Financial Services Industry Responses

Products and Services

Expand the Range

As basic services like cheque accounting and savings accounts become commodities, a natural strategy is to increase the product and service range to include those that are less price sensitive, less open to comparison shopping, and can be sold as add-ons to the basic services.
 

• Building Societies are continuing to expand, particularly in the areas of insurance and basic foreign services. Examples are house insurance with a mortgage, travel insurance with a holiday, accident, sickness and unemployment (ASU) insurance with a loan. Building societies have often developed these insurance services through acting as tied agents to insurance companies, an example being the Birmingham Midshire Building Society who uses Sun Life Marketing Group.
• Likewise banks now also offered insurance and mortgage services. Some of this has been developed internally (TSB with its highly successful Trust Company), but often through acquisition (Lloyds Bank acquiring Abbey Life).

Provide Product Variations
 

• Building societies have become adept at offering a plethora of alternative accounts at different interest rates and conditions:
  • Banking and savings accounts with different notice periods; branch and postal accounts; limited number of withdrawals; minimum withdrawal amounts. (e.g. Woolwich 60 day Postal).
  • Mortgages with fixed interest rate periods; mixed endowment / repayment plans.
• Unit Trusts managers offer a wide variety of funds:
  • Capital growth or high annual interest; low, medium or high risk; Far East or UK; ethical funds; tracker funds; and so on.

Many of these products are cosetted in their early life to gain more customers and then neglected, relying on customer inertia not to change. But there are signs that consumers are getting sharp to this practice and are switching funds where possible, prompting a retort from marketeers that customers are being promiscuous.

Provide Value Added Options

Increased competition is driving promotional incentives and all inclusive options in an effort to gain market share.
 

• "Free" offers include:
  • Legal and removal costs with a mortgage.
  • Loss recovery with motor insurance.
  • Telephone advice lines.
  • 24 hour emergency help line with general insurance products.
  • Accident insurance.
  • First £1,000 life insurance being free.
• Linked offers include:
  • Credit cards that offer points or discounts (e.g. Vauxhall's GM card)
  • Donations to charity (e..g. Royal Society for the Protection of Birds, the UK's largest charity with over 5m members, has its own badged credit card)
  • Cashbacks for switching a mortgage (e.g. Halifax's 5% cashback)

See what could be the Ultimate Home Insurance Policy Brochure (1 page of 19K text + 66K images)

• Is this really the ultimate, all embracing home policy; or is it the ultimate horror policy? - you decide.
   

Next is Price

External Resources

1. Building A Financial Service Supermarket, Gora, Jean, CyberTalk, December 1996.

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