Don’t think ‘bank’, think ‘shop’. That was the instruction I was given by Egg, the UK internet and telephone bank. It was about five years ago and I was editor of Egg’s customer magazine, a large-circulation publication produced by a virtual bank (how ironic). I reported to the bank’s marketing director, Steve Hicks.
The most memorable thing about Steve, apart from the black leather trousers and black t-shirts he wore at formal meetings, was that he’d come directly from the marketing department of Tesco, Britain’s (and arguably the world’s) most successful supermarket chain.
One of the reasons he was employed was because he was a retailer, not a banker. Egg had enough bankers on its payroll. The company decided that if it was to succeed in its aim of attracting the masses in a short space of time, it had to think like a mass-market retailer: pile ’em high and sell ’em cheap.
The strategy proved successful. Steve has since moved on, but the same retail mentality permeates the organisation, except that it is now think ‘online shop’.
“We have taken on board the power of what an online retailer like Amazon can offer a customer, by tailoring intelligent and relevant website content to individual customers in order to drive better results,” says an Egg spokesman.
The company claims that this has improved response levels, sales and the overall value of relationships. “We have evolved our web capability so that we can put targeted messages in front of the right customer, whether these messages are designed to drive a sale, a value response or are just for information.”
Egg is staffed by people from a variety of business sectors. “We never recruit our people based on the requirement that they must have worked in financial services,” says the company. “We place specific emphasis on developing customer relationships through marketing interactions. Hence, in recent years, we have recruited marketing people from leading high-street retailers because they were individuals with drive, passion, experience and proven marketing track records.”
Top-down and bottom-up
Probably the most high-profile former ‘shopkeeper-turned-banker’ is Andy Hornby, chief operating officer of HBOS, Britain’s fourth biggest bank. Aged 38, and tipped to become its next chief executive, Mr Hornby joined the bank from ASDA, one of the UK’s top four supermarket chains. For several years, he headed the bank’s branch network.
HBOS’s retail recruitment strategy is bottom-up as well as top-down. Its recruitment literature features Mr Hornby’s youthful, beaming face and describes the high-street branches of Halifax and the Bank of Scotland, plus Halifax Estate Agency, as “more high-street retail than high-brow banking”. “We’ve got 1000 high-street stores, some fantastic and popular products, 25 million customers and a bright and lively sales culture, so we’re turning expectation on its head,” it continues.
Richard Pym, chief executive of Alliance & Leicester, Britain’s eighth largest bank, also boasts a previous life in shops. He worked at Burton, the clothing group, in the 1980s under Ralph Halpern and alongside Stuart Rose, now chief executive of Marks and Spencer, and Angus Monro, former head of Matalan, the cut-price out-of-town store.
Mr Pym was a non-executive director of Selfridges, the London department store, from 1998 to 2003, and last year, he became a non-executive director of Halfords, the car parts and bicycle chain – so he still has a foot in the old camp.
With retailing in his blood, Mr Pym has a better understanding than most bankers of customers’ needs. For Alliance & Leicester, he has devised some original products and marketing ideas, favours tabloid writing style for promotional literature, checks every advertisement before it appears, and can react quickly to market changes. His management team is from a mix of banking and retailing backgrounds.
A worldwide phenomenon
Deloitte’s Global Banking Industry Outlook: 2005 Top 10 Issues puts the “renaissance of retail banking” in its top 10. It says the key aspect of this revival is “bonding with customers”, which involves using the best techniques from more advanced players in the retail sector.
“Banks can learn from the example of leading retailers – such as Takashimaya, LVMH, Ikea and Starbucks,” says the report, especially the importance they place on their stores. “The bank branch has the potential to be that kind of vital customer touch-point.
“Banks should bear in mind that ‘retail is detail’. Successful retailers excel by instilling a customer orientation into all elements of their organisation. In terms of technology, for example, they typically analyse huge amounts of customer data to offer ‘what will sell’, as opposed to the traditional banking approach of offering ‘what we want to sell’.”
NCR Financial Solutions runs a Branch Effectiveness Modelling Consultancy that goes into bank branches to see how they work and analyse their effectiveness. It then makes recommendations on how they can be redesigned to enhance the customer experience, increase revenue and reduce costs. It has done this for MultiBank in Poland, Garanti Bank in Turkey, Barclays in the UK and many others.
Once the consultancy has completed its task, the client will then use its own design teams or NCR Financial Solutions’ Design Centre to implement the changes.
Charlie Rohan, NCR’s head of design, takes up the story. “Banks are adopting techniques and customer service behaviours used in other marketplaces,” he says. For example, they are using the ‘assisted model’ pioneered by airlines with their self-check-ins (where airline staff help passengers to use automated check-in facilities) and by supermarkets with their self-check-outs (where staff help shoppers to use machines to scan and pay for their groceries).
“Banks still tend to be full service or self service, but the assisted model is being used more, with meeters-and-greeters and other staff on hand to help customers use new self-service terminals to make deposits and other automated transactions,” says Mr Rohan.
This focus on branch effectiveness and self-service is at the core of what NCR has done for MultiBank and Garanti Bank. “We completed two Garanti branches in Istanbul in December, one in Taksim Square and the other in an upmarket shopping mall,” says Mr Rohan. “A third is on the drawing board for Ankara.”
The Garanti branches look more like clothes shops than banks. They are designed for locations where there are masses of shoppers, to compete with other shops and to get people through the doors. “We use ideas borrowed from retailers – the frontages are fully glazed, the windows don’t have blinds or posters on them so you can see what you are buying and there are almost no obstacles inside. We use a back-projection system to create a multi-media image in large format on one window.”
Once inside the new Garanti branches, the emphasis is on making transactions easy. The self-service terminals inside (which can take cash for deposit or making payments) are open 24 hours a day, with screens to close off the teller areas.
Retailers selling financial services
Any study of retailers in banking has to look at retailers that are selling their own-brand financial services. Tesco Personal Finance, Sainsbury’s Bank, Marks & Spencer Money and Virgin Money are just some of the best-known in the UK. Every major country has its equivalents.
Marks & Spencer Money is an unusual case. HSBC bought it outright from M&S in November last year for about £700m. Yet it is jointly managed, the name stays the same, its main distribution channel is the M&S stores, and the profits will be shared 50-50 for 10 years.
That is an example in extremis of a bank that is so enamoured of the power of retail in financial services that it did not just ‘think shop’, it bought the shop. Yet the balance has to be right, it still needs bankers – which is why the top team at M&S Money are bankers: Brendan Cook, chief executive, was formerly in charge of HSBC’s group cards business; David MacKay, commercial director, moved over from HSBC in May; and Eddie Nott, chief operating officer, used to work for GE Capital.
Michael Geoghegan, HSBC’s chief executive, says: “Combining our expertise in banking with Marks & Spencer’s prestige and experience in retailing will create an exciting new force in UK financial services.”
This nicely illustrates the point that the best retailing banking models today have to use a combination of techniques, principles and people from both retail and banking. One set without the other set will not work.
