New financial service brands including Virgin Direct and Goldfish are failing to convert high levels of awareness into new business.
The brands, supported by estimated ad budgets of about 5m and 10m respectively and featuring Richard Branson and Billy Connolly, were ever present on TV at the end of last year, with Goldfish securing 30 per cent brand awareness for its credit card and Virgin 13 per cent for its products. But neither converted that awareness into new business, according to exclusive research on new financial service and loyalty schemes conducted by the RSL Strategic Initiatives Monitor (SImon).
Its monthly survey of 1,000 consumers, during the last quarter of 1996, shows that less high-profile brands such as MBNA’s credit card, which had an awareness of only ten per cent, achieved a holding of two per cent – outstripping its higher spending rivals.
Goldfish, owned by the British Gas and HFC Bank joint venture company Goldbrand, has the highest prompted awareness of all “new” credit cards. The latest figures for February indicate that Goldfish’s prompted awareness has risen to a 47 per cent high, but the number of people holding it has only just crept above one per cent.
The data will be of particular interest to Centrica, the British Gas subsidiary, which is being investigated by the Data Protection Registrar for trying to use its database to help build the brand’s sales (MW March 21). MBNA ran a major direct marketing campaign to launch its card but Goldfish cannot mail direct to British Gas customers.
Despite prompted awareness for Virgin Direct of 13 per cent, it too achieved a retention level of less than one per cent of total customers. February figures show an increase in awareness to 16 per cent, but less than half of one per cent of the sample claims to be a customer.
But the survey also reveals the extent to which traditional credit card companies are under threat from the new branded ones. About 75 per cent of new cardholders have existing credit cards. Of that total 17 per cent have cancelled their existing cards, 18 per cent have stopped using them, while a further five per cent are using their existing cards less often.
The market leader Barclaycard, with 9 million holders, is the hardest hit by the new cards, which while individually not having a great impact, have stolen 15 per cent of the total market. Of those doubling up with “new” credit cards, 21 per cent already hold a Barclaycard, ten per cent have a Midland version, while nine per cent have NatWest and another nine per cent hold TSB.
Significantly the reasons for changing suggest that credit card holders are looking for immediate benefits rather than the promise of rebates in the future from their cards. Over a third of new cardholders mention low APR (annual percentage rate – broadly, interest rate) and a quarter “no annual fee” as reasons for taking new cards. In contrast only six per cent were attracted by points or tokens offered, while five per cent claim to have switched because they banked with the card issuer.
These figures will make interesting reading for Sainsbury’s which launched its credit card last month. It is hoping to attack existing brands such as Barclaycard with an introductory low APR, no-fee offer. And on the evidence of the RSL research it will prove a powerful seducer for many cardholders already in the market.
Armed with a direct marketing campaign it could have a dramatic effect – making a more significant dent in the credit card market than the “new” cards from Goldfish, Orange, RBS Advanta, GM Card and Co-op combined.
However, the research also shows that the supermarkets own-brand loyalty cards are only having a limited impact on loyalty – 20 per cent of supermarket customers claim the cards would make them more inclined to use the store. Shell Smart card users have the highest propensity to use the card, with 34 per cent of customers saying that it makes them more inclined to buy Shell petrol.
Yet Shell has low penetration among its own station users. Just 36 per cent of Shell station users hold the Shell Smart card. This compares with penetration levels of 71 per cent for Tesco Clubcard, 70 per cent for Sainsbury’s Reward Card and 77 per cent for Safeway.
Such figures go someway to explaining Shell’s decision to extend the Smart card through its consortia trial in Scotland (MW March 21) and bring in other players to boost penetration. Ironically, Shell’s high loyalty levels could be adver-sely affected by bringing in new partners.
Well over 60 per cent of supermarket loyalty cardholders use them on every visit. Among non-supermarket cards, Homebase scores highest, with 51 per cent using it on every visit.
Argos Premier Points is the least used card in the survey, with only 38 per cent of its customers using the card every visit. Total Tops has the highest number of customers who no longer or never use it – 24 per cent – followed by Argos Premier Points at 21 per cent.
The main reason why loyalty cardholders say they are happy with the cards include savings and reductions (22 per cent), redeeming points and vouchers (12 per cent) and money back (eight per cent).
Of those customers who were completely dissatisfied with their loyalty cards, 36 per cent say they have to spend too much to get anything back, 13 per cent prefer an instant discount and eight per cent see it as a “con” designed to get them into the store and buy things they don’t need.
Analysis of the relatively new direct financial services operations reveals some strong brands in the market. Direct Line achieved three strongest prompted awareness with 40 per cent, followed by First Direct on 28 per cent and AA Financial on 20 per cent.
But both First Direct and AA Financial have lower retention levels – one per cent each – than M&S Financial and TSB Phonebank, which had holdings of two per cent and awareness of 16 per cent each respectively.
First Direct recorded extremely high satisfaction levels among its own customers, with 41 per cent saying they were delighted with its service. Direct Line also scored well for a general insurance company, with 78 per cent of customers being “completely satisfied” or “delighted” with its service.
This compares with the lowest number of delighted customers: Halifax Direct six per cent, and TSB Phonebank nine per cent. TSB Phone- bank was the only one to record customers who were completely dissatisfied with the service. Abbey National Direct also had a significant number of customers who were somewhat dissatisfied with the service.