The High Street Battle for Trust

High Street Image

Jasmine Butler Burnham

Marketing Manager

The Financial Services Forum

Bringing the value of mutuals and membership to life, says HILARY McVITTY, is not always that straightforward.  It’s why marketers are closely examining how to positively differentiate building societies and other mutuals from the rest of the financial services sector.
If you were to ask people in the street what mutuality is and what it means to them, it’s a fair bet that the majority would look at you blankly and offer no answer.  Some may say that it’s something to do with ownership and a few may just link the word to a specific organisation that they do business with.  On the other hand, if you were to ask about building societies the chances are that the sort of words that will be associated would include secure, value, fair, service and community with a smattering of ‘old fashioned’ thrown in for good measure.   This difference neatly sums up both the strength and one of the challenges of marketing building societies in today’s market.
To set the scene, there are 47 building societies in the UK, and between them they demonstrate significant diversity.  For example in size and presence they range from  national to regional to some which have a very specific local presence.  High street branches are common to most, but some have none, and in terms of services these range from full service personal banking to those which have stuck to their knitting and offer a full range of savings and mortgage products; and size doesn’t always determine which is which.  Between them they serve over 25 million customers and hold around 20% of the mortgage and savings markets in the UK.
What unites them all however, is that they are mutuals.  What this means goes beyond the organisational fact that they are owned by their members, and past the practicality that in most cases the act of becoming a customer automatically confers membership.  What it delivers is a business ethos that is based on optimising profit while serving members and participating in communities.
This is very different to the standard plc mantra of maximising profit to the benefit of shareholders.   One member, one vote is a building society core principle, compared to the plc model where the number of votes corresponds to the number of shares a body or individual holds, and being a shareholder is often totally divorced from being a customer.  Societies are about delivering value over the long term to members rather than increasing risk to boost short term profits for shareholders.
All of this means that, particularly in today’s financial services market, the very fact of ‘membership’ confers a huge but, at the same time, challenging marketing advantage.   Why challenging?  Because, in the commoditised world in which we live, bringing the value of membership to life is not always that straightforward.
It goes without saying that societies compete on the hard functional factors such as product structure, interest rates and location.  The additional marketing opportunity rests with some of the, perhaps softer, factors of which membership is one.
Today’s financial services market – structure, regulation and consumer perception – has been defined by many things, key amongst them being the financial crisis of a few years ago, huge tax payer bailouts for a number of banks and of course continued economic uncertainty, recession and now fears over the impact of the Eurozone.  In our sector, the choice made in the 1990’s by a number of large building societies to demutualise and become banks is now seen as a costly and failed experiment.  In fact not one of these firms still exists as an independent entity and in come cases the name has vanished completely.
In contrast, those which made the decision to keep to and develop the mutual model weathered the more recent financial storms pretty well. Where necessary, stronger societies took over their weaker brethren, but assets and customers were retained.  In a recent report, ratings agency Standard & Poors (S&P) comments that building societies have survived the financial crisis in better health than the UK banking industry as a whole.  As societies focus mainly on lending and deposit taking, S&P view them as good examples of back-to-basics banking.
So we have a sector with the multiple advantages in the current climate, including a membership model, minus the taint of tax-payer bailouts and in better financial shape than many banking behemoths.
But how is it all viewed by consumers?  Sadly it is not difficult to find surveys which are critical of the customer service provided by plc banks.  A common phrase which gets bandied about is that they are a ‘necessary evil’.   Whilst no financial services organisation can afford to be complacent there is good evidence that customer satisfaction with mutuals is higher.  The BSA commissioned Gfk NOP to conduct research this Spring¹ exploring this and related factors.
The results clearly show that across all three of the main product groups:  savings, mortgages and current accounts, customers with mutuals are better satisfied.  In fact just taking those who were extremely or very satisfied into account, the differential between mutuals and other providers was at least 10% in favour of the mutuals. Looking at each product group – 56% of savers at mutuals compares to 46% with other providers.  For mortgages, 69% plays 57% and for current accounts 77% compares with 64%.
In addition to these results which are based at least partially on functional factors, building societies and other mutuals² scored above banks and other providers for 11 other factors which include complaint handling, fair treatment, value-for-money, trust and propensity to recommend.  These positive differences have in fact characterised research over recent years.
In conclusion, mutuals and building societies specifically, obviously have a lot going for them, a fact that is being demonstrated through the most recent financial results of the majority.   With functional factors in a row, more clearly articulating and demonstrating the benefits of membership and the softer factors such as community involvement provides additional opportunities for differentiation.  Social media and the ability to convene conversations make this form of conversation both more possible and more personal.  Coupled with this, demonstrably listening to members remains central and it is already far from unusual to see building society senior executives out on the road participating in member forums.
Building societies are different, both in what they do and how they do it.  Marketing in its widest sense clearly has an important role to play in positively differentiating both at individual society and sector level. From my perspective, a media that moves away from using the phrase ‘banks and building societies’ in a negative way, when unwarranted by the facts will be one means of testing future success.

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