If you want to boil a frog, put it in cold water and heat slowly. It won’t notice the rising temperature until it’s too late. The same approach has been used to sell financial products.
“Consumers didn’t notice what we’d been doing over the past decade. Just before they got boiled – when the credit crunch hit – they all tried to get out and started to question things.”
So said Andrew Fisher, chief executive of wealth managers Towry, at the Ten Years On conference on November 19. The event, which was organised by the Financial Services Forum, served as a talking shop for marketers to discuss the state of the financial services sector.
A decade that started with the dotcom bubble burst and ended with the global financial crisis has left financial services providers wondering where to go next.
Towry’s Fisher considered what the next ten years might bring; one nihilistic scenario was one of food shortages, anger leading to a right-wing swing in politics and even wilder fluctuations in markets. His alternative picture was that, “the consumer becomes more reasonable and accepts the idea that she is responsible for some of the decisions she takes. Providers can then be fair and reasonable.”
Marketing has been helping to “scald the frog”, by burying the less appealing aspects of financial products deep in complex terms and conditions – a result of the commission-based system. But financial advisers will soon be required to explain everything clearly because new rules mean the consumer will be paying them upfront for that service.
“Consumers want simple, fair products that deliver what they say they will. Companies will have to operate in an honest way with integrity. If you are in marketing, forget the clever things you have done in the past and focus on simple, honest communications in the future,” said Fisher.
Despite the wobbles in the financial services market over the past decade, the focus of most marketers was not on product design and regulation. Instead, the main talking points were socio-demographics, the rise of the BRIC countries, and a focus on service.
Some delegates warned that surviving the next ten years will require a cultural change. “In financial services, there is confusion about the customer,” cautioned Standard Life chief marketing officer Simon Gulliford. “We haven’t worked out whose money it is. The way investment managers have dealt with customers’ money is that it becomes part of their fund and goes on to their balance sheet.”
Little wonder that customers have been left feeling aggrieved and angry. In a YouGov snapshot opinion survey carried out for the event among 6,652 consumers, when asked to describe financial services providers in one word, the majority called them “greedy”.
Gulliford pointed to communications such as annual pension statements as part of the problem. Even as a professional in the industry, he admitted to finding them difficult to interpret. “It doesn’t help the customer lying awake at night worrying if their money is being looked after,” he said. Simpler communication, like a bold arrow showing if the fund value has gone up or done, might be part of the solution.
While the financial services industry has pursued complexity, other sectors have focused on service. Tesco was repeatedly used as a reference point because of its concentration on service. As the biggest wine retailer in the UK, it has managed to increase the average price paid per bottle from £2.55 to £6.20 in the space of five years.
In a previous role as marketing director at Sears, Gulliford saw for himself how service can drive profitability. By introducing personal shoppers at Selfridges, the average purchase by male customers shot up from £74 to £1,350 per visit. “If people can’t decide between brown and black shoes, there is no chance they can choose between 17,500 competing ISAs,” he pointed out.
Discussion moved on to how marketing finds itself caught between the anger of the customer and caution of the provider, with neither keen to make a decision that could turn out to be the wrong one. That underlines how difficult it is to rebuild trust once it has been lost.
Anthony Thomson, chairman of Metrobank and chairman of the Financial Services Forum believes current constraints make delivering a better service even harder. “There is a cultural problem because banks are sales oriented, they have poor technology and they lack the money on their balance sheets to invest in improving,” he said.
Hard as it might be to persuade a board concentrating on rebuilding its capital base that a bigger marketing budget is the way forward, Thomson said there is little choice. He added/ “Successful organisations, particularly in retail, see it is as a win-win – if you give good service, you generate more profit.”