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Manchester United life assurance - the next big thing? Back  
Amid almost universal change in the face of financial services delivery, Owen Purcell advises that it will be the financial services companies with a strong brand that will be the long term survivors.
T he concept of Manchester United Life Insurance may seem ridiculous to some, but it would appear that consumers and competitors might soon be faced with this new offering. Courtesy of MBNA, the US Credit Card Company, consumers can already purchase with their Manchester United credit card, so why not extend this successful brand into life insurance, pensions, car insurance, etc.?

Manchester United has to date succeeded where many organisations in the insurance and wider financial services industry have failed - they have mastered two key business components - developing a brand and building consumer loyalty.

The key to Manchester United's success lies in getting the basics right and producing results on the pitch. Getting the basics right for financial services organisations means getting the customer proposition right.

We are all well aware of the current challenges in the financial services industry in Ireland, such as EMU, new channels to market, new competitors, etc. As a result of these challenges, financial services companies need to wake up and realise the importance of brand and customer loyalty in achieving success in the future. It is a process involving long term strategic investment rather than short term tactical manoeuvres, which will create loyal and profitable customers. The focus of this article is to identify the key ways to build business in financial services through effective branding, building loyalty and developing appropriate distribution strategies.

How do you get the basics right?

The first step in the process is to develop your mission, vision corporate objective and strategy. You need to understand the business you are in and develop a strategy to compete over the long term, incorporating your products, customers, service, pricing, distribution channels, etc.
Clearly, getting the basics right will depend on your strategy. For example, if you want to be a low cost, single product provider then your product offering should be simple and genuinely low cost, your service must be efficient, and your channels to market must be convenient to your target customers' lifestyle. On the other hand, if you want to develop a multi-product relationship with your customers, then you must provide a range of good value products for customers, with value added advice, top class customer service and a variety of distribution channels which meet the range of needs of your target market.

Once you have these basics right you can then look to build brand and customer loyalty.

Building brand - you have to start somewhere

Many established financial services providers are realising that either, the public do not know who they are, or the public have little interest in the products and services they offer.
While advertising and promotion are the key tools used to build a brand, evidence suggests that, to date, the primary motivator behind the development of advertising and promotional strategies has been to avoid the loss of market share. Advertising strategies have often been short-term, tactical responses to competitor initiatives, and there has been scant evidence of creative thinking compared to other service industries. More critically, advertising and promotional campaigns have not necessarily attempted to fulfil a much broader role of building up brand awareness levels over the much longer term by informing, educating or even entertaining the consumer.

Promoting products has only short term benefits

Much of the advertising and promotional content in financial services has been heavily product focused rather than conveying any wider, more substantive, messages about the company's ethos, or affirming its commitment to customer values, such as service quality or value for money. This emphasis on products, in an industry where many products and services are becoming commodities, runs the risk of financial services providers being unable to differentiate themselves from other competitors, in the minds of the consumer.

Without an over all brand strategy, the customer sees many products but there is no common message and, therefore, no reason to buy one company's product ahead of another company's. The result is that the only differentiator that remains in the customer's mind is price.
Why bother building a brand?

Building a brand requires developing strong and distinctive brand values, which are seen to mirror customer values. This can affect customer loyalty rates and facilitate cross selling. Developing a strong brand also has an impact on distribution strategy, in that it can encourage more distributors to market your products and services and increase sales force commitment through brand empathy.

The diagram opposite summarises some of the benefits of developing a strong brand.
Branding can affect the performance of organisations in financial services in a number of ways. It can shift some types of product and service away from being purely price driven commodities and potentially increase profit margins. It can raise the customer's awareness about a provider and differentiate its services in a very crowded market. A strong brand identity helps to simplify choice in a consumer environment where few people have the time or inclination to shop around for several alternatives.

What can we learn from others?

As stated earlier, brand is no substitute for getting the basics right. Once the basics are in place there is no end to the lessons that can be learnt from others, particularly, in industries such as retailing, telecommunications, brewing and airlines.

In particular, the UK mobile phone operator Orange has achieved a high public profile, and grown new business levels on foot of a consistently imaginative and engaging series of TV and press advertising campaigns which have made a strong association between Orange's corporate vision, customer values and its specific products.

More recently, the launch of Egg, the direct financial services provider of Prudential in the UK, has broken the mould for financial services brand development. When the company was launched it was heavily promoted in the TV and Press, but what made the Egg campaign different was that all of the promotion was based on the brand attributes, which in Egg's case are financial products, tailored for the individual.

The 4 steps to building brand

l Decide what your company stands for from the customer perspective.

l Ensure that the business process and the products support these values, i.e. get the basics right first.
l Ensure that all advertising and communication promotes the values first and products second.
l Be patient, it takes time!

Brand is only the first step in building loyal customers

Customer loyalty in financial services is likely to fall from its existing high levels as customers’ expectations and choice increase, as a result of new industry entrants and new channels to market. In addition, previous ‘false loyalty’ creators such as high switching costs are in decline.
Customer inertia is still a major factor in the financial services market, particularly in Ireland, as was demonstrated by the minimal customer reaction to recent media revelations on over charging at National Irish Bank. However, the success of new brands such as Egg, in the UK, have demonstrated that an innovative customer proposition, rather than a ‘me too strategy’, can entice significant numbers of customers away from traditional providers in a short period of time.

The message to established players should be clear, - develop a customer loyalty and retention strategy before it is too late!

Understand what your customers value most

Companies need to gain a far greater insight into the values and expectations of their customers. Most financial services companies have an almost unique position in terms of the length of the customer relationship and already hold large amounts of valuable information about their customers but few have managed to tap into the wealth of this information. This is largely due to their inflexible legacy IT systems. Without insight and understanding, any communication between the customer and provider is based on a purely superficial narrative, which neither engages nor interests customers.

Customers are not stupid and will expect to be rewarded for their loyalty

Customers recognise that their loyalty is valuable. In response, companies must be seen to share the benefits gained from loyalty in direct proportion to the value the customer's loyalty creates for the company. This requires developing a package of relevant loyalty rewards, which go beyond simple price discounts and add value to the specific target customers. Commercial Union, in the UK launched a loyalty scheme, which encompasses more than price discounts. Their scheme, 'Customer Power', is based around a service charter, loyalty card and price discounts. Some of the features it incorporates are:

l Power Line - 24-hour assistance on insurance related emergencies, including recommending tradesmen for home repairs.

l Power Promise - A customer charter promising price discounts from future premium if certain standards are not met, for example:

- if a claims form is not sent within 24 hours.

- if a phone quote is not confirmed in writing within two days.

l Power Card - a loyalty card which can be used in a variety of retail outlets nation wide.
Building loyalty is not a mass market initiative

Customer loyalty schemes should be targeted at your most profitable customers and those customers who have the potential to become highly profitable. The customer valuation matrix above helps employees, at all levels of a company, to evaluate the attractiveness of customers, on a segmented or individual basis.

The horizontal axis maps the relationship between the customer and the company or salesperson. The vertical axis maps the estimated profitability of the customer/segment. The beauty of this simple tool is that it helps you to easily spot the customers or segments you should be concentrating on.

Your ultimate goal is to turn all of your customers into your sales force

Truly loyal customers will sell your products and services for you. Word of mouth has long been recognised as a crucial promotional tool in the entertainment industry, e.g. movies, plays, restaurants. Financial services providers must begin to recognise that loyal customers will endorse their products and services to friends and relatives. On the flip side, an unhappy customer has a greater power to damage your business.

Manchester United have it easy

Distribution channels are the main point of contact with the customer and, as such, are one of the main drivers of brand and loyalty. The strategic remit of distribution channels is changing from the one-off sale to developing a meaningful customer relationship.

One of the increasingly difficult aspects of operating in today's financial services environment is the multiple channels to market which need to be managed. Manchester United have it easy, they have one core product and two channels to market, i.e. fans who go to the matches and those who watch the performances on Sky TV.

It is getting more and more difficult to manage multi-channel strategies, as the rate of change increases, forcing traditional providers to react rather than set the pace. In the past, channels evolved gradually in financial services, over several decades. Now changes in the distribution of financial services are occurring so swiftly that providers are being forced to take calculated risks on new channels, such as the Internet, call centres and interactive television, for fear of being left behind by customers and competitors.

While it is possible and, at times, desirable for one company to promote different brands through different channels, e.g. Bank of Ireland Group successfully sells mortgages through the intermediary channel under the ICS brand and through the branch channel under the Bank of Ireland brand. In general, when there is only one brand involved and a financial services company promotes multiple products through multiple channels to its target customers, it must manage the relationship from a customer perspective and not a channel perspective.

It is vital that for any particular target segment, customers receive the same level of service and product offering through each and every channel. In addition, it is vital that the promotional activity in each of the channels is co-ordinated to ensure that the customer is not bombarded with offers from all directions.

In order to compete successfully in the future, financial services companies will need to have a clearly defined strategy, get the basics right, develop a brand and build customer loyalty over time, using its distribution channels as tools for relationship building rather than purely sales.
Owen Purcell is an associate director with strategy consultants Prospectus (www.prospectus.ie).

This article is based on a series of three reports recently completed by Prospectus, for the Financial Times, on Marketing and Insurance in Europe.

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