Goodbrand

Yesterday, Lloyds Bank announced that Co-Operative Bank is the preferred bidder for the 630-odd branches that the EU requires Lloyds to sell, following the state aid it received in 2008. The acquisition would triple the Co-op's current size from 300 to 900 branches and is expected to boost competition between high street banks.

Co-Operative has been a star performer in the retail banking world for the last few years, with its distinctive “no shareholder” positioning appealing to more and more of the public, despite Co-Op’s relatively limited high street banking presence. 2010 saw a 79% increase in the number of current accounts switched to them, for example (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.

But acquisitions  - particularly of this scale - are potentially destabilising for both staff and consumers alike.  How can the Co-Op ensure that its distinctive values and brand, which have served it so well recently, are successfully implanted into the new much bigger bank, rather than becoming diluted and confused?

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 Co-Operative Bank  and Lloyds, and the other larger banks and building societies.

Comparing the overall GBSEI results for Co-Operative Bank to banks and building societies in the UK is interesting – Co-Op currently outperforms all the other banks in the survey, and by some distance. Lloyds, on the other hand, is down in the “distinctly average” pack on social equity, along with most of the other big banks  - and only slightly above RBS and Northern Rock (which, incidentally, in the poorest performing brand in the whole UK survey). So the opportunity for either upside – for the Lloyds branches joining forces with Co-Op – or downside – for the Co-Op brand becoming tainted through acquisition – are both pretty spectacular. What will make the difference?

Source: Goodbrand Social Equity Index 2010

The answer perhaps lies deeper in the GBSEI data, in the six component dimensions of social equity. In service industries, particularly those with geographically widespread staff such as a branch network, the Workforce factor is often key. Organisations that can harness the positive power of their people to deliver a consistent high quality service can build long term sources of competitive advantage. Why is this an important weapon for the Co-op in the next few months? – because it has a one-off opportunity to re-inspire the Lloyds staff in the acquired branches, based on understanding them as citizens as well as workers. Show people the purpose of their work, and relate this to the values that those same people have as individual citizens in the wider world beyond their workplace, and motivation levels tend to rise.  That’s real leadership: the first challenge that the Co-op faces.

The second key challenge is around convincing the “inherited” Lloyds customers about the merits of the Co-Operative Banking proposition. This requires a clear understanding of how to translate those existing co-operative values into clear, powerful, simple messages that the ex-Lloyds customers can relate to. Bearing in mind that the branches being acquired include many of the former Cheltenham & Gloucester customers with a relatively affluent profile, there is a super opportunity to re-connect these relatively sophisticated customers with the wider purpose of banking – to enable the economic and social development of communities – and to show them the positive impact that their banking relationship can have via the newly enlarged Co-Op.

If this sounds a little nebulous, consider the example of Triodos Bank, the niche ethical bank whose communication to its savers concentrates almost exclusively on the good use to which their savings have been put – principally through lending to sustainable businesses that generate both an economic and social return. Triodos customers bank there because of the impact that, by doing do, they have on the wider world. Co-Operative Bank would do well to follow a similar approach, showing the ex-Lloyds customers that their money is now in – quite literally – a better place. If Co-Op can pull this off, it will not only retain the majority of the customers inherited, but attract many new citizen-consumers via its newly enlarged distribution network. In doing so, Co-Op has a real opportunity to shape British retail banking for the better.

James Cashmore

Senior Consultant. Goodbrand

15^th December 2011

www.goodbrand.com

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.