When most people start out in a marketing career, the very first thing they learn is that the success of any marketing activity rests on the 4 P’s – the product you are selling, the price you sell it at, the places you sell it in, and the way those three things are promoted.
The second thing they learn is usually that their peers within their organisation think marketing is all about Promotion, and nothing else.
This massively hampers marketers – all the way up to Marketing Directors – because whilst controlling the 4 Ps is pivotal to a CMO’s success, it’s very rare for the rest of the C Suite to let the Marketing Director control what they see as their particular fiefdoms.
Today I’m going to talk about a particular example where I believe what a company currently seems to be doing with the “Place” part of the mix is potentially undoing a quarter of a century of brilliant marketing: marketing where advertising has actually played quite a minor part in its enormously successful comms strategy.
And where – if my suspicions are true – the CFO and the COO are imposing negative changes that directly affect the successful proposition the company was founded on.
FirstDirect first opened its phone lines on 10 October 1989, the same year that Tim Berners-Lee invented the World Wide Web, but long before the web was ever used for personal banking.
What was (almost) revolutionary about FirstDirect was that its main channel of product delivery was over the phone, not via a branch network. (Telephone banking had actually been pioneered in the 1970s by the state owned National Girobank. Girobank’s ‘branch’ network consisted of 22,000 post offices, none of which had access to their banking customer account details, and so – almost apologetically – if a Girobank customer wanted to do anything other than cash a cheque, they had to speak to a Girbank call centre).
Historically – particularly since the advent of free-banking-when-in-credit current accounts in the in mid 1980s – high street banks had run current accounts at a significant loss. Part of that loss was due to having to ascribe the fixed cost of running a nationwide branch network to a current account product for which the majority of customers made no direct revenue contribution via bank charges.
The financial genius of FirstDirect was to develop a compelling business model where there were no direct branch overheads, and so the cost-to-serve was substantially lower than rival banks.
If FirstDIrect could convince potential customers that they didn’t need a branch network to run their current account, then they could attract low-cost customers and then cross-sell them high margin products – credit cards, loans, mortgages and the like.
Someone at Midland Bank had clearly taken a look at the Girobank model and could see that by adapting core elements of it – telephony banking, supported by a national cash machine network, with Midland Bank branches only used as a last resort – they could serve a potentially sophisticated, wealthier market segment at a much lower cost than the rest of the retail banking industry.
The planning for the launch of FirstDirect was a well-guarded secret. Indeed, the first inkling Girobank’s management had that anything like it was planned was the day one third of its Leeds call centre staff resigned en masse, announcing that they were going to work for a new division of Midland Bank, with the promise of £1,000 pay rise and a staff mortgage sealing the deal.
From a marketing perspective, part of the clear blue water between FirstDirect’s proposition and Girobank’s fustier model was to make their telephony proposition 24 hour, 7 days a week. Girobank’s call centres operated 8am to 8pm Monday to Friday, and til lunchtime on Saturdays. Up until that point, this had put Girobank well ahead of the hours what its high street competitors offered, and it didn’t think there was much customer need for a service that ran through the night.
The genius of the FirstDirect 24 hour proposition was that once the 24 hour banking claim had been made, no competitor could better it.
The launch of First Direct in 1989 was advertised twofold. Firstly, there was a TV advert for Audi which was interrupted by a broadcast purportedly back in time from 2010, celebrating the 21st anniversary of the company (the interruption was agreed with Audi beforehand).
Secondly, there were two different adverts running concurrently on ITV and Channel 4, one offering a negative view showing the aspects of normal banking and the other a positive view of First Direct, with the two crossing over at a key point.
After the initial launch, however, FirstDirect downweighted their adspend compared to their high street rivals, and instead trusted to a different method of primary promotion: the word of mouth recommendations of their own customers.
In order to be confident that new FirstDirect customers would recommend it to their friends, FirstDirect’s management knew that the telephony service had to be flawless – not only through short wait-times, but through the particular qualities of people that were staffing the phone lines.
From the outset, one of the key qualities that FirstDirect hired staff for was not (just) competence operating a computer when a customer called. What they deliberately set out to hire for was empathy.
FirstDirect wanted to hire people who were natural volunteers – folk who could evidence that they helped out with a local charity, or regularly got involved with socially-useful organisations. Unlike the rest of the UK telephony industry, they didn’t want to hire people because they were cheap and available, they wanted staff who would show a natural commitment to help the customer achieve what they wanted to.
And the customers loved it. FirstDirect quickly became Which?’s most recommended current account (up until that point, the annual Which? “Best Buy” bank account had been Girobank’s – oh, the irony).
FirstDirect has been winning customers and accolades pretty much ever since. As recently as 2019 it was (again) named ‘Britain’s Most Trusted Financial Services Provider’ by Moneywise, and in February 2020 it was ranked top in the Competition & Markets Authority biannual survey of service quality.
The FirstDirect brand has proved remarkably resilient. In 1992 it withstood the rebranding of parent company Midland Bank as HSBC. The Midland Bank brand’s endorsement of the FirstDirect brand had always been absolutely minimal, and the FirstDirect brand had been deliberately designed from inception to stand on its own reputation.
It was subsequently able to withstand the onslaught of competition from a plethora of internet bank start ups and me-toos since the turn of the century, chiefly because they had made the service quality of its telephony channel impossible to better.
Up until Covid hit, it made for a fantastic marketing case study in how focussing investment on one particular element of the marketing mix – Place – it has been able to carve out for itself a significant and highly profitable niche without massive investment in Promotion; without having to undercut its competitors on Pricing; whilst the core Product from a functional perspective is pretty much identical to every bank’s current account, bar a few bells and whistles.
So far, so good.
However over the last 18 months, as a FirstDirect customer, I’ve noticed a distinct deterioration in the quality of the telephony service. It’s not that new staff lack the empathy of old – the staff are still of the highest calibre.
The problem is call wait times, and queue management. As Covid hit, FirstDirect had to rapidly adjust to a world where mass call centres weren’t a practical solution in a world where people were having to isolate at home.
The obvious short-term solution was to push customers away from the telephony channel, and on to web and app solutions that could do 90% of what the telephony channel could do, at a fraction of the cost. So as wait times increased, so did the recorded messages pushing waiting customers down other channels.
Here’s the problem. 18 months into Covid, and the perception of many FirstDirect customers is that wait times are still high. I’m only speculating here, but my suspicion is that having seen how much more profitable it is when existing telephony customers use digital channels, senior management at FirstDirect have chosen to continue to push existing customers down digital channels, rather than increase investment in the channel that is at the heart of what makes their proposition distinctive.
Every bank has an app. Every bank has an online banking website. No bank has been able to match the Word-of-Mouth recommendation that FirstDirect has been achieving for decades.
Elsewhere this week Les Binet has published research showing how brands that downweighted adspend have seen subsequent decreases in market share. It feels logical – as fewer people are given a reason to choose a differentiated brand, over time fewer people buy it.
The argument I am making here is that as FirstDirect seemingly downweight their investment in what differentiates them as a brand, they too, over time, will see a fall in the word-of-mouth recommendations. Recommendations that will have seen them save millions of pounds in advertising down the years. Ultimately they will just become another me-too FS brand.
I don’t work for FirstDirect, never have. (Though it won’t surprise you to know that I started my marketing career in 1986 at National Girboank). But as a customer of some 25 years it grieves me to see them apparently making a fundamental marketing channel error.
As I said at the start of this piece, every pup marketer is taught that the four primary levers of a marketing strategy are Product, Price, Promotion and Place. Non marketers tend to believe that Promotion should be the sole domain of the marketer, and for the other three, marketers should frankly stay in their lane.
I’ve set out above a real-life example of where great marketing has transcended pure Promotion, and where I get the impression the marketers at a particular brand are losing the battle to stay in control of all the pillars of the marketing mix that made it great in the first place.
Let me know if you disagree.
UPDATE – MAY 2022
Whilst I’m not going to claim that my humble blog has made the difference, I have to say that of late access to First Direct’s telephony service has been exemplary.
But the point of the blog still stands: it’s absolutely vital that marketers retain control of all four “P”s in the marketing mix in order to deliver on their strategy.
Maybe in the future this particular blog post will be an example of the marketers gaining control, rather than losing it.
More power to the elbow of the team at First Direct.