers
became firmly embedded in employees'day-to-day practice. In addition Abbey
hired 600 dedicated customer services staff in branches and telephone
centres to further meet the demands of customers needs.
Abbey selected a small, dedicated team to be responsible for the change
programme within the overall organisation. Secrecy was essential, because a
key aim is to make Abbey different from its rivals, and it is commonplace
within the financial services industry for organisations to copy each other's
best ideas.
To ensure maximum impact, the internal communications campaign to
employees was delivered in a relatively short period of time in 2003:
23rd Sept Inform 500 top tier managers and 2500 other managers.
24th Sept Supply all other staff with a briefing pack.
External communications quickly followed:
24th Sept Inform the press
24th Sept Alert the wider public, with the first advertisement slotted within
'Coronation Street' - the programme with the largest audience (approx. 15
million viewers)
23
24. Sept-Dec Conduct a phased campaign to customers.
5.6 Page 6: Conclusion
Abbey has set out to transform banking practice by adopting a customerled approach rather than a product-led approach. It has produced a statement
of intent designed to make itself the best provider of customer focused
financial services in the market.
A key part of Abbey's strategy is to continue to research and develop new
tangible products and services, which actively demonstrate its commitment to
'Turn Banking on its Head' and as part of this process continually evaluating
the effectiveness of its advertising and communication strategies is key. That
is its ability to successfully communicate its new brand position and new
products. Prior to the re-launch, Abbey established a rolling4-week tracking
study to measure how effectively the message was getting across. In addition,
Hall Tests, devised to measure consumer recognition of Abbey's
communication messages, are being used to check on the advertising
campaign's effectiveness. Abbey has also placed reply cards within all of its
catalogues with a view to discovering what customers think of the changes so
far. Analysis of the results is ongoing.
24