Banking on new ideas

First Direct is about to become the first UK bank to launch podcasts to communicate with customers – enabling customers to download advice on choosing passwords and ensuring personal details are secure (MW last week).

First Direct is the first to offer podcasts on banking advice, but it will have to do better if it is to stay in front with innovation. By Nathalie Kilby

First Direct is about to become the first UK bank to launch podcasts to communicate with customers – enabling customers to download advice on choosing passwords and ensuring personal details are secure (MW last week).

Being “first” with new products to market is at the heart of the bank’s ethos. When it was launched in October 1989 by Midland Bank (now HSBC), First Direct was the UK’s first telephone-only bank. Almost 17 years on and it has 1.2 million customers, with roughly a 2% share of the market. It lags behind rival Egg, which has 3 million customers, and its customer base seems insignificant when compared with Barclays’ 14 million customers, but it is faring better than other direct rivals Smile (500,000 consumers) and Cahoot (about 650,000).

Customer acquisition is key to continued growth for First Direct, but the adage that you are statistically more likely to divorce than switch current account still holds true, according to Financial Services Forum chief executive Anthony Thomson. “The great anomaly about First Direct is that it is a strong brand, with huge levels of customer advocacy – off the scale compared with other banks - yet it has a very small customer base,” he says. “Nevertheless, First Direct has a great reputation for excellent customer service and is perceived by HSBC as a centre of excellence.”

First Direct head of brand and communications Matthew Higgins says the company is unconcerned by its small size. “We may not command 20% of the market, but customer value and recommendation are huge,” he adds. “We are not a mass-market brand and never intended to be. First Direct is a people business, offering a human touch. That is our unique selling point.”

Jan Smith, most recently working at Open University, was marketing director at First Direct at the time of launch. She agrees that First Direct has never sought to be a mass-market brand and says: “The very nature of the business prevents it from being a mass-market brand. It has an iconoclastic status due to excellent customer satisfaction. It is a niche player targeting specific consumers.” According to Higgins, the target market is 24- to 55-year-olds, but he says the majority of registered customers are ABC1, cash-rich, time-poor consumers. “It’s more about attitude,” he adds. “Our consumers want more control and we enable them to have that with the services we offer.”

Innovative product offerings, such as being first to market with offset mortgages, have been matched by innovative ad campaigns, created initially by HHCL & Partners, WCRS and most recently JWT. When it launched, First Direct’s first television advertisement interrupted (by prior arrangement) an Audi ad. Higgins explains that the brand has always tried to “buck the trend”, saying: “The black and white with red has been a consistent way to convey clarity and simplicity, a theme that has been continued by all our ad agencies. Our launch ad was unique, while the campaign featuring Vic Reeves and Bob Mortimer was irreverent and fun.”

Mother creative director Andy Dellass, who works on the Egg account, agrees that First Direct’s advertising has been quirky in the past but says: “It hasn’t made much noise since the Vic and Bob ads. It is a fantastic brand but it feels as if it has lost its edge. Its advertising was fairly disruptive and attention-grabbing, but has now lost its way.”

Dellass has been a customer of First Direct for many years and says the service is first class, but questions its communications strategy. “There is no need to run campaigns reassuring existing customers,” he says in reference to the campaign using testimonials from customers, which another observer describes as “anodyne”.

He adds that a change of direction in advertising has been reflected in recent policy decisions, such as sending out blind mail-shots and texts – “something you do not expect from First Direct”.

First Direct is in profit, although there are no financial figures for it as a standalone brand, but competition is growing. It has migrated many of its customers online (850,000), but so too have most major players. Barclays has 5 million customers signed up to its online service, while Lloyds TSB Online Banking has more than 3 million registered users. Online banking has become part and parcel of modern life.

If First Direct is to encourage consumers to join, it might have to consider a return to its irreverent and innovative brand positioning. Podcasts may appear to be a step in the right direction, but as more consumers become tech-savvy it will have to look beyond technology if it is to grow and maintain that personal touch.

Facts and Figures

⢠First Direct has had the most satisfied customers of any UK bank for the past 13 years (Ipsos MORI and Gfk/NOP)

⢠More than one in three of First Direct customers join because of personal recommendation

⢠First Direct has been in profit every year since 1995

⢠First Direct has 1.2 million customers – 840,000 of them use internet banking, 460,000 use SMS text message banking

⢠First Direct is the largest text messaging bank in the UK and sends about 3.5 million text messages to customers each month

⢠40% of First Direct’s sales are via web-based channels

⢠75% of customer contact with First Direct is electronic

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