Guest blog: The need for ‘value-add’ from mutuals in a competitive market

Guest blog by Andrew Holden, Managing Director of BSA Associate Member, Parliament Hill Ltd.

Guest blog by Andrew Holden, Managing Director of BSA Associate Member, Parliament Hill Ltd.

I once read that brands like KitKat sell more chocolate bars if the wrappers feature some sort of prize-winning opportunity on them. Interestingly though, most people don’t then bother to go through the rigmarole of actually entering, and I suspect that few of those that do ever imagine they’re going to win something. It’s instructive, though, as a lesson in human psychology. If there’s a choice to be made, and one option gives me the chance of a better outcome, I’ll have that one, please!

Step (regretfully) away from the world of chocolate, and certain principles still remain. People making decisions generally like to be presented with options – and then choose the best one. When we’re assessing what’s on offer, many of us are looking for ‘What’s in it for me?’ Or we examine the equation of ‘What I pay’ versus ‘What I get’. And in certain circumstances, our assessments reach a peak of intensity. Within much of the financial services sector, for example, we have been conditioned for years to compare, and to switch. To pick the name at the top of the list, whether they’re familiar or not. And then to do it all over again 12 months later.

It can be fairly relentless, and put a huge strain on mutuals and their bottom lines. It’s hard to realise the potential lifetime value of a customer if they’re jumping ship 12 or 24 months after they were signed up – in some cases those early periods are loss-leading anyway.

And, sadly, mutuality is not always enough of a pull to make the difference. Many of our clients report that members don’t understand mutuality and what it can bring – and even if they did, they’re more focused on their own options and getting what they see as the very best deal, right now. Local brands and branch ties can still help with loyalty, particularly when it comes to older members and savings accounts. But younger generations, and many mortgage customers, aren’t so interested in coming into a branch.

All of these factors are being brought into sharp focus by the ongoing cost of living crisis. Some people are feeling forced into comparing and switching, whether they’d really like to or not.

And yet for many members, it should be possible to demonstrate that it simply isn’t worth the hassle of changing, for a rate that may just be a fraction of a percent better. This is where ‘member benefits’ can come in. If a member is lucky enough to find a 2% better rate elsewhere on their £10,000 savings, that potential £200 gross additional return may not be worth chasing after, if it would mean walking away from £300pa of savings.

These savings might be on their weekly shop. On holidays and family outings. On health and wellbeing, or motoring services – and so on. Even if a member could get a 0.4% better rate by switching their £150,000 mortgage away to a different lender, and you can’t show them how to save ALL of the notional £600 savings, you may still be able to show them enough value to make it not feel worth the aggravation (and cost) of switching.

It’s also possible to add value in ways other than purely helping members’ budgets. Benefits can support members with areas such as health and wellbeing – for example with access to discounts at health clubs, and to counselling services, and to GP / nurse helplines, health consultations and so on. At a time when wellbeing indices are so low, these all constitute ways that mutual organisations like BSA members can support their members – our business Parliament Hill already works with BSA members (including now a credit union) and other mutuals to do this.

It’s unlikely to be the primary driver, but such actions can then feed into regulatory conversations on fair value and the Consumer Duty, to name just two areas that are right on everyone’s lips at the moment. And offering additional value can bring additional opportunities to talk to members about it. This can include encouragement for members to sign up to e-communications (obviously an immediate and low cost way to communicate) – as well as reasons to keep in touch, in such a way that members are being more regularly reminded of the brand that is supporting them, and in a positive way.

Added value can also be employed tactically in the run-up to key moments of vulnerability for mutuals – for example, when members are approaching the end of fixed rate savings or mortgage products. Demonstrating to them the value that is on offer in the build-up to such crucial decision points will help make it less attractive for them to climb over the ‘hassle threshold’ of initiating a switch to a competitor.

Adding value is of course second nature for mutuals, and sits really well with mutual values. The challenge can be finding effective ways of delivering it, without breaking the bank or disrupting the underlying business – not just with cost, but also with hassle or distraction.

Find out more:

Parliament Hill Ltd is hosting a webinar for BSA members on 28 March - Using 'Member Benefits' To Assist With The Delivery Of Fair Value and The Consumer Duty. You can find more and how to register here