Value: do you add or extract?

In the June issue of Market Leader, Hugh Davidson identified banks and other sectors as value extractors. In this article, Fiona McAnena sets out the challenge facing marketers in businesses that are not marketing-led, and suggests ways in which they can lead a change for the better

 Imagine that you’re at the checkout at Tesco. As your can of baked beans goes through the scanner, the helpful assistant says: “Did you know we have these for 10p less?” “Great – charge me less, then,” you say. “It doesn’t work like that,” says the assistant. “You have to say you want it cheaper, and you have to pick up the right can. I’ve let you know you can get them cheaper – it’s up to you to go back up to aisle 74 and get the cheaper one.” Sounds crazy, but the Nationwide thinks it’s such a good service that they’ve made a TV ad about it. Their new ‘SavingsWatch’ service will ‘advise you personally’ when the rate changes on your savings account (provided you register for the service).

Sounds like progress. But that’s not what most people really want. More emails or texts from the bank? No thanks. Just give me the best available interest rate. Full stop. I don’t want to be ‘advised’ that my rate has gone down, or that there’s a better rate available, with the onus on me to do something about it. Nationwide says: “And if we launch a new variable rate savings account that might suit your needs better, we’ll tell you about that too, by email.” Is that a euphemism for “might give you a higher rate”? Is there anyone whose needs are better suited by a lower rate? When my Nationwide fixed rate savings bond ended recently, I was probably ‘advised’ – and my money defaulted to a so-called ‘holding account’ (isn’t this just a deposit account?) with a laughably low interest rate of 0.05%, as I recall. Better rates were available but you had to ask for them.

My Santander ISA came off its fixed rate and onto a similarly derisory rate in an instant access account. When I got in touch, I was given a better rate and also instant access. When I asked why they didn’t do this automatically, they said they weren’t sure I would want it. Meanwhile, my daughter’s savings (£700) with the Halifax are now earning 0%. That’s not 0.05%, as I was getting – it’s 0.00%. Recurring. They did tell us – but there’s a penalty to withdraw the money, even into another Halifax account. Awkwardly, they cannot tell us how much this penalty is until we close the account (and incur the penalty). Franz Kafka would feel right at home.

These are clear examples of not just a company but apparently a whole industry which is a value extractor, not a value adder, as described by Hugh Davidson in Market Leader June 2012. If any bank was really on my side, as Nationwide claims, it would have defaulted my account to the highest available instant access rate, not the lowest. Only the Aldermore Bank does this, to my knowledge. Nationwide makes much of being a mutual, so it can put customers’ interestsfirst since it has no shareholders. Either this self-serving behaviour is so entrenched in banking that it cannot imagine a more radical approach that genuinely puts customers first or, in the absence of shareholders to trump customers’ interests, it’s prioritising the interests and bonuses of the other stakeholder in the mix – Nationwide itself. Hugh Davidson made some great suggestions for marketers to help us drive consumer-led capitalism. Could any of Hugh’s eight suggestions help transform the banking industry?

It’s certainly tougher in those organisations than in Hugh’s alma mater, P&G, where the supremacy of the marketing function goes without saying. The primacy of consumer interests is embodied in former CEO AG Lafley’s mantra, “The consumer is our boss”, and the brand manager is her anointed representative inside the organisation.

This is broadly the case right across FMCG businesses, in contrast with many service businesses, where marketing departments are typically seen as providers of promotional communications. It appears that the more regulated the sector, the greater the pressure on marketers to operate according to sector rules – formal and informal – and not to rethink or repackage their offerings to match consumer understanding or preferences. This seems especially so in financial services, where compliance adds an extra push back into the box. Does this mean that marketers in financial services can’t take Hugh’s advice – because of their organisational structure, their lack of board representation, their compliance officers, or all the other factors beyond their control? I suggest they could, if they are willing to try. People have said to me, how can we do that when marketing is not seen as a leading function in our business?

My advice is to forget how your function is seen and start doing what it’s there to do – starting with providing consumer understanding. Just as great brands deliver first and then come to be seen as great, marketers who provide this leadership for the business will come to be seen as leaders. Taking Hugh’s tips, here’s how.

BE THE CONSUMER’S VOICE

It takes courage to be the voice of the customer inside a business, so if you’re a marketer in financial services, don’t expect it to make you popular. Sometimes people will think you are suggesting things that will cost the business money, not make it money. If that is true, it is usually because the business has rigged up systems to extract value from customers, rather than creating value for them. Putting this right may well cost money in the short term. Hugh’s first suggestion, to simplify things for customers, is one of those times. But helping people make more informed decisions will win friends, retain business and grow profit in the long term.

As a marketer, if you can’t create allies in your business for that principle, you need to work somewhere else. Otherwise, you’re a value extractor, not a value adder. Ensuring that the voice of the customer is heard in every decision is no longer a radical idea, and we are probably our own worst enemies here. Most boards nowadays are open to receiving customer information in their board packs and will usually ask the marketing department to select and provide what’s relevant. Marketers who spend too much time on marketing communications, and on the budgets they consume, will miss the opportunity to make the customer data in the boardroom the right stuff.

Customer data is not about proving the marketing department is getting it right, or about ROI for marketing communications budgets – it’s about helping the entire business focus on how well it is serving its core purpose – doing what it does for customers. It can be hard to view regulators and consumer advocates as partners, not opponents, especially with those who take an adversarial approach that naturally puts you on the defensive. Let the corporate affairs team defend your reputation, by all means, but as marketers we need to be curious and open to new information all the time. Consumer advocates are giving us free market insight – don’t waste it. As for regulators, if you read Treating Customers Fairly – the basis of FSA compliance in the financial services industry – you’ll see the core principles of proper marketing. We surely can’t be threatened by that? Of course you can’t expect the compliance team to know that – it’s up to us as marketers to embrace the common sense embodied by the principles.

LISTEN TO CRITICISM

Incidentally, critical consumers can be hard to hear too, but still important. Here’s a personal example. Years ago, when I was at Added Value, we did some work for the Marketing Forum on consumer brands that were on the up and those that were in danger of losing relevance, based on some new primary consumer research that we conducted. Kodak was named as a brand consumers saw as losing its relevance. This was in 1998 – 13 years before it filed for Chapter 11 bankruptcy protection – and the Kodak marketing folks were furious that their venerable, hundred-year-old brand was being criticised.

It was a shame they read about this research through the business press and not in a sensitively-handled private debrief. Nonetheless, here was some important feedback they should have wanted to hear and could have had for nothing. Instead, they refused to speak to us or work with us ever again. Hugh proposes legislation requiring every quoted company to have two non-executive customer directors. A few far-sighted companies are doing this already. Until recently I was the consumer director at Cafédirect plc, a fairtrade coffee and tea company. But in truth, the marketing director, and any NED on the board, could and should play this role.

It’s easiest for natural marketers, but any NED needs to know what purpose that business serves for its customers, and hence who its natural and potential competitors are, and what it can do to pre-empt them. It’s the clearest way to think about strategies for growth in established markets, and about how to defend your strongest lines of business. So there are sound business reasons for the board to want to know what customers are saying and thinking, especially their sources of dissatisfaction about the category in general and the business in particular. You could see it as another aspect of (suppress that yawn) risk management – if that’s what turns your board on.

Call it whatever helps the directors to see it not as some fluffy do-good marketing or corporate responsibility issue but as a fundamental tool to protect and grow thebusiness, because that’s what it is.

BOLD VISIONS

The last of Hugh’s eight suggestions is the most important: develop bold visions for improving people’s lives through brands. If you know what your brand is for, not just what it does, then you can create a bold vision that engages and inspires people, inside and outside the business, and which provides a springboard for innovation. If your business is not brand-centric, don’t try to convert your staff through an internal comms campaign. As Hugh says, use marketing skills to change cultures. This doesn’t mean you should run an internal comms campaign to persuade everyone to get behind the brand vision. That’s not marketing – that’s just more promotional communication.

True marketing means reframing your propositions to be relevant to your target audience, in language they understand, and to appeal to what they already believe and value. I’ve come across so many frustrated marketers in service businesses trying valiantly to persuade the rest of the company that a brand vision can lead the business but without being able to follow it through with action. This is also tough in tech-based businesses, where everyone else knows the technology came first. Forget it. Drop the b word and instead engage people in the vision itself. Work with other functions to figure out what the whole enterprise is for – the role it plays in people’s lives. That’s your bold vision, and everyone can share it. Let the brand serve the business, not the other way round. Both at the corporate brand level in financial services, and for individual products or services, the marketer’s job is to view and describe the offer from the outside in, showing how each ‘product’ meets a need, engineering and communicating benefits, not listing features and endless rules. You can do all that without a battle over the true meaning of ‘brand’. This is what marketing leadership really means.

Not winning an argument about whether marketing leads the business, or that business strategy comes from brand strategy, or that a brand-led approach is better than HR’s values-based approach to shaping the company. On the contrary, it means leading quietly, by enabling the business to understand and satisfy customer needs profitably – the definition of marketing. Marketing leadership means that the focus for the whole organisation is articulated in a customer-centred business purpose that provides a shared agenda that people see as theirs, not marketing’s. Not (just) an expression of the brand but a touchstone for the whole business – the reference point against which decisions are made.

Be content to let the brand be an outcome of this, not the starting point, and a powerful brand will be created by the whole enterprise working towards the same goal. Fiona McAnena is the founder of Clearhound [email protected]