Our Online Dialogue colleague and strategist Michiel Jansen has for Marketingfacts.co.uk wrote an article on the appeal of sub-labels for large banks and insurers.

Many large financials have launched ‘sublabels’ in recent years. And this is remarkable, because traditionally in the financial market, ‘big’ equaled ‘good’. ‘Eat or be eaten’ and ‘scale up’ are the terms used before the banking crisis in 2009. Now we are more likely to think of too big to fail. In any case, it is striking that the big banks and insurers are increasingly creating small sublabels. Wherein lies the right to exist of Moneyou (ABN), Zekur (Univé) and recently Knab (Aegon) and Bewuzt (VGZ)? In the unmatchable schwung of a small team, the customer focus and the agility of IT? Seven trends that are making the small ones stronger and stronger in the marketplace.

Big was good

Many financials got and stayed big because of their nationwide network of branches, intermediaries and later ATMs. To provide the right service to the customer, you wanted to have many locations to get money, take care of business and offer advice. The large size also offered advantages ‘on the back end’. In ‘sourcing’ money from capital markets, through the economies of scale of nationwide advertising or to spread the purchase of expensive but necessary IT systems over many customers. So big was a good strategy. But markets are changing, and the Internet and mobile are leading to fundamental changes.

Trend 1: Customer experience is becoming increasingly important

Simple products such as savings and loan products are increasingly being taken out online. Investing is also increasingly done online. Small players such as ALEX or Binck have become a national brand as frequent investors benefit from low transaction costs and a good interface.

Because this kind of online-only players do not have an office network, they rely on dialogue via website, app, mail and the occasional phone call or interaction via Facebook or Twitter for their customer interaction. And .... you notice that. They offer a good online customer experience and that is precisely where many large financials are lagging. You can see from their online banking and websites that many of the big parties suffer from the law of the inhibiting lead and that they have no customer experience manager have that looks at the site from the eyes of the consumer.

Conclusion 1: The big financials cannot keep up with the speed and customer focus with which the ‘little ones’ are shaping their customer experience and customer dialogues. A fragmented customer view, the law of the inhibiting lead and too much power of the old channels lead to lack of online entrepreneurship.

Trend 2: Communication and internal organizing easier with fewer products

The advantage that smaller players have is that they have fewer products, which makes communication with customers easier. It is much harder for large players to coordinate all the communications of all the product groups. If you sell 20 insurance policies, 3 payment packages, 5 loan products, 20 mortgages and 5 credit cards, some things do go wrong in the alignment of customer contact.

Does it seem like a lot, 50 products? If you start counting at the three big banks you end up with between 43 and 70 products. And with this count you are only talking about the products they are currently selling, to individuals. Often they are also stuck with hundreds of old products that are still ‘running’. With so many products, you can also wonder about economies of scale. Suppose you are 10 times the size of a ‘little one,’ but you also have 10 times as many products, how big are you still?

* Source: own count on the .nl websites of ABN, ING, Rabobank; individuals only and excluding investment products.
** Some of which still include up to 5 additional coverages.

Conclusion 2: The big banks and insurers are in dire need of a less is more-approach. Need inspiration from another industry? Just study how Apple with one iPhone blew Nokia and its 60 phones out of the market.

Trend 3: Innovation moves faster in small businesses

In most cases, the product group that is historically the most important will get the most marketing funds and set the innovation agenda. If you ever wonder if large companies don't realize that a particular product or product category is an expiring business? Yes, several people and departments within that company probably realize that. But they don't pull the strings. The people responsible for that historically important product do, and they protect their short-term interest.

Conclusion 3: less is more and customer focus rules! Don't let your marketing and product development agenda be determined by the product that has made the most money in the past or currently.

Trend 4: Less and less cash

Savings and investments are activities that can be done remotely (telex and telephone) for much longer, often with providers that do not have ATM networks. Consumers take these products more readily from those parties because of that history. Until very recently, besides your savings, investment or mortgage product from such an online player, you still wanted a house bank with ATMs. Because it is becoming increasingly easy to pay by debit card, chip and SMS, and because mobile payment systems are on the rise, a branch and ATM network is becoming less and less of an issue. must. And that collection of that new bank card or identification for closing an account? As an online bank you can put up a terminal at Starbucks, AH, Hema or the Shell, they are happy with the extra visits it brings.

Conclusion 4: Less cash leads to less benefit from a network of bank branches. Couple a good online experience with a good app and call center and you are ready to compete. Pick up pass, identify? At the Hema, the Starbucks or at the door by TNT.

Trend 5: Simpler products

As a consumer, when you start purchasing financial products, you soon find yourself at Independer or other comparison sites out. So that's an important destination for banks and insurers and that's why it pays to be high in the listings there. How does your product score high on Independer, Money.com Or any other comparator? With a cheap and simple product and a high rating.

To recommend a product on social media or a review site, you have to be able to understand that product. So exit complex products, simple products are becoming the norm. Products that you can quickly see through and that, just like a car, you can dress up with the extras you need. But then only the extras you actually use and with transparency about the extra costs involved.

Conclusion 5: The future belongs to simple products, with understandable terms and a manageable number of features. If anyone understands the power of simple, it is the small players. They have to make clear choices because they have fewer resources to develop and market many variants.

Trend 6: Government pays better attention

Banks and insurers grossed in non-transparent products in the years before the crisis. Consumers did not understand all the subtleties and hidden costs, and it was quite convenient. By giving intermediaries high commissions or by offering people an extensive free consultation at their own bank branch, many expensive and complex products were sold anyway. Now products and advice must be more transparent and you can no longer hide high overhead in products with unreasonably high margins.

Conclusion 6: The advantage of an extensive network of offices and advisors outweighs the low overhead of the smaller providers.

Trend 7: Lean & mean IT

In the online savings and investment markets, it has been proven since 2000 that the 'little ones’ can take market share from the established banks. Companies like Alex, Binck and MoneYou have thus captured profitable niches for themselves. Alex and Binck prove what is possible when your online services are well designed and your costs are low.

These newcomers are not ‘brought down’ by mandatory links to ‘old systems’ or an IT department that is slow to respond to the business. The big banks release - some exceptions - innovations twice a year, and that is far too slow in today's market. Many smaller players who agile work, do a small release every two weeks. This allows them to react much faster to changes in the market and to optimize their site regularly with A/B testing.

Conclusion 7: The law of inhibiting advantage works in favor of the small ones. They often start their IT from scratch and are not limited by mandatory links to legacy systems. 

Overall conclusion

Banks that have a better customer experience and offer transparent products sell themselves. Such financials need little marketing other than word of mouth and what free PR. Therefore, if you do not have an office network and a manageable number of products, you will save a lot of money.

When you realize that, you tend to think a newcomer is going to win, but the financial markets are strange. There is a lot of government interference and you don't just get a banking license. Also, your size often determines what price you can borrow money at. In that respect, ‘large’ or ‘small within and large group’ again have the best papers. That new bank may well be a foreign bank entering the Dutch market. It's the best of both worlds: they can borrow money cheaply in their home market because of their size and then be a small and flexible player in the Dutch market. 

Is a new bank emerging? Does an industry foreign player enter the market? Or will a ‘small' label eventually win over one of the big players? In any case, I hope there will be more banks that think from the customer's point of view.

Whatever the outcome: I would recommend that the existing major banks do a major rationalization of their product portfolio, branches and appoint a customer experience manager to break down the silos between product groups. In fact, there is a lack of focus and too much unnecessary complexity - and that costs money and customers. Customer loyalty lies with the bank or insurer that offers superior customer contact and clear products. For a fair price and - as banks like Triodos and ASN are proving - increasingly with an honest mission.

What do you readers think? I personally suspect that the ‘small' initiatives of the big financials are mainly created to make a competitive offer to people who are price sensitive, without having to make that offer to the rest of the customers. So especially for the customers you lose on price, these you keep ‘in the family’ with a cheap sub-label. Do any of the readers already have a product with one of the ‘little ones’ and what are your experiences?

Originally posted on December 5, 2012 at Marketingfacts.co.uk

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