In cahoots with too few

Despite critical acclaim, Cahoot admits it has failed to deliver customers, but the online bank insists it can build on the brand. By Catherine Turner

When Cahoot launched six years ago, it promised to cut out the middle man and give customers what they wanted, when they wanted it. Now the Abbey-owned online bank is looking at how to market itself in an age when most banks offer web-based services and almost one-fifth of all banking in the UK is conducted online.

Managing director John Goddard says the days when brands could use online as a unique selling point are over/ strategies must change.

Despite critical acclaim for its products and high rates of interest, Cahoot has been derided for failing to build a viable consumer base. It has about 650,000 customers, of which 180,000 are current account holders.

Goddard says the brand has not evolved. “People aren’t looking for online brands; they’re looking for products. We haven’t kept up,” he concedes. “This is a fast-moving environment and it needs a lot of marketing focus. There is a fundamental opportunity to create definition around the brand and become a much more efficient direct marketing organisation.”

Goddard was recruited as managing director six months ago from Prudential, where he was marketing director of the M&G brand. Cahoot had been through an unsettled period, with four managing directors in eight months. And in November 2004 Spain’s Banco Santander Central Hispano bought parent bank Abbey, casting doubt on Cahoot’s future.

Former Egg marketing director Patrick Muir, now UK consumer marketing director of US bank Morgan Stanley, says/ “It is not clear what Cahoot stands for anymore. It suffered a little due to Abbey launching its own online bank, but Cahoot was a very clean, clear, value offering with very good products.”

Yet, despite being, as Muir says, a “quirky, irreverent brand backed up by some very sound products”, Cahoot and rivals, such as Egg and Smile, have struggled to attract customers in the numbers originally anticipated.

Four years ago Abbey hired brand development agency Underground in a bid to boost disappointing acquisition figures. Despite a &£15m launch campaign and continued support, Cahoot had attracted only 300,000 customers – a fraction of the 2 million signed up by rival online bank Egg, which launched in 1998.

“As always, the problem is that nothing builds a brand as well as getting customers and Cahoot has found it very difficult to attract them to its current account offering,” says Muir. “It has struggled of late. Many established companies set up quirky brands, that was the way in the late 1990s, but Abbey needs to decide if it really wants to back it.”

Cahoot made a loss of &£17m for the 12 months to June 2003, prompting speculation it would be folded into the flagship brand. The new management has made no secret of its wish to streamline Abbey’s brand portfolio and in December, Abbey announced Cahoot management would merge with the main Abbey brand, but insisted the two brands would continue to trade separately.

Goddard says online banks were launched primarily as marketing platforms, but high street banks soon caught up. “Whoever heard of a financial organisation marketing in the mid-1990s?” he asks. “They were too busy making money. Online brands showed that marketing could be an advantage in this industry.”

Sue Hannums, of independent financial adviser AWD Chase de Vere, agrees online banks failed to attract the number of customers they had hoped for because of high street banks launching e-banking offerings while retaining branch networks.

“The gap between online and telephone, post or branch-based services is closing,” she says. “Online accounts don’t seem to be as popular as many thought they would be. People want branches and personal contact. If the customers aren’t there, what’s the point of offering fantastic rates? They still need to pull in customers. If that isn’t happening, they need to look at meeting the customer’s demands.”

When asked what Cahoot can do to differentiate the brand, Goddard says it aims to be an even simpler proposition than Abbey, which itself announced a “back to basics” approach last year (MW September 22, 2005).

Cahoot has already launched a simpler savings account this year. Its easy-access savings account pays an annual equivalent rate of 4.85%, with a minimum deposit of &£1, and is intended to challenge ING Direct’s savings account, which brought the “simple” concept to the UK in 2003.

Analysts expect more financial services brands to follow suit. One says: “I would not be surprised if it were the first of many to offer simpler accounts this year.” But Cahoot is determined to be ahead of the game, hinting at a raft of product simplifications, a renewed focus on “low-hassle” products such as insurance, loans and credit cards, and a burst of marketing activity planned for the spring.

In 2004, it ran a campaign by TBWA/London that continued the “smart with money” theme developed for Abbey. This time, though, it has tasked online creative agency Grand Union – not Abbey’s agency WCRS – with creating the work. Cahoot will be banking on those changes to attract those all-important customers.

Facts and Figures

⢠Cahoot launched in 2000 as a separate unit within the Abbey National group. It first offered an online savings account but soon added loans, current accounts and mortgages. It now also offers general insurance products.

⢠Cahoot has 650,000 customers.

⢠Late last year Abbey owner Santander announced it was merging the management of Cahoot with Abbey.com. It said it would merge the e-commerce and research operations, but confirmed both brands would continue.

⢠In January consumer group Which? praised Cahoot for its rates and ease of switching. Customers of online rival Smile were most satisfied and Intelligent Finance scored well too.

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