Do you REALLY listen?

Do you listen to the Voice of Your Customers? I mean really listen, not just to what they say but what they do and how it affects your business?

Could listening to the Voice Of the Customer (VOC) have saved a UK bank?

Back in autumn 2008, we highlighted the story of Norwich Union (Aviva, if you watch the adverts or are based anywhere outside the UK) who had just started a car insurance marketing campaign which we felt was a really good example of Lean Marketing.

WHAT WAS IT?

NU (Norwich Union) offered to give its potential customers a quote for car insurance and at the same time it would give prices from its competitors (using web technology) even if they were cheaper.

WHY?

We hypothesised that NU was testing similar work to that we talk about in Lean Marketing, in which we talk of Customer Value & Loyalty being built on three core foundations;

  1. Features & Benefits – what is it about your product/service that are the hygiene factors? what sets your product/service apart from the competitors?
  2. Brand – what does the brand say about how you’ll treat me as a customer? in these credit-crunch days, how much confidence do I have you’ll be here next year?
  3. Price – often “quoted” as the single reason customers buy from a company however it’s rarely the biggest reason!! (try testing people by asking what their competitors charge – if it’s that important surely they’d know?)

These foundations impact on the value customers place on the total package they receive and on their loyalty, the exact nature of the impact varies, depending on the industry. However we believe NU was saying if you value our Features and Benefits, trust our Brand then our Price is less important and we don’t have to be the cheapest in the market.

I can hear almost what you saying “but they’ll have lost potential customers”.

Almost certainly they have; there are consumers out there who buy the cheapest, but exactly what have NU lost?

Potential customers who were basing their purchase solely on price, so what would happen at the renewal of their insurance? they’d look for the cheapest supplier again. So NU would have invested (marketing & sales) resources in acquiring a customer, incurred costs setting up their details (operational resources), sending out policy document and packs (distribution resources) only to have that customer looking to leave after one year. This type of customer is probably less likely to have bought anything else from NU, the price was their largest consideration.

Contrast this with the customers they may get on their book with Lean Marketing? they are not so readily driven by price, these customers are also placing more value on the Features & Benefits and Brand offered by NU. So again a hypothesis, these customers are probably more likely to buy other products (cross sales) and more likely to stay with the company when it comes to renewal.

Result: the organisation removes one of the “7 Hidden Wastes of Marketing” – the waste of attracting customers who only buy one product once based purely on price! There is always someone else waiting with bigger and deeper pockets ready to compete on price.

Does it work?

Well the advert appeared to run for a couple of months, in Autumn 2008 and then stopped, now it is back and running again, a classic direct marketing test you could say.

We are summarising that the fact that it is back and running is because it worked;

  1. customers acquired by Norwich Union have proved to be more robust, less likely to cancel!
  2. more likely to purchase other Norwich Union products.

we can’t say that they are more likely to renew, the advert appears to have only been running for 7 months so far, we’ll know if this strategy stays past Oct/Nov later this year.

You may have also noticed that the UK price comparison (moneysupermarket, gocompare, confused.com etc) websites have started introducing new features that compare the product features and allow for feedback on customer experience (of the brand) – have they too realised that not everyone buys on price alone?

So could this help anyone else? even have saved a UK Bank?

Back in in 2006/07 HBOS (now part of Lloyds Banking Group) implemented a new mortgage strategy, prior to whch they commanded 21% of the new mortgage market. The strategy which was simple and not too dissimilar to NU’s, was that HBOS would no longer offer potential and existing customers different mortgages @ different prices.  There would be one group of prices and they would be priced to maintain a reasonable margin for the bank.

(In the UK most lenders had a policy of offering new customers introductory rates to entice them in these would rise at the end of a fixed period – though you could move and re-mortgage as a new customer rate with another lender.)

So what was the result? The HBOS share of the new mortgage market dropped 8% from 21% – or a 62% reduction – in a six month period. Other lenders retained their policy of offering great deals to new customers. HBOS on the other hand was offering not so great deals to new customers but offering better deals to its’ own customers coming to the end of their existing deal – to try and improve customer retention.

What were potential and new customers telling HBOS? over half (62%) of the customers HBOS could have expected to sell to, went elsewhere. Was it that

  1. The features and benefits of the mortgage weren’t compelling enough over those of it’s rivals?
  2. The brand wasn’t strong enough to convince these people to come to the company?
  3. Price became the primary factor in the decision making process – effectively customers saying “We’re that strapped for cash we need to watch every penny?”

This last one I find interesting – was it the first warning sign of the economic health of HBOS customers or even the housing market and economy in general?

It certainly should have highlighted that 62% of the customers on the existing mortgage book might not be interested in other products (cross-selling), they might only have bought on price alone. Or highlighted that the branding work and the features and benefits of the HBOS mortgages were not regarded as positively different enough by over half the market – the same conclusion could be drawn about the competitors. Remember these customers came to HBOS prior to their pricing changes.

Did HBOS listen? We’ve no idea, the only articles in the public domain talk of corrective pricing strategies that reversed the previous strategy and boosted their share of new mortgages back up to the 15-20% band.

Maybe HBOS did consider what their customers (existing and potential) were telling them, maybe they changed their features and benefits, maybe they changed their branding work, we’ve no evidence, they never said, maybe they considered all this and dismissed it.

Maybe they considered the shareholder customers above those who bought the product and services. (The share price dropped when HBOS admitted that their share of the mortgage market had dropped.)

If you realised that 62% of your market were

  • in financial difficulties
  • couldn’t discern product differences between providers
  • didn’t believe your brand offered a different experience?

What would you do differently?Listen, ask more questions, change what you do, stay doing the same, get out (let someone esle take the risk)…..

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One response to “Do you REALLY listen?

  1. Enjoyed the post! The first paragraph is excellent and really sets the tone by challenging readers and business leaders to ask themselves if they listen to their customers. Business leaders are paid to “see around corners.” One way to assistance in that effort is to be keenly aware of what your customers are saying about your company and your competitors. Business need to adjust to changes in the market and listening to the VOC helps identify coming changes. One of my favorite business quotes is “when the pace of change outside the company is faster than the pace of change inside the company, the end is near.” You challenge leaders to listen to the VOC and make the necessary changes based on their input. It is about the lifetime value of a customer and not a “once and done” approach.

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