Building trust through media spend

Record low savings rates and rising insurance premiums are benefiting well-established financial services providers as consumers turn to brands they trust, according to the DMA’s latest study.

money

While money is tight, you might have thought that people would try to get the best deals for their household finances. But there has been a fall in the number of people gathering information on the best rates for credit cards, loans, savings accounts and other financial products, according to the latest Financial Services Tracker from consultancy fastMAP, commissioned by the Direct Marketing Association (DMA).

The biggest drop is in the percentage of people who ask friends and relatives for their views. Only 28% of people discuss which product to choose, down from 40% who were doing this according to the previous study last March. People are now showing a slight preference for getting information from comparison websites, with about a third of people saying they use them.

Consumers appear to see few differences between the offerings of financial services brands. This is likely to be driven in part by a lack of competition in the retail banking market and by the record low Bank of England base rate.

As a result, savings accounts offer relatively low rates across the board, with banks rarely undercutting each other to offer a better deal.

“Interest rates used to be about 4-5%, so it made sense to shop around to find an account,” says Christopher Brooks, vice-chair of the DMA’s financial services council. “Now people are probably thinking the hassle of moving accounts is going to be more draining than the additional interest they will make on the back of it.”

aviva
A trusted brand: Aviva has a high level of consumer awareness

Almost every method of information gathering has seen a fall in the number of people using it since the DMA tracker started in 2008. Independent and comparison websites saw bigger drops over 2011 than brands’ own websites, direct mail, email and leaflets. But newspapers have remained a constant source of research over the past two years, with 27% of people saying they turn to the financial pages to help them choose – the same number that did so in last year’s study.

The general lack of interest by consumers in finding the best rates is driven by the inability of savings providers to offer them, says Brooks. “Banks, investment houses and insurance companies are unable to offer fantastic deals because their margins are very tight.

“Invariably, we as consumers then take less notice and have less engagement with them. We just make purchases in a routine fashion and do not go out of our way to find a good deal.”

Even though fewer people are researching and switching financial services providers, it is worth a brand maintaining a good website and physical presence. Two thirds of people strongly agree or agree that “a clear and easy to use” website is important and 43% agree this is the case for seeing branches on their high street.

But consumers are also less likely now than in previous studies to exhibit strong opinions about the financial brands they trust and use. This could suggest that they are generally less inclined to make active decisions about financial products, sticking with what they know.

Brooks comments: “There certainly is not such ‘a buoyant switchers’ market. It is expensive [for brands] to be putting out ‘come to us’ messages, which is why there has been a drop in such communications.

“However, savvy consumers still default to price comparison websites as a starting point for the search when they come to a renewal.”

In insurance, comparison websites continue to hold influence over consumers’ decisions. While insurance is a strongly price-driven market, it is also one where brands have had to differentiate themselves in other ways in the past year.

graph
Click the table to enlarge

Brands with a high level of consumer awareness appear to benefit from what AA marketing director Michael Cutbill and Aviva marketing director Heather Smith both see as a flight to trusted brands (see The Frontline, below).

It is these well-known brands that shine in the study. Consumers say they would choose Direct Line (25%), AA (22%), Churchill (21%) and Tesco (20%), if all their rates and offers were the same.

This year, Direct Line climbed above the AA to become the number one choice, which Brooks says shows a link between how much advertising a brand is doing and the effect it has on people’s awareness and choice.

“The strong correlation between the brands that are preferred and their level of media spend demonstrates that the more share of voice you get, the more people will put you on their consideration list,” he adds.

thinkingabout graph
Click the table to enlarge

Brooks says that many other companies may be sacrificing their own branding in favour of chasing traffic through comparison sites. The most popular brands, with the biggest media presence, are spending money in communicating what they can offer above and beyond price.

And he expresses hope that financial services companies will continue to promote the added value of their offerings first:”For example, there is a huge technology focus on getting your bank account on a mobile. It does not change my bank account, but it is supplementing a range of benefits.”

Barclays, for example, has recently introduced a mobile phone transfer app. Pingit allows users to send and receive money without having to share bank details. Brooks believes that this type of service should be promoted to attract and retain customers.

The frontline: we ask marketers on the frontline whether our “trends” research matches their experience on the ground.

heathersmith

Heather Smith
Marketing director
Aviva

We have spent a lot of time making sure consumers have reasons to come to Aviva direct. Comparison sites are not the solution to everything.

The level of cover is important. Consumers need to ask themselves, what am I getting for my money? We find that consumers are taking flight to trusted brands at the moment.

When times are difficult, of course they want value for money and reliability, but I think those brands that have been around for a long time and proven their worth in consumers’ minds feature heavily when confidence is low.

I do not think you will ever get away from price in the insurance market. It is the first box you have to tick. People can switch when they want, it is an annual contract, you have price comparison websites and you still have brokers in the market.

We believe in making sure we have something different to say to customers that is of value to them. Consumers are looking for a fair deal, but not just on price at the sacrifice of everything else. That is something we have been focusing on in the past 12 months. Reputation and trust are critical.

michaelcutbill

Michael Cutbill
Marketing director
The AA

Across financial services generally, we have a situation where savings products are not really offering a huge amount of return. There is less point in comparing and researching those very heavily, as this research shows.

At the same time, you also have a reluctance and inability to borrow. If you have an inability to borrow in the mortgage market, that is going to drive down the total amount of research on financial products.

I think that, to an extent, when people’s budgets are particularly under stress, they tend to look for quality as well as to price. I have noticed that most readily in the breakdown cover market. We are the most expensive in the market, but it is not hurting us.

AA

The trust element is very important and there is certainly more scrutiny than ever before from the consumer through blogs, price comparison sites and the different means of online feedback.

Nearly every participant in the market has an amount of negative comment against it. In those circumstances, people’s natural reaction is to stick with what they think might be good quality and what they know.

kerryc

Kerry Chilvers
Marketing director
Direct Line

We are not on price comparison sites and people will not get a complete quote unless they come to us direct. That is going to be something that we continue to talk about, making sure people are aware of the fact. That is a key metric for us. We use targeted media to make sure we are interrupting people in their shopping journey and that we are there when it is most relevant.

Because it is an annual purchase, insurers are duty-bound to contact customers every year to remind them of the price and get a contract for another year. That prompts them into shopping. In retail banking, you do not change account every year. It has been widely reported in the past 12 to 18 months that there has been price inflation in car insurance because of claims inflation. People have seen their premiums go up regardless of who their insurer is. Again, that prompts people to check that they have a good deal.

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