FINANCE: BANKS AS BRANDS - Supermarkets, utility suppliers, car manufacturers - all have been piling into the financial services market In the battle for consumers, Harriet Green asks, do the high street banks have the marketing nous to outwit the newcome
By HARRIET GREEN, campaignlive.co.uk, Friday, 29 January 1999 12:00AM
The unlikeliest people want to manage our money these days. First the supermarkets, humble purveyors of washing-up liquid, tomatoes and dried lentils, offered us competitive savings accounts, credit cards and mortgages.
The unlikeliest people want to manage our money these days. First
the supermarkets, humble purveyors of washing-up liquid, tomatoes and
dried lentils, offered us competitive savings accounts, credit cards and
Then came Richard Branson’s Virgin Direct and British Gas’s
Now it’s the turn of the motor manufacturers, with Volkswagen just the
latest in a long line to consider an attack on the personal finance
Since when did banking become so sexy?
Selling financial products on the back of a trusted brand like
Sainsbury’s or Tesco has been one of the great marketing successes of
In the past two years, the market has been shaken by the emergence of a
host of low-cost operators serviced by vast telephone call centres.
According to Mori Financial Services, a staggering fifth of all new
savings accounts opened in the past year were with supermarkets. The
result: the big four - Barclays, Lloyds, Midland (now HSBC) and NatWest
- burdened with the high cost of branch networks have been undercut time
and time again and, perhaps worse, wrong-footed.
’There are a lot of people interested in getting in at the moment
because there are a lot of rewards,’ explains Rupert Howell, managing
partner at HHCL & Partners, which launched First Direct, Midland’s
revolutionary direct banking division, in 1989 and in October last year
created the launch campaign for Prudential’s direct telephone bank, Egg.
’People are becoming more and more financially astute. There’s still
great potential for change and brand-shifting.’
As far as the advertising industry is concerned, such frantic activity
is welcome news. The new operations have opened up the market for
agencies simply by creating more accounts. As Howell says: ’When you are
creating a new brand like b2 or Egg, it’s got to be kept culturally
different, including the staffing structure. It’s a bit like Go (BA’s
new low-cost operation handled by HHCL) and BA. Of course, M&C Saatchi
(BA’s main agency) could have done the launch but the Go people wanted a
completely separate operation and completely separate suppliers.’
And agencies will be called upon for wide-ranging strategic advice.
DMB&B Financial’s planning director, George Miller, picks up the theme.
’In the past, banks had distribution power. The key to their success was
linked to the strength of the personal relationship with the branch
manager. When the high-street branch was king, it didn’t matter if it
was a Midland or a Barclays. Now people are driven not by the closest
bank but by the brand.’ Which means, of course, the big four will be
forced to sharpen their marketing act if they’re to compete in the
increasingly crowded market. Howell believes the fightback has already
started: ’The big players were not particularly nimble and were
wrong-footed. But they’re getting better.’
Meanwhile, many of the new entrants are from outside banking and
They have used technology, innovative products and aggressive marketing
to muscle in on the turf of the traditional banks and building
As well as the supermarkets, which have used their checkouts to woo the
public, life insurance giants - Prudential and Standard Life - and even
holiday operators have launched assaults on the sector.
More are still to come. Norwich Union, the life insurer, is stepping up
plans for a bank and even BA is rumoured to be entering the market.
So what’s the appeal? ’Many different kinds of businesses have realised
that their core business is less profitable than banking,’ Miller
’If you consider Sainsbury’s and Tesco’s wafer-thin margins on food, you
can see how they would consider using their access to customers and
What has given the new entrants the upper hand is the strengths of their
various brands. For years, the traditional high-street banks have abused
customers’ loyalty, offering poor service and poor deals. Their brand
value has consequently plummeted. In contrast, you’re unlikely to feel
the same distaste for your local Tesco or Sainsbury’s, two of the
strongest and most trusted brands in Britain. Branson, too, wields his
brand as his trump card. Virgin is synonymous with shaking up stuffy and
inefficient industries (Virgin Trains being an unfortunate exception).
He has consequently named his financial arm Virgin Direct.
But carmakers? It’s five years since General Motors launched its GM
loyalty card. Since then car manufacturers, which use their financing
arms as a natural launch pad, have expanded their offerings. Ford
Credit, the financial arm of the US motor giant, for example, recently
offered customers a branded insurance scheme, a neat way of enhancing
customer loyalty using its extensive database.
Volkswagen, too, is set to launch a series of savings accounts, credit
cards and banking products in Britain this year (CampaignLive, 4
The bank is to be modelled on the company’s huge German banking business
and comes four years after Volkswagen set up a British financial
services arm to offer business development loans to Volkswagen dealers
and hire-purchase deals to car buyers.
The Japanese car company, Daihatsu, is also considering a full range of
financial services in a bid to enhance its relationship with its
customers, as is BMW, which already owns the weighty BMW Bank in
Germany. Both, however, remain cautious about rushing into the financial
game at the first sniff of prey. Paul Williams, Daihatsu UK’s chief
executive, says: ’Every man and his dog is putting out a credit card at
the moment. We have to come at it another way. It’s about service,
relationships and understanding your customers.’
Richard Downs, customer marketing manager of BMW UK, agrees: ’We have
looked at launching a credit card in the past. It’s still there at the
back of our mind but it’s difficult to come up with a proposition that
is attractive to customers and different. The last thing we want to do
is a me-too. You’d need a reason for having it above an MBNA (a US
credit card) or a Barclaycard.’
So how are the traditional banks and financial organisations responding
to this alarming assault? At the moment they’re targeting youth with a
new range of shiny packages bearing untypical names, such as Barclays’
b2. The advertising is radically different too: Banks Hoggins O’Shea
/FCB, b2’s agency, shipped the cult actor, Richard E. Grant, to a
Caribbean island to shoot its stylish pounds 15 million launch campaign.
’Young people are a lot more selective in the way they bank,’ Sven
Olsen, managing director of Banks Hoggins, explains. ’They are more
Banks are starting different brands to appeal to them.’ Howell outlines
similar motivations for the launch of Egg: ’Prudential has very powerful
financial services but the main brand isn’t particularly contemporary.
It’s big and conventional.’
Another way of putting it is that the traditional players are doing
their best to distance themselves from their has-been brands in a bid to
woo wised-up youth. ’What Barclays is hoping to do with b2,’ DMB&B’s
Miller says, ’is to set up its own competition so that at least if the
business goes out the door it might go back to them.’
Certainly, punters would have to scrutinise b2’s TV and print
advertising very carefully to link the brand to Barclays, although the
service’s management insists the pointers are there - the letter ’b’ and
the preponderance of the colour blue. ’It’s a new brand but it’s backed
by the security of an established one. In fact, in our focus groups, 15
per cent of customers immediately identified the new image with
Barclays,’ Graham Leigh, b2’s marketing director at the time of launch,
And let’s not get this out of proportion. The new banks don’t have it
all their own way. Many experts are sceptical about the new banks’
credentials, arguing that they have just bought market share from
Behind the glossy brand names are alliances with existing players -
Safeway is linked to Abbey National, Tesco’s banking arm is run in a
joint venture with the life insurer, Scottish Widows, and Virgin Direct
has links with AMP, the Australian insurer.
So far, the new banks have turned most of their fire on savings
The main weapon has been instant access accounts offering top rates.
Prudential’s Egg outflanked rivals by offering a rate of 8 per cent on
an account with more than pounds 1 invested. Woolwich, in stark
contrast, offers just 7 per cent on its direct access account and
demands investors hold a balance of pounds 2,500. As a result, the new
banks have grabbed more than pounds 6 billion in deposits as savers have
switched out of the high-street banks in search for better deals.
According to Datamonitor, the market research company, Sainsbury’s alone
has raked in pounds 1.7 billion in 20 months. Standard Life Bank has
grown even faster, passing the pounds 1.7 billion mark last month - less
than a year after it was launched. But how long can such growth go
Jo Owen, a partner at Andersen Consulting specialising in financial
services, outlines the hurdles ahead. ’The challenge for them is to make
sustainable businesses. It’s potentially quite easy to buy market share
in the short term. In many ways the golden prize is to hold the current
account, since from that you can cross-sell a lot of products. However,
the track record of people moving from PEPs and unit trusts to current
accounts is not established.’
Others question the suitability of the newcomers’ brands to the world of
banking. Harry Macauslin, J. Walter Thompson’s deputy chairman, who
heads the main Barclays account at the agency, is doubtful: ’Banks have
to be careful about being sexy brands. They are about probity and
honesty. These are inherently not sexy things. If you were to paint a
portrait of a person who runs a bank, it would be a man in a pinstripe.
That’s fine; that’s what you want from a bank. Can banks become service
organisations with the warm cuddly feelings of a Branson or a
Sainsbury’s? You’ve got to be true to what you are.’
Laziness is still a useful ace in the hands of the old banks. As one
analyst puts it: ’The inertia factor in customers is still very high.
People may open an account with, say, Sainsbury’s Bank, but only an
incredibly small number of these will actually close their existing
current accounts. The vast majority of these new banks actually only
offer one product.’
Whatever the perspective, Andersen’s Owen forecasts a vibrant time over
the next decade: ’Everyone has predicted the end of the traditional bank
for a long time. In five or ten years’ time we will still be predicting
the death of the traditional bank. It’s a bit like the Roman Empire. It
took a long time declining but there was a lot of fun to be had along
This article was first published on campaignlive.co.uk
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