The popularity of price comparison websites and the establishment of Fintech means that many financial services products are becoming a commoditised offering. So how can financial services companies create customer loyalty when in many cases they may have limited brand recognition?
For example, an app called Knip that acts as a mobile insurance broker enables users to compare and buy insurance products, manage their policies, and even make a claim.
While this sounds like a great service for users, this type of app has potentially dire consequences for financial services companies. Knip owns the customer relationship and products are completely commoditised. The insurance companies become just faceless providers.
If these apps continue to gain popularity (and potentially branch into other areas of financial services, such as pensions and investments), should financial services companies stop investing in brand marketing altogether? And would it not make more sense to focus all investment into creating a brilliant back-end and operations team to ensure that integration with platforms like Knip is quick and simple? Stripping out marketing costs could also mean that products are cheaper for the client.
Emphasise value over price
So how can financial services companies combat this move towards commoditisation and price comparison sites? The answer lies in shifting the messaging and service proposition to emphasise value instead of price.
Using the insurance sector as an example the truth is that loyalty often comes about due to customer apathy. If people can be bothered to shop around for a new policy, then decisions are often driven by price, a reality reflected in the marketing messages we see from financial services companies.
The challenge is how to avoid this race to the bottom and put the focus on the value on services rather than the cost. Direct Line for example have been running their ‘Fixers’ campaign featuring Harvey Keitel, which highlighted the ways in which the company helps customers when they have an emergency (providing a free hire car for 21 days if a customer’s own vehicle is stolen or damaged).
The challenge is that most customers only recognise the value of their insurance product when they’re complaining about something as people buy on price assuming they’ll never actually have to make a claim.
Communication therefore needs to put a clear focus on educating customers as to why value is important when buying insurance.
For companies selling pensions and investments, that has historically been done through personal selling, companies must stress how the relationship the company’s adviser has with a client is key to making the correct investment advice and adds significant value over a faceless transaction.
In summary, financial services companies need to understand exactly what their customers want, position their brand accordingly and deliver on that promise. By providing a service that gives value over and above the core product will help fend off the move towards commoditisation.