Part 2: Restoring Confidence

One of the most important implications of the financial crisis is consumer’s broken confidence in banks. Although banks did never perform better compared to other sectors in terms of confidence, the situation has drastically evolved over the last two years. The bank sector is now faced with an important confidence challenge. A study from the Vlerick Leuven Gent Management School and Deloitte indicates how drastic the situation is. The percentage of customers who are not sure they will stay at their current bank increased from 11% in 2009 to 25% in 2010.

Not only have customers lost confidence in banks, banks do not trust each other. If the confidence amongst the players in the market is so low, is it then a surprise that customers have many questions as well? The pan-European stress test which is currently being organized by the European Union’s Committee of Banking Supervisors is analysing whether the biggest European banks are well prepared against a financial crisis. Banks will have to take action if they do not perform well on these tests, if not the inter-banking trust will remain at low level. The question yet remains whether this will restore confidence in the bank sector.

The confidence-crisis isnot only an issue in retail banking. Companies have lost their confidence in the financial sector as well. The German group Siemens has submitted an application to the German banking authority to start its own bank, as a solution for funding difficulties they encountered on the market. Other companies such as Volkswagen and BMW already have their own banking licence for their leasing activities. This indicates how large industrial groups search for solutions to be independent of financial institutions.

When a company has been placed in very negative spotlight, it is important to analyze how hard the brand has been damaged. Often it is impossible to continue business under the same company or brand name. And so did Lehman Brothers, changing their name to Lamco once they received the permission to restart their activities. Rebranding or renaming is certainly not always necessary, especially if the brand has not suffered too much. It is nevertheless time for action to restore confidence. Marketers should clearly take the lead in this process and focus on certain attention points in order to boost confidence in their brand.

Attention points:

Transparency and clarity of the offering
Customers are often faced with the complexity of a bank’s offering which definitely leads to frustration and misunderstanding. Dexia recently started to put labels on its products to indicate the risk-level of its offering in order to avoid surprises for customers, which certainly happened during the crisis. This is a nice example of evolving to a more transparent offering.

A need for open communication
Banks cannot afford anymore to continue business in silence without informing their customers. As customers expect a true conversation, banks should not be afraid to communicate about their unique selling proposition and should not neglect the contact with their customers.

• Open communication throughout all channels. New channels such as social networks offer many opportunities, especially to communicate to youngsters.
• Open communication about top management and their remuneration is a touchy point these days in the financial sector.  According to research conducted by Brandhome, 93% of Belgians believe top-managers are responsible for the financial crisis. Reasons enough to be open and clear in the communication.
• Open communication, even when it turns out to be negative. Customers want to be informed of their situation and the impact of the financial crisis. There are many examples to learn from. When Fortis was struggling with very negative rumours in the market in 2008 there was no communication at all whereas customers where expecting more clarity on the situation.

Consistency in the communication
Once the positioning has been defined, each bank should make sure to communicate consistent messages. Impossible to restore confidence by shouting different messages in the market. Banks should not forget that this does not only involve marketing and communication. Each employee or customer-touchpoint can build or break the customer experience and thus reinforce or destruct confidence. Internal training and internal communication are therefore more than ever important in order to align all employees

Getting the fundamentals right
will certainly help to restore confidence as well. By performing simple service acts such as greeting customers when they enter the branch and offering assistance when needed, banks can create a positive customer experience which leads to a higher overall satisfaction. As marketers, we should never forget that it is much cheaper to retain customers than to acquire new customers. Marketers should therefore be ambassadors of a customer-centric organization where restoring customer confidence must be a top priority. This is a long term objective. Trust is something you need to earn, every day again.

After “from Differentiation to Innovation” , this is the second article on three challenges Belgian retail bankers are facing.

Grégory Delens

The House of Marketing