Supermarkets need to tread carefully with financial services

At a time when the reputation of Britain’s banks is taking a battering, the supermarkets are moving into financial services.

But what do consumers really think of the supermarkets’ chances of beating the banks at their own game? Findings from advertising agency FCB’s programme analysis, Mind & Mood, shows open workshops provide a more honest means of understanding what motivates consumers. The findings have some important lessons that the supermarkets should heed.

If consumers are asked how satisfied they are with the service at their bank or supermarket, their typical answers are: “No complaints”, “Pretty good” or “Not bad”. When they are asked to rate the service at their bank or building society they’ll usually give them between 75 and 90 out of 100. You would be forgiven for assuming everything in the garden was rosy. But further questioning reveals that consumers have low expectations from their banks and building societies.

If you had started by asking them about service, consumers always give the multiple grocers a good response: “My local Safeway is open from 8.00am to 10.00pm most days and is open seven days a week, that is service.” Or: “Tesco opens additional checkouts if there is a queue; my local bank could learn a lot.”

In fact, if you ask people to rate different sectors for service and overall performance out of 100, they will usually rate multiple grocers between 75 and 100 and banks and building societies between zero and 25.

Why are there such large discrepancies between the two sets of figures? It is all about expectations. People would like much more from their banks and building societies but simply temper their expectations based on experience: “There is no point in changing bank accounts – they’re all the same.”

In other words, they are giving the banks high scores based on a low quality threshold. Multiple grocers, on the other hand, are not only scoring highly but, significantly, on a much higher quality threshold. Where it becomes interesting is when major players from these two sectors enter each others’ market. The idea of Barclays or Nat-West entering the multiple grocery sector is treated with complete derision.

However, there are many who accept that the major multiple grocers can credibly enter the financial services arena. In fact, one of the key reasons consumers welcome the entrance of the multiple grocers to this sector is to “give the other banks a kick up the backside”.

If you evaluate Tesco’s brand equity, people will rate it highly on all criteria listed. Whereas NatWest, for example, will score poorly on most criteria. Behind these startling findings is a simple truth, based on whether the consumer feels respected or exploited. Financial services providers are seen as homogeneous in what they offer and have a reputation that can be summed up by these quotations from consumers:

“Everything is focused on their profits and not on satisfying our needs.”

“Banks believe that they are doing you a favour by offering you facilities.”

“All they are interested in is hitting their targets for selling specific proposals.”

“They make mistakes and never admit to them, or apologise when invariably you have lost out.”

“I always think they are like morgues.”

“I always compare going to the bank with going to see the dentist. It is not the most pleasant of experiences.”

Consumers believe they are at the mercy of the financial services providers with the sector firmly in control and the consumer relegated to a subservient role. The multiple grocers, however, make consumers feel they are the ones in control. Consumers comment:

“I don’t feel the need to dress up to go shopping whereas I would always do so if I was seeing the bank manager.”

“If I have a problem at the checkout I can demand to see the manager. Try that in a bank and it’ll say you don’t have an appointment.”

“My local Safeway has a crèche, my local bank wouldn’t even get as far as thinking about it.”

Given this set of attitudes we could conclude that it is simply a matter of time before we see a revolution in the financial services sector, with the multiple grocers triumphing over the existing players.

Consumers’ expectations of the multiple grocers are a great deal higher than for the banks. This is an opportunity for the supermarkets, but also their potential downfall. If Tesco and Sainsbury’s simply rehash existing banking services they will disappoint consumer expectations. The consumers expect to see the multiple grocers change the face of financial services, failure to do so may damage their brand equity.

Consumers have many expectations of supermarkets. Here are three examples where they could fall foul:

Consumers will expect their normal retail offer: that is to be able to choose between at least one or two top brands in each financial services category as well as having an alternative good value own-label product. At present Sainsbury’s offer is purely own-label.

People assume that supermarket banks will target women. This recasts women as being key initiators on financial services. The multiples may be right, but they will be attempting to change current consumer behaviour.

It is clear that housewives feel they would be the natural target, and although telebanking may be of interest, they want facilities in-store. At present it does not look as if Tesco or Sainsbury’s intend to offer this.

The opportunity for the multiple grocers within the financial services arena is huge. The rewards, if they get it right, are bountiful. But the question remains: have the multiple grocers considered the cost of getting it wrong?