Building societies are adept at providing competitive and innovative products and services to help their members save, build financial resilience and have a place to call home.
However, no sustainable business can consistently sit at the top of the best buy list. But as consumers are becoming ever more proficient at comparing rates before they buy, and then switching to the next headline rate as soon as they’re able, the increasingly competitive marketplace brings greater vulnerabilities for societies.
Increased intermediary involvement in the mortgage market, where customers remortgage as soon as it’s viable, can interrupt the relationship between member and society. In the savings market, the loyal older (and often local) savers, who so often hold the most valuable balances, are gradually being replaced by younger cohorts, with a greater affinity to comparing and switching rather than loyalty. And as interest rates have risen, the value of switching becomes all the more worthwhile for the individual.
Fair value and the wider Consumer Duty mean tactical rate offers for all may no longer be feasible, meaning new ways of providing member value to savers and borrowers are needed.
One way to add further value across the board, and to bring about the ability to take tactical action, is through the use of ‘member benefits’. These may include everyday savings for individual members, their families, and even their businesses. It could be discounts on the weekly shop, or trips to the cinema, or buying a car. Or it could be a 24-7 GP helpline, a legal helpline or an IT support helpline.
Benefits and offers like these can be used (for example through the Parliament Hill ‘savings calculator’) to demonstrate how members can save hundreds of pounds every year. And they can be employed tactically to help achieve numerous outcomes, including attracting new members and increasing engagement, and therefore strengthening relationships, with existing members.
Benefits can be used to make the case for members who are considering leaving a society, to stay. Any perceived advantages elsewhere can be offset against the savings available within the benefits scheme. It may not always be necessary to make up all of the difference to a better rate elsewhere – we’ve heard of members with a ‘mortgage tolerance’ of £20pm, or others who would only cross the ‘hassle threshold’ of switching for a certain monthly gain. The value available through benefits can help to keep them under that threshold.
Improved CRM systems are enabling more effective use of data and segmentation. This can help to identify members approaching a point of vulnerability – e.g. product maturity. Promoting valuable benefits at anticipated points of vulnerability, should positively impact their decisions.
More strategically, in light of the current cost of living crisis, offering benefits such as described, including to the most vulnerable individuals above, could provide additional evidence to support the FCA’s expectation that ‘firms should be stepping up now to support customers in these straitened times’. They also demonstrate fair value in line with the requirements of the Consumer Duty.
Overall, this is a natural extension for building societies, an additional step in providing appropriate and relevant support to help their members, along with the opportunity to support wider CSR goals. And further differentiating mutuals from their plc competitors.
Contact Andrew Holden firstname.lastname@example.org. Visit Parliament Hill parliament-hill. co.uk/membership-engagement
This article was first published in Society Matters magazine at the end of September 2023