TSB CMO Nigel Gilbert: ‘We need to rebuild the broken covenant of trust in banking’

“People do get hung up about influence. It’s not about being on boards. What matters is, do you have the appropriate voice and are you influential?….I don’t get hung up about being on boards that’s not what drives me. It’s far more important to be on the executive committee. That’s where operational decisions are made.”

The executive committee is exactly where Gilbert has sat since joining TSB a year ago. It is a position that offers him the influence he craves.

He joined soon after the bank was launched in September 2013, a product of statute forced upon then owner Lloyds Banking Group when it was told to sell more than 600 of its branches by the European Union as a condition of accepting state aid. Gilbert was tasked with bringing its local banking proposition – essentially the almost quaint notion of a deposit and lending bank that doesn’t get involved in what Gilbert describes as the “funny stuff”, namely trading in esoteric banking instruments such as derivatives – to life.

Marketing is not the entertainment

This is central to the bank’s sell to both customers and investors, when 50% of shares in the bank were sold in June. So much so, that Gilbert was asked to speak to analysts to explain TSB’s proposition ahead of the IPO, a job that companies in a similar position might ask the finance or chief executive to perform.

Gilbert says his involvement is illustrative of the importance “the brand is to the TSB story”.

“Because of that no one said ‘what are you doing here’ because it is an integral part of the story. If it wasn’t and, as it has sometimes been categorised in the past, the marketing department might be thought of as the entertainment.”

TSB’s first year as a standalone brand has been successful by most considered measures if not entirely unblemished. It has attracted customers from bigger rivals, announcing recently it opened one in 10 current accounts over the summer. Profits are up – by 28.8% in the latest quarter to £33.1m – and the IPO was considered a success.

The size of its mortgage book has been its main drag. It will look to reverse recent declines when it starts selling through mortgage intermediaries, which account for 60% of the market, in January – essential for long-term growth.

The challenge of being a challenger

Despite the relative successes and the ready-made infrastructure of the branch network – a 4.2% share of the current account market and more than 4.5 million customers – the divestment from Lloyds afforded it, Gilbert and the executive committee is keen on instilling a challenger mentality among staff.

He is no stranger to challenger brands having worked at Virgin Media for three years, first as CMO and then in a group-wide project role before joining TSB. Despite operating in very different sectors, the two were the biggest challengers to the market leaders and both operated in a market blighted by churn – driven by incentives offered to new customers but not existing.

In banking, the current account switching service launched by the Payments Council in September 2014 and backed by all the major UK banks including TS, has sought to increase the numbers moving between banks by making the process easier. It has also increased the number and variety of incentives offered.

Gilbert says TSB’s determination not to offer short-term incentives and instead focus on values – what he describes as the “doom and boom loop” – is what is attracting people to TSB and will be what drives sustainable growth for the business.

“In essence that loop, like discounting for new customers as opposed to existing customers, attracts the wrong people – promiscuous people – and upsets the people you already have. New people will churn because they are promiscuous and the other people will churn because they are fed up. That means you’re in a doom loop. That’s how I described it to the analysts and the business. If you start with a brand that has meaning, value and purpose, which I strongly subscribe to, that creates advocacy if people believe in it and you tell them the truth. Tell them a story they understand and they will advocate you, believe in what you say, that means you attract higher value and retain the people you have got.

“You retain the important people and you attract people at a higher value because they believe in it. That means you don’t churn and that means you’re cost per acquisition is lower – the boom loop.

“If you can create that, and to some degree we were able to at Virgin Media and I am certainly creating here, it’s a far more sustainable growth strategy than the usual approach of discounting to success or mediocrity in some cases.”

Values in banking

Some of the financial services sector’s most vehement critics might balk at the notion that bank brands can have values or a purpose beyond the functional. The perceived profligacy and risk taking of some of the UK’s most recognisable bank brands was the primary trigger for the financial crisis of 2008/09 that ultimately gave birth to TSB.

Gilbert was the group marketing director of Lloyds Banking Group during the worst of the financial crisis, a period that saw Lloyds TSB rescue HBOS from oblivion only to be rescued by an emergency bail-out from the Government. He was also central to the creation of HSBC’s “the world’s local bank” platform when global account director at Lowe at the turn of the noughties. He is well placed, therefore, to comment on the changing nature of banking and the marketing of banks. His rather brutal assessment? “The covenant of trust when I started out has been broken completely in banks. There’s no trust that hasn’t got to be earned. The final straw was 2008/09 when people considered banks responsible – rightly or wrongly – for the crash.”

“The covenant of trust when I started out has been broken completely in banks. There’s no trust that hasn’t got to be earned.”

It is not just the crash that was responsible for the present state of affairs, he adds, but the role marketing traditionally played in banks. “The bank itself hasn’t really respected the discipline of marketing. Often in the past it has reverted to the position of sales and while selling more things to customers is important to certain banks I’d much rather that we persuaded people that we stood for something.”

Which brings us back to TSB and the bank’s raison d’être – “banking done right”.

“It is up to us in banking to earn back lost trust. That’s what appealed to me about coming to TSB. We can start with a clean slate. It was created through legislation and circumstance. It enabled those of us with a strong sense of purpose and values to show it could be done – banking done right.

“When Paul [Pester, TSB’s chief executive, who Gilbert worked with at Virgin Media] came to me and said ‘Would I be interested in doing it?’ I said yes. I share values with Paul, the board and executive committee. If you feel that the brand is the customer experience then that infiltrates the operating model of the bank.”

Creating ‘compelling differences’

The experience of banking with TSB is a topic Gilbert returns to time and time again. It is not just about values and purpose but also about offering “compelling differences” that create buzz, he adds. He declined to share the specifics of what was planned but did offer some clues by citing the benchmarks – John Lewis, Amazon and Virgin Atlantic – of customer experience as an inspiration.

“You need to be different as well as better. It can’t be that you just do things a bit quicker than anyone else. That will not make you distinctive enough. Banking is an inert market so you have to do things that are compellingly different. You learn that from Virgin Atlantic, John Lewis and Amazon. Virgin Atlantic’s salt and pepper pots, which say ‘pinched from’ on the bottom, for example, that is witty and amusing. Behaviour like that is compellingly different, that is what we are aiming for. Neighbourly actions, people talk about what no one else does.”

Digital banking will also be a priority. TSB has just hired Ashley Machin from Lloyds as its first chief digital officer with the mantra of improving the customer experience ringing in his ears. A new app is likely to be the first product.

Its first-year “cause”, ‘Local Banking for Britain’ will however remain the key focus and the means it will seek to replicate the relative success it enjoyed in year one, Gilbert adds.

“We were the biggest startup in the world constructed to be a competitor. We have a responsibility to do the right thing and that is a constant responsibility.”