Can the Virgin brand essence rub off on Northern Rock?
Yesterday’s announcement that Virgin is buying the “good” parts of Northern Rock, and entering the world of branch banking for the first time, has been welcomed as potentially ushering in a new era of heightened competition and improved service in the world of personal banking. After all, Virgin’s track record in re-writing the rules of competition in favour of the consumer – across many of the industries it has entered, from airlines to mobile phones - is pretty strong.
But retail banking is also a sector characterised by huge consumer inertia – back in the 1980s, you were more likely to get married than to change your bank account. And, even today, changing banks is still perceived as a hassle – with the result that customers often feel trapped with their current provider. At a macro level, this inertia (not to be confused with loyalty) benefits the incumbents – in this case, the “big 5” banks.
So what are Virgin’s chances of making big inroads into the world of retail banking and persuading consumers to flock to its branches? The key lies in creating sufficient motivation – both rational and emotional – for any of us to consider switching. One bank that seems to have gained real traction is gaining new customers in recent years is Co-operative Bank, which in 2010 saw a 79% increase in the number of current accounts switched to them (source: Co-Operative Group Annual Report 2010). And Co-operative’s customers are essentially not principally switching for a “hot deal” – they are moving for much bigger and permanent reasons. In short, they want to place their business with a bank that shares their values – something that they no longer feel holds true for the big 5.
In market share terms, Co-Operative is still relatively small, so there is plenty of room for Virgin to capitalize on similar emotions. What are their chances of succeeding? Goodbrand’s Social Equity Index, a quantitative consumer survey based on the perceptions of a representative sample of UK adults, provides some interesting clues. GBSEI measures the extent to which consumers see individual brands and companies as either a “positive” or a “negative” force in their world. An average performance scores 100 on the Index. Becoming perceived as a positive force - which GBSEI calls gaining social equity - relies on a brand’s performance across six key dimensions – from how it is perceived as treating its customers, its workforce, its suppliers and the environment, to the contribution the company makes to its local communities and to society as a whole. GBSEI currently measures 340 different UK brands including both Virgin and Northern Rock, as well as all the larger banks and building societies.
Comparing the GBSEI results for Virgin to banks and building societies in the UK is interesting – Virgin currently outperforms all the banks except Co-Operative Bank, which has a big lead, and Triodos, a niche ethical bank that is also making good headway in the UK. So the opportunity for Virgin to win the hearts and minds of consumers who have fallen out of love with the big 5 seems pretty clear.
But, in truth, Virgin - with a GBSEI score of 116 - is not that far ahead of the average UK GBSEI brand score. Why not? And why is it so far behind Co-Operative Bank for example? It might also be interesting to know that Virgin lags well behind other commercial social equity leaders from other UK sectors, including brands such as Body Shop Marks & Spencer and Sainsbury’s.
Source: Goodbrand Social Equity Index 2010
The answer lies deeper in the data, in the six components of social equity. Virgin is seen as the customer champion but, for the citizen consumer, being “good for me” is only part of the picture. Being “good for others” and “good for the world” as a whole is, in many markets, just as important in driving brand preference and recommendation. Goodbrand calls this “the sweet spot” for consumer brands.
And in these latter two areas, perception of Virgin is less strongly positive at present.
In other words Virgin currently appeals to the selfish side of our personalities (and we all have one) but its appeal to the citizen in all of us is – whilst better than the big banks – perhaps not yet sufficiently compelling. In short, that motivation to switch may not yet be strong enough. Whilst behind the scenes Virgin Money actually puts a lot of time and effort into putting something back into society, it needs to do more to change the broader perception of it as predominantly a “good for me“ brand.
In today’s world, it’s the “us” brands, not the “me” brands, that are really winning consumers’ hearts.
Senior Consultant. Goodbrand
18th November 2011
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Notes to editors:
GoodBrand is an international sustainability and social responsibility consultancy with 14 years’ experience of developing strategies and creating programmes to build value for our client partners.
GoodBrand Social Equity Index (GBSEI) is Goodbrand’s proprietary customer insight tool and is an online all-adults survey, with over 20,000 respondents, covering over 1000 companies and brands across 10 European countries, first run in UK in 2005. GBSEI measures perception of company and brand social equity, brand energy and their relationship with preference. Designed to complement traditional brand tracking research, GBSEI enables clients to compare their performance with a range of competitive benchmarks, including immediate competitors within their category and country, a broader competitive set beyond the category, and the best-in-class performers across Europe.