National Savings offers government-backed guarantees and has a distribution network of more than 19,000 post offices. It is the sort of advantage other financial providers would kill for. Yet National Savings still missed its 2bn financial target by over 400m this year.
With its reputation as a place where grannies put their pensions and kids save their pennies, National Savings is in dire need of an image overhaul. BMP DDB was appointed last week to the 10m creative account with a brief to produce advertising to reposition the brand. Walsh Trott Chick Smith will continue to handle project work. Other advisers are known to have suggested a radical name change to compete with its rivals ranging from the high street banks to the supermarkets.
Apart from admitting the need to modernise, National Savings has yet to decide exactly how its brand should be repositioned. A source from an agency which has worked closely with the company in the past says: “Everyone has heard of National Savings but nobody knows what it actually represents. People think its products are for pensioners and kids.”
This is a fundamental problem for a body striving to compete against slick marketing machines like Virgin Direct and even supermarkets like Tesco and Sainsbury’s.
National Savings is soon to complete a strategic marketing review which will provide the ammunition for BMP DDB’s advertising. This follows a business-wide review, conducted by Peter Bareau soon after he was appointed National Savings’ first chief executive in 1996.
The business strategy rethink was completed in March 1997 and concluded that, while National Savings provided a cost-effective way for the Government to borrow money, serious investment is required to improve competitiveness in the retail savings market.
The strategic marketing review covers four main areas: products, channels, customer segmentation and branding. National Savings head of marketing Patrick Hickman Robertson says the review has highlighted the problems with the “saliency” of the brand.
“I do think there is a problem with branding – people still don’t know what National Savings stands for,” explains Hickman Robertson. “Research indicated it is perceived as old-fashioned and for specific sectors of the population. They also see National Savings as downmarket and because of this image, people don’t buy its non-risk products.”
As a government agency, National Savings has a unique selling point – it can offer tax-free products with a 100 per cent guarantee. Customers will only lose money in the unlikely event that the Government goes bankrupt.
Moreover, National Savings is tasked with supporting the Government’s policies for personal savings and providing a source of funding. When the Government needs more cash to tackle the Central Government Borrowing Requirement (CGBR) – the shortfall between spending and the amount raised from taxes – it will raise the sales target for National Savings.
The other way to fund the CGBR is by issuing gilts to the wholesale market, pension funds and institutions, rather than individual investors, in a scheme administered by the Bank of England.
But the Government has set National Savings a 12bn target for total sales and it must contribute at least 1bn to funding for the year ending in March 1999.
But National Savings is struggling to meet its targets and the Government has been forced to reduce them in recent years. It contributed over 5.1bn, a figure distorted by increased sales of Pensioners Bonds when the age limit was cut, for the year 1995/96 – its highest contribution to date. But this slipped the following year to 4.8bn. Last year, the figure plummeted to just 1.5bn and National Savings blamed increasing competition from other savings accounts offered by commercial companies and reductions in medium-term rates.
Put simply, National Savings has been paying out more than it has taken in. Financial experts say this is partly due to savings certificates maturing but also because it has cut interest rates on its fixed-rate products twice this year, while commercial companies, including Nationwide, have managed to raise rates for equivalent products.
Constantly shifting demands, to suit the level of government funding required, has resulted in an inconsistent advertising message which has confused the general public, according to agency sources.
“As the funding requirement fluctuates, so does the need to change the nature of the advertising as it needs to be turned on and off relatively easily. There has not been a single idea sustained over a long enough period of time,” says one source.
National Savings has existed as a brand since 1969, when the Post Office Savings Bank became a Treasury department and was renamed National Savings. It traces its roots right back to 1861 when the Palmerston government set up the Post Office Savings Bank as a simple savings scheme to encourage ordinary working people “to provide for themselves against adversity and ill-health”.
The idea took off and Savings Certificates were issued during World War I to finance the war effort. Premium Bonds were launched in 1956 by then Chancellor of the Exchequer, Harold Macmillan.
Premium Bonds revolutionised saving by using the element of chance – the chance to win a tax-free cash prize of up to 1m in a monthly draw – as an incentive to put some money aside. People can get the original sum invested back at any time by cashing in their bonds and the principles of the scheme remain the same today, although it has created more prizes.
Premium bonds is National Savings main money spinner. They contributed a total of 1.9bn last year and 280m in March alone.
The quest to define identity and positioning began in earnest when the previous government relaunched National Savings as an executive agency in July 1996. This gave National Savings more autonomy in its day-to-day management but overall policy and funding targets are still set by Treasury Ministers.
In a framework set out by then Chancellor Kenneth Clarke, the main aim of National Savings is defined as: “To support the Government’s management of its debt and its personal savings by attracting and retaining investments from the retail market efficiently and cost effectively.”
As part of the reorganisation, Bareau was drafted in from Lloyds Bank, and appointed chief executive and director of savings. He reports directly to Gordon Brown. Observers are expecting to see the influx of top-level management from the private sector, replacing civil servants, as a positive sign that National Savings is becoming more commercially viable. Commercial director Christopher Moxey was brought in from Australia’s Commonwealth Bank to fill the position created in a restructure, which saw the departure of head of marketing Ann Nash in May 1997.
Ideally, National Savings would like to be up there with the big boys on the high street. “We want people to think of a bank, building society or National Savings when they are looking for a non-risk product,” adds Hickman Robertson.
First, it will have to look at where advertising has failed in the past.
Over the past ten years the advertising has jumped from safe and warm images of grandfather and grandson, to the early Nineties Gary Larson campaign, through McCann-Erickson, to the most recent TV work from HHCL & Partners, which brought National Savings to life as a wad of pound notes. HHCL, with Mich-aelides & Bednash, also developed the “virtual shop” idea – off-the-page ads to sell savings accounts.
One agency source says: “The virtual shop was a joke. It was a clever device for winning a pitch.” But it was effective in sales terms.
Hickman Robertson says: “Advertising has been successful in bringing in money but it hasn’t developed a strong brand.”
The strategic review also pointed to the need to make it easier to buy the products and improve distribution channels. There has been speculation that National Savings will link up with supermarkets. A pilot scheme for selling Premium Bonds over the telephone using a debit card and off-the-page ads was deemed successful and Bareau has promised to roll out a full telephone service. Marketing will also focus on independent financial advisers who have the power to recommend the products to a more affluent and sophisticated audience.
National Savings has also been involved in an automation trial with the Post Office and has discussed developing its Ordinary and Investment Accounts.
National Savings has a huge customer base – over half the population of the UK has some savings, even if that means a 1 Premium Bond. But it has failed to maximise on the cross-selling opportunities. It is updating its customer database to improve targeting and its customer knowledge.
Hickman Robertson says better customer targeting and segmentation is a priority. It recently appointed new media communications agency The Presentation Company to redesign its Website with the longer-term aim of offering customers online access to their accounts. But it still has security doubts when it comes to full electronic transactions.
Individual Savings Accounts will provide a big marketing opportunity for National Savings and this will be the focus of a major advertising campaign before they are introduced in April 1999. Hickman Robertson says: “The Government’s aim is to try to encourage people on low incomes to save more than they do at the moment. Advertising for ISAs will not exclusively target people on low incomes but it will reflect it.”
The target audience for National Savings is traditionally seen as the over-65s who buy products like Pensioners Bonds. But it wants to reach a younger market of more affluent over-35s, which will be reflected in the new advertising.
The product range came under scrutiny in the marketing strategy review. Hickman Robertson will not reveal detailed plans but claims some new products will be introduced and existing products improved.
But drastic measures are needed. Hickman Robertson admits that a change of brand has been considered.
“We could change the brand name but we would need legislation to do it. But it isn’t top of our agenda. The high priorities are to increase awareness of National Savings, to strengthen its identity and to invest the brand with a greater degree of saliency,” he explains.
National Savings has been singing the same old song about the need to modernise and improve its commercial viability for at least 12 months. But its performance is getting worse, rather than better. ISAs will provide a major opportunity but revolutionising the image of a 136-year-old institution is not an overnight job. However, after two years of strategic reviews, National Savings will be expected to come up with something worth shouting about.