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First Direct – A Fully Customer-Oriented Business Model

April 1, 2009

First Direct, one of Britain’s fastest growing banks, operate solely on a digital and phone basis (no branches) have managed to create a very impressive business model making use of new media and new technologies.

logo first direct

logo first direct

In banking, with reference to a Mintel report, there is a tendency towards customised and simplified business transactions, First Direct appears to be a simple and transparent service provider with a focus on its customers and with customer driven operations. It ticks all the boxes, of how a successful organisation should operate. Through brand differentiation, and as all their services are entirely built around customer needs. they have created something their customers can identify with. Marketing Strategist David Meerman Scott would approve of this, as he stresses the importance of creating content that solves people’s problems, rather than trying to promote the brand.

He states: You must unlearn the use of gobbledygook about your products and services. Instead start from the problems and needs of your buyer personas. (Read the full article here)

First Direct won several awards related to their operations such as: “Carbon Trust Standard” (They were the first bank to receive the Carbon Trust Standard award. More info), “Institute of Customer Services (ICS) Satisfaction Award“, “DADI podcast award” and many more. Not only that these awards improve First Direct’s brand reputation, but they certainly led also to positive publicity and word-of-mouth.

There are a two aspects I would like to consider a bit closer that give insight into First Direct’s business excellence.

Online / Telephone Banking

The benefit of operating online or via call centres is that every customer contact data is recorded and helps to develop a customer profile. This increases the quality of service as every employee servicing a customer has a wide range of technology available that provides full information about the person during the contact and thus, allows the  best possible service performance. Hence, there is opportunity for perfectly tailored database marketing to the customers. Moreover First Direct can make use of these data to learn more about their customers, make decisions about target markets for specific campaigns (customer segmentation), evaluate and compare customer values and finally, provide specialised offers for customers. Database marketing is invaluable, as it allows First Direct to create exceptionally tailored offers and services in a market based upon trust and confidence.

Telephone and Online banking can be perceived as a move towards a greener economy that supports the carbon footprint reduction. Having branches all over the country is related to high maintenance costs. In the case of First Direct these costs are limited to two headquarters and therefore the funds can be invested in consistent improvement of services, quality and technology. Besides,without the overhead of managing and maintaining branches First Direct are able to channel more resources into web development.

Interaction

First Direct make perfect use of their web page, a very fresh, creative and interactive offering – atypical for a bank in my opinion. The webpage provides podcasts with recent queries, concerns and expert information about interesting issues for their consumers (check it out). Moreover, one can find useful information about how to save energy at home. One podcast by “Energy Doctor” Mark London from “Energy Saving Trust“gives specific advice for energy savings in every household, by visiting a customer’s house (listen to the advice here). Not only are they are anxious to keep their own carbon footprint low, they also motivate their customers to take part as well as promote and encourage them to turn off the function of receiving paper bank statements in order to support their campaign “virtual forrest“. First Direct claim to plant one tree per 20 customers who switch onto paper-free transactions and let people vote where the tree should be planted. Another interesting approach is that they provide a section called “enthuse” with video clips of customers, who tell you their personal experiences with the bank and the reason why they are satisfied. These people can be seen as so called “brand advocates”, as they promote the bank by spreading their favourable perceptions and thereby generate greater brand awareness. It’s more credibe when someone like you and me gives you advice, rather than a brand trying to promote itself. This is supported by several consumer behaviour studies which identified higher confidence from consumers in personal recommendations amongst acquaintances than in advertisements.

These examples show how much more one can do with the help of new media tools, and how much more a customer may expect from a simple bank website. And as their side wouldn’t be already much more advanced that the ones from other banks, First Direct have only recently introduced a new tool: the little black book. This serves in form of a social network that is based on recommendations from First Direct customers to First Direct customers, where they can exchange information about travel, restaurants, bars, shops, services, money-saving tips etc. A great idea considering that a third of First Direct’s customers join via recommendations from existing customers, as stated in Chris Laweer’s article on FutureLab. First Direct state:

As first direct customers, you’ll know by now that we’re not like other banks. We tend to do things a little differently. We know you appreciate that – and that’s precisely why we wanted to create the Little Black Book.

Or rather, why we want you to create it. Because the Little Black Book isn’t just another review site. It’s more of a unique source of inspiration – a collection of interesting recommendations made by people like you for people like you that you’re unlikely to find anywhere else but here. And it’s exclusively for first direct customers.

A very smart move to engage with their customers! Not only did they build a social network for and with their customers, but also they gain further insight into interests and specific data about their customer. This in turn, will allow First Direct to create even better and more tailored offers for their customers. Imagine Mr X will show as being very proactive and keeps posting reviews of British heritage tours he’s made. First Direct needs some sort of reward for this customer. That they can tailor an offer, fully based on personal interests, in Mr X’s case probably a short trip to a place of interest – or even better, one that matches his interests, but it is not recorded that he has been there yet!

It appears that First Direct spends more time and effort in getting to know their customers in order to provide them with the expected services and added value. In essence, it excites me to think how great marketing opportunities must arise from all the customer data First Direct has access to. Unfortunately I don’t know anyone who is banking with them, and have no personal experience, so I cannot add any personal judgement. However, my impression stays the same. First Direct have created a very impressive business model, that seems to be a cutting-edge example for the creative and successfully implemented use of technology and new media means!

In that context, based on another statement from David Meerman Scott that says:“You must unlearn the idea that “leads” are the only way to measure your marketing efforts. Instead, consider how you are engaging your buyers and building a position as a trusted resource”, he may compliment First Direct’s efforts once more, as that is exactly what they are doing.

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12 comments

  1. Yes, I do approve! It looks as if First Direct has an excellent Web strategy. Sadly, most banks do not. But of course, it is an advantage for those who do.


  2. I didn’t know that much about First Direct before, so thank you for the detailed insights. First Direct appear to apply “personalised marketing”, as they seem to be collecting as much information about their customers as possible to create their business objectives and drive their customer focus forwards. It seems actually too nice, that a bank builds its business around customer demand – a very unusual approach for a bank, as you said. I’d wish my bank would be a bit more like that! However, I still do appreciate to have the ability for face-to-face contact when it comes to bank transaction, so I guess I would not be the perfect customer for them.


  3. Joe,

    I had similar thoughts about people wanting face to face contact. I also thought “what about the other very profitable face of banking, i.e commercial transactions rather than private banking?”

    Then I saw that First Direct is part of the HSBC group, which obviously does cater for the high street banker. I guess First Direct is aimed at people who don’t necessariy want personal contact but do want high customer service/social benefits and HSBC are covering their bases.


  4. This blog’s great!! Thanks :).


  5. very impressive! thanks joy!
    that’s what marketing is all about! to analyse the marketplace and know about customers needs.
    that’s why every shop gives you a customers card, for collecting your data.
    it’s obvious that the new media, especially the internet, makes this possible. that’s why i get every week my personalized email from amazon. or, each time i’m on a products page, i see: “Customers Who Bought This Item Also Bought…”.
    this is, indeed, very convenient. but sometimes, it’s also annoying. back in 2003 i bought some books for school about gardening with kids: i’m still getting recommendations for gardening and kids books. and this, even if i bought lots of other stuff during the last 6 years. sometimes i’d prefer to get some random advertising. you should have the opportunitiy to delete preferences. as far as i know, you can’t do this on amazon.
    i’m a person who likes to learn more and more in life. i want to step forward and not to stand still. e.g. i like the “Today’s featured article” on wikipedia. (http://en.wikipedia.org/) i’m very happy that wikipedia doesn’t show me, each time i’m on their homepage, the articles i already read or they recommend me, based on what i did read.

    so i think, for me, a perfect customer service should have both of them: advertising based on what they think i want, and random advertising.

    now let me provide you, with one of my favorite sentences…:
    “if everything seems under control,
    you’re just not going fast enough!”

    so keep going on, folks!
    🙂


  6. Thanks for all your comments, I am glad I could provide you with some interesting thoughts.

    @Joe and Jack Gee
    I also thought about the aspect of people who want to bank face-to-face. Finally, everyone who chooses to go to First Direct knows that this won’t be possible, as you do all via phone or the Internet. Moreover, most of them join the bank because of personal recommendations from friends or peers, as stated in my article. In the end, it’s just a case of changing your mindset I suppose – call instead of go and meet. That’s actually not too bad, is it? I think if I would go for an English bank account I would give First Direct a go, but being Swiss I am happy with my bank 🙂

    As far I know First Direct are selective with respect to their customers. Back in 2006 First Direct announced a charge of £10 per month to its customers unless they deposited £1,500 each month into their account, keep this as a monthly balance, or engage to another of their services such as; savings account, insurance, credit card, etc. (http://www.firstdirect.com/1st-account/overview.shtml). This caused massive outrage amongst some of the affected customers and many of them ended their relationship. Chris Pilling, the chief executive of First Direct mentioned he wanted to focus the organisation’s efforts on their most valued customers.

    This can be seen as an aggressive strategic decision against price sensitive customers, as segments of non-profitable customers produce costs rather than benefits. Thus it seems a good move considering that “best-buy” hunters and highly price sensitive customers tend to be disloyal customers. Also bearing in mind that focusing on existing customers is more beneficial, an early ‘selection’ supports the ability to focus on the core customers in order to perform excellence. As approximately 15% were affected by these charges, they were preventing First Direct from servicing the other 85% appropriately and with higher service quality.

    @Parasite
    That is an interesting point of view. I haven’t thought about that, but now you’ve mentioned it – it is true and definitely something marketers should consider! One can easily overdo it with repeat offers, especially Amazon, you’re right. And since it’s so easy and fast with new media, it wouldn’t be great effort to enclose a link that brings you to a page where you can turn off such functions or change preferences, as you say. I suppose that from Amazon’s point of view, that is some sort of exit barrier for customers. So if they stress you all the time, the next time you need a book – Amazon it will be.
    In the case of First Direct I think, this may be a little different, as people provide each other with recommendations of things or places they like or dislike. That gives much more informations, especially the knowledge about things customers dislike. Bearing in mind what you’ve said, First Direct should make sure they tailor their service based on up to date entries from customers.


  7. This article is very interesting and gives me several information I did not know before.

    In my opionion, especially the telephone banking is a great marketing tool, which offers the customers the best service, they can expect from First Direct. The contact data of each customer is recorded and the employees know at all times what activities the customer accomplished before and therefore they can offer a great service. The customers feel special and the bank can also benefit from their positive word-of-mouth advertisement.

    Thanks Joy for giving me these interesting information.


  8. Interesting post, Joy!
    When I familiarised myself with First Direct’s offers I was very impressed, too. It seems to be that they are extremely customer focused and provide everything feasible to satisfy their customers. I agree with Joe, the lack of personal contact is a major argument for potential customers not to join the bank. First Direct knows that and tries to reduce these reservations with easy access, outstanding customer service and positive word-of-mouth generated by their customers. In my opinion it is very difficult for First Direct to initially convince potential customers but statistics show that their rate of satisfied customers is very high and therefore, the customer switching rate is below average. All in all I think it is a very successful and clever business.


  9. About First Direct I agree with you as the competitive advantage it has to be the first in interacting with the customers directly through website. Moreover to the extant I know about the First direct one of their strategy is to provide customer service 24 hours, as the bank is working or surving 24 hours a day and customer can call them and discuss about their problem to the service officer at any time.


  10. Interesting post !

    I didn’t actually know about first direct but after reading the blog i am impressed.To gain competitive advantage and survive the competition one has to give top most priority to its customers and that is what first direct is doing.They are trying to satisfy their customers in every possible way.


  11. Interesting post Joy!!! Indeed customer service is the most focused area today for any organisation operating in this tough competition.


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