Customer Acquisition in UK Retail Banking by lonyoo

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Customer Acquisition in UK Retail Banking

Description:    A report drawing on consumer data from MORI exploring customer acquisition strategies in UK
                Retail Banking.

                Scope of Report:

                - Information on current accounts, mortgages, personal loans and credit cards

                - Consumer data broken down by class and age including the reasons why consumers choose a
                provider and how they want to arrange their financial products

                - Unique examples and case studies gleaned from our in-house expertise and extensive interviews
                with industry executives

                Report Highlights:

                Our analysis shows that the branch is one of the key assets in the fight for retail banking
                customers. A significant proportion of current account, mortgage, personal loan and credit card
                consumers choose their provider because it had a branch nearby

                Mortgage lenders are going to great lengths to win new customers by cutting fees and offering
                competitive interest rates. However, there is little benefit in winning a new mortgage customer if
                that customer switches provider a few years down the line. Mortgage lenders need to focus on the
                issue of customer retention as well as acquisition.

                High street banks have traditionally relied on cross-selling high APR credit cards to a captive
                customer base. However this strategy is no longer working. The UK credit card consumer is wising
                up and banks must respond with competitive offers on balance transfers and purchases.

                Reasons to Purchase:

                - Gain access to consumer data based on surveys carried out by MORI using extensive sample sizes

                - Understand the factors which are most important to consumers when they are deciding which
                provider to use

                - Plan your distribution strategy using the analysis of how consumers arrange their retail banking
                products



Contents:       CHAPTER 1 CUSTOMER ACQUISITION IN UK RETAIL BANKING             9

                Introduction 9

                Winning the current account customer 9

                How do consumers evaluate between providers? 10

                Six ways to acquire the current account customer 11

                How do consumers arrange their current account? 14

                Winning consumers in the mortgage market 15

                How do consumers evaluate between mortgage providers? 15
Winning the re-mortgaging consumer 21

How do consumers arrange their mortgage? 23

Winning the personal loan customer 25

Segmenting the personal loan customer 25

The least competitive players hold most market share 26

Product differentiation tactics 27

Targeting personal loan customers by social class 29

Targeting customers by age 30

How do consumers arrange their personal loan? 31

Winning the credit card consumer 33

How do consumers evaluate between different credit card providers? 33

“No annual fee” can play a role in winning new customers 36

Flexible credit cards offer an escape from direct price competition 37

How do consumers arrange their credit card? 40

Action Points 40

A branch network – the ultimate customer acquisition tool 40

Current account providers should offer a range of current accounts 40

Low interest rates on balance transfers and purchases are a must 40

Mortgage providers should innovate to tackle retention issues 41

CHAPTER 2 APPENDIX 42

MORI Financial Services data 42

Current accounts 44

Mortgages 44

Personal loans 46

Credit cards 49

Current publications 50

Future publications 50

How to contact experts in your industry 52

LIST OF TABLES:

Table 5: Definitions of social classes 43

Table 16: What was the main reason for opening a current account with your present provider? 44

Table 17: What was the most important factor when you chose your present mortgage lender? 44
Table 18: What was the most important factor when you chose your present mortgage lender? By
class 45

Table 19: What was the most important factor when you chose your present mortgage lender? By
age 45

Table 20: What was the most important factor when you chose your present mortgage lender? 45

Table 21: How did you make your initial approach when arranging your mortgage? 46

Table 22: What was the most important single factor when deciding on your personal loan
provider? 46

Table 23: Relative market share and APR on a £5,000 personal loan at June 2003 47

Table 24: What was the most important single factor when deciding on your personal loan
provider? By class 47

Table 25: What was the most important single factor when deciding on your personal loan
provider? By age 48

Table 26: How did you arrange your personal loan? 48

Table 27: How did you arrange your personal loan? By age 48

Table 28: What was the main reason for choosing your current credit card supplier? 49

Table 29: Credit cards in issue, 1993 and 2003 49

Table 30: What was the main reason for choosing your current credit card supplier? By class 49

LIST OF FIGURES

Figure 17: Consumers cite a wide variety reasons for choosing a current account provider 11

Figure 18: Lloyds TSB’s Current Plus Account now comes out top when searching for a high interest
rate account 13

Figure 19: Top five reasons for choosing a mortgage provider 17

Figure 20: Providers in the AB social class are more financially aware and therefore shop around for
the best interest rate 18

Figure 21: 25-34 and 35-44 year olds respond well to low price propositions 19

Figure 22: Remortgaging is driven by interest rates 23

Figure 23: Consumers prefer to arrange their mortgage face-to-face with an adviser 24

Figure 24: The majority of personal loan consumers are “price takers” 26

Figure 25: Four least competitive players still command the biggest market share in the unsecured
personal loans market, June 2003 27

Figure 26: Price-takers are prevalent in all social classes 30

Figure 27: There are no strong links between age and the reasons for choosing a personal loan
provider 31

Figure 28: Providers must have a branch presence if they intend to be significant players in the
personal loans market 32
            Figure 29: The majority of consumers within all age groups visit their lender to arrange a personal
            loan 33

            Figure 30: Many consumers take out a credit card with their existing bank 35

            Figure 31: US entrants, MBNA and Capital One now control 13.2 per cent of the UK credit card
            market 36

            Figure 32: A demonstration of Accucard’s Cardbuilder 37

            Figure 33: Those on the lowest levels of subsistence appear to be price takers when choosing a
            credit card supplier 39



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