Consumer Trend Report 2011 Direct Marketing from the Financial Services Sector

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1 Consumer Trend Report 2011 Direct Marketing from the Financial Services Sector Background At REaD Group we believe that effective direct marketing is built upon strong data management principles. The fact of the matter is that good data management encompasses data security; it is mindful of ID Fraud, it adheres to best practice guidelines and above all else, it is responsible. Furthermore, for consumers to have confidence in the organisations using their personal data, it needs to be treated with the respect it deserves! We are committed to providing Industry with invaluable information that will help them to better their working practice, execute more effective marketing campaigns and increase ROI. To that end, the 2011 Consumer Trend Report on Direct Marketing from the Financial Services Sector pinpoints consumer attitudes to Financial Services Marketing that could help providers working in the sector to increase the efficiency of their marketing resources in a difficult economy. The Sample The sample were randomly selected from Consumer Research Specialist fast.map s Consumer Voice panel to be representative of the UK population The panel was closed i.e. members of the public cannot voluntarily join and are recruited via a number of sources to demographically represent the markets based on age and gender Results are re-weighted by age and gender Sample Size = 2,330 This gives a statistical confidence level of +/-2.07% In order to identify current consumer attitudes to marketing by organisations working across Financial Services, the 2011 Consumer Trends Report on Direct Marketing from the Financial Services Sector surveyed a cross section of British consumers.

2 Introduction Unless you have been on another planet for the last two years, you can t have failed to notice the global economic maelstrom or wondered what would happen to the Financial Services providers at the epicentre of the chaos. For the companies lucky (and robust) enough to emerge from the wreckage relatively unscathed, the landscape is forever changed and many are facing a host of new challenges when it comes to marketing their products and services to consumers. With consumer trust in the financial sector at an all time low, British consumers are not surprisingly scrutinising everything they spend and are taking a fresh approach to selecting the Financial Services providers they do business with. The days of lifetime customers are gone and Financial Services marketers need to work extra hard to win business back from up-and-coming Financial Services brands and also the new entrants to the market such as retailers. Furthermore, the sector has seen an explosion of liquidations and the survivors are hunkering down, which has caused an unprecedented increase in mergers and redundancies. In the midst of all this change, CEOs and strategists at financial institutions could be in danger of forcing their marketing departments to employ shortterm solutions to avoid being the next victims of the economic crisis. While it might be difficult to contemplate and could even attract criticism for spending money on extraneous activities, the companies who invest in honing their customer and prospect communications and make savings by trimming down any waste in their direct marketing campaigns, are well positioned to rebuild customer trust and bolster brand perceptions. The Survey Top of the Class Since the dawn of the World Wide Web, Financial Services have become increasingly accessible to consumers and, with the recent rise of comparison sites; it has never been easier for consumers to find the best deals. For this reason, it was important to identify the financial products that consumers prefer. After a series of blows to the pension market and the near collapse of the US mortgage market, which had global ramifications, it s not really surprising that Pension, Mortgage, Investment, Loan and Income Replacement products were the least popular products with consumers surveyed. By contrast, 87% of the consumers surveyed had Bank Accounts and Paypal was the second most popular financial product in the category with a whopping 68% of consumers holding an account. The most likely explanation for the increasing popularity of Paypal is the unprecedented rise in ecommerce during the last decade. However, with free banking coming under threat following a High Court test case to establish whether unauthorised overdraft charges are fair, consumers may also be more open to new or alternative banking and transacting models proposed by Paypal and Virgin Bank (Fig. 1).

3 Fig. 1 Which of the following financial products do you have? Financial Services provider and is fast fulfilling its promise to become the people s bank (Fig. 2a, 2b, 2c). However, while Financial Services providers from retail backgrounds are gaining ground on traditional Financial Services brands the survey did indicate that they do not yet pose any real threat. Sainsbury s only ranked 18th in our survey, Asda came 31st and John Lewis Greenbee came second from bottom of the list at 41, with only 1% of the sample claiming to have a relationship with the brand Banking Account Paypal Account Home Insurance Motor Insurance Savings Account Credit Cards Insurance Pensions Mortgages Investments Loans Income Replacement Lloyds TSB and Sainsbury s Finance are more popular with men and Santander and Tesco Finance resonates more with women. Rising Stars To find out the most popular financial brands and see if any rising stars were challenging the status quo, we asked the sample which Financial Services providers they currently had a relationship with. As one would expect the front-runners were leading high street banks Lloyds TSB, Halifax, Santander, NatWest & Barclays, followed by the credit card Barclaycard and Nationwide Building Society. The research also looked to see which rising stars in the Financial Services sector were challenging the status quo. Out of 42 brands, Tesco, the UK s biggest retailer with a brand value of $25.7bn, was the 8th most popular

4 Fig. 2a Which of the following Financial Services providers do you currently have a relationship with? 3 25% 2 15% 1 5% Lloyds TSB Male Halifax Female Santander Natwest Barclays Barclaycard Nationwide Tesco AA HSBC AXA MBNA Norwich Union Capital One RBS None of the above American Express Fig. 2b 1 9% 8% 7% 6% 5% 4% 3% 2% 1% Sainsbury s Alliance and Leicester Direct Line Virgin Egg Churchill Liverpool and Victoria First Direct Admiral More Th>n Bank of Scotland Saga Royal and Sun Alliance Zurich Money Supermarket ASDA RAC Direct Male Female

5 Fig. 2c % % % % 1% 0.5% esure Swinton Comparethemarket.com Allianz Yorkshire Building Society Privelige Sheila s Wheels Greenbee (John Lewis) Insureandgo Male Female

6 Data Disasters In addition to the chaos in the sector, Financial Services providers have seen an increase in data losses, which have dented consumer trust even further. In August 2010, the Financial Services Authority hit Zurich Insurance with a 2.3 million fine following their loss of 46,000 customer records. With unprecedented access to highly sensitive data, including customer s intimate identity details and information on their bank, loan and credit accounts, Zurich and other Insurers now face mounting pressure to heighten security and improve their internal reporting systems. In 2009, HSBC divisions (HSBC Life UK, HSBC Actuaries and Consultants, and HSBC Insurance Brokers) came under fire for failing to adequately protect their customers confidential details from being lost or stolen and were fined 3-million by the FSA. With trust playing such a huge role in the popularity and continued success of Financial Services brands, we asked the sample to rank organisations according to how much they trust them with their personal data (Fig. 3). At a glance Banks & Building Societies come out on top with 28% of consumers saying they were most trusted in the group, however, when the scores were aggregated Financial Advisors came in 1st place, Bank and Building Societies came 2nd and Supermarkets were 3rd most trusted. In comparison, when we aggregated the bottom three ranking scores, the least trusted organizations overall were Lenders, closely followed by Credit Card Companies and then Comparison Sites. Despite all the stories in the press about catastrophic data losses, it s not always the big issues that cause Fig. 3 Please rank the organisations below according to how much you trust them. 1 is the most trusted and 8 is the least trusted Financial advisors Supermarkets 1 - most trusted Banks and Building Societies Insurance companies Comparison sites Credit card companies Lenders Mortgage companies / Brokers 8 - least trusted problems. Often simple, careless errors in the way that data is captured or maintained can lead to highly distressing situations for individuals, not to mention the money that is wasted on mailing obsolete records. This includes sending marketing mailings to the deceased, using incorrect address details, getting your customer s name wrong and any other forms of badly targeted marketing messages. For businesses hoping to improve brand image and rebuild consumer trust in a fragile economic climate, the consequences of rolling out a poorly targeted campaign using erroneous data could have serious financial implications, as well as causing brand damage.

7 Highlighting the mitigating factors involved in customers or prospects being turned off a Financial Services brand, the research discovered that while 43% of consumers would contact a brand directly to let them know if they had sent a badly targeted marketing communication, 18% of consumers said that it would negatively affect their opinion of the brand. A further 13% said they would be less likely to use the brand s products and services in future and 4% said that they would never use the brand s services again. In terms of the UK population, this equates to million adult consumers with a negative and potentially harmful 35% impression of a brand (Fig. 4)! Fig. 4 As a regular client of a Financial Services provider, how would you react if you received a piece of marketing through the post and your details were incorrect, or if you received a piece of mail addressed to a previous occupier? And, the FSA topped the list of official bodies that consumers would complain to if they had a problem regarding a providers marketing practice with 2 stating that they would take their concerns to the Financial Ombudsman Service. (Fig. 5) Fig. 5 If you were dissatisfied with a marketing communication you received from a Financial Institution, which of the following organisations would you be most likely to complain to? 4 35% 3 25% 2 45% 15% 4 35% 1 5% 3 25% 2 15% I would not complain The organisation directly FSA - The Financial Services Authority Financial Ombudsmen Service ASA - Advertsing Standards Authority DMA - Direct Marketing Association Other, please specify 1 5% I would notify them of the error and ask them to change it It would negatively affect my opinion of the brand I would do nothing I would be less likely to use their products and services in the future It would not affect my opinion of the brand I would never use their services again

8 Making Amends In order to start building bridges with consumers it s vital that Financial Service marketers ensure that all their comms. are hitting the right note. It might seem blindingly obvious but a squeaky-clean database and well-targeted campaigns that deliver age appropriate messages shows that you understand your audience. Our research indicated that a staggering 29% of consumers had been sent irrelevant or inappropriate marketing regarding loan products, and credit cards didn t fare much better with 26% of consumers receiving unsuitable marketing. By contrast, only 9% of consumers received inappropriate marketing for banking or pension products, which may indicate that they have a better knowledge of their customer and prospect base (Fig. 6). With all of the different channels available to marketers, it can be difficult to know how to allocate precious marketing budgets or how consumers want to be communicated to. Although the percentage differences were marginal, the research showed that 39% of consumers would rather receive marketing communications by from Financial Services providers they have a relationship with and prefer to receive Direct Mail if they don t have an existing relationship with a provider. Overall, consumers preferred Direct Mail to any other marketing channel, with coming in a close second, which was followed by Telephone and SMS (Fig. 7). Fig. 6 Which of the following Financial Services providers have sent you inappropriate or irrelevant marketing? If you feel you have not been sent inappropriate or irrelevant marketing, please select that option I have not been sent inappropriate marketing from financial services providers Loans Credit Cards Investments Insurance Income Replacement Mortgages Pensions Banking Fig. 7 What is your preferred method of marketing communication from Financial Services providers? Organisations you do not have an existing relationship with Postal - direct mail Telephone Mobile phone call SMS message Organisations you have an existing relationship with Online - social networking websites Advertising No preference Would prefer not to be contacted

9 Because Financial Services providers always strive to better their consumer marketing communications, we asked our sample what they felt marketers in the sector could do to improve their postal, telephone and advertising campaigns and the quality of information available on their website (Fig. 8). Fig. 8 Please tell us in your own words how Financial Services providers could improve their marketing? Send less paperwork. If I receive an unsolicited communication by post or and it is more than two A4 sheets it goes straight in the bin. Cut down the amount of unsolicited direct mail, particularly when it is not at all relevant. Stop sending blanket deals which demonstrate no thought as to the receiver whatsoever. Don t send post addressed to `the occupier`. I find it hugely annoying. GET MY NAME RIGHT! Try to avoid sending new customer offers to existing customers. s should be correctly addressed, the details concise and correctly spelt.

10 Research Summary Overall, the report shows that while consumer perceptions of the sector have been damaged, green shoots are appearing and that by making simple changes to the way they communicate to consumers, Financial Services brands across the sector stand the best chance of repairing the damage. Topline Stats Credit Card and Loan Companies are considered to be the worst marketers in terms of relevance and data Banking and Pension providers are seen as having more relevant and correctly targeted marketing Tesco were the top supermarket based Financial Services provider AA were the top Insurance Only organisation MBNA were the top Credit Card Only organisation Consumers prefer to receive Direct Mail and marketing communications from companies they have an existing relationship with. This is split by gender, with females preferring postal DM and males preferring If consumers want to complain about badly targeted or misdirected marcoms they prefer to talk to the organisation itself followed by the FSA and then the Financial Services Ombudsman Service Admiral appears to have a younger audience, whereas Alliance & Leicester has an older audience For case studies and bright ideas on how to manage your data please visit www. A growing number of consumers place high levels of trust in financial products and services offered by consumer retail brands 35% of people who have received badly targeted marketing from Credit Card companies said it had a negative effect on their view of the brand The most popular banking provider is Lloyds closely followed by Santander, Halifax, Barclays, Natwest and Nationwide