first direct marketing plan
DESCRIPTION
first direct is the first phone banking in UK. it belongs to HSBC Group. this is strategy marketing plan for first directTRANSCRIPT
First Direct
Strategic Marketing Plan
MARK6024 Advance Marketing Strategy
Take Home Final Exam Assignment Semester 1 (T1B) 2010
8 June 2010
Presented by: Yang Liu 3303788
EXECUTIVE SUMMARY
This strategic marketing plan is to identify the strategic orientation and development marketing plan to realise
the mission and objectives for First Direct.
I. MISSSION AND OBJECTIVES
First Direct wants to know how much of the market will gravitate and could even supplant its parent HSBC
among the Big Four in United Kingdom as their new mission. To achieve those they have to maintain high
customer satisfaction and recommendation rating, increase market share and realise revenue growth.
II. SITUATION ANALYSIS
In macro environment, the global financial crisis has been influencing the entire economy of UK. Customer
spending, investment and savings have been changed by the global financial crisis, most negatively.
However, PWC (2010) points out that people should see gradual upturn in business investment growth in
2011 by UK Economic Outlook Report of PWC.
In micro environment, First Direct competes with four big bank and some direct competitors. However their
customer-orientation strategy makes them distinctive.
III. TARGET SGEMENTS
Primary target segments are experienced business owners and high income workers.
Secondary target segments are business starters and mid income workers.
IV. MARKETING STARTEGIES
Referring to the market map and Ansoff’s product market growth matrix, the marketing strategy should focus
on seeking revenue growth and offering new service/product to existing customers and new customers.
V. FINAL RECOMMENDATIONS
The final recommendations are focusing growth young affluent customers including business owners and
high income workers. Providing customisation and personalisation product and service will realise revenue
growth and then achieve market share increase.
First Direct Strategic Marketing Plan page 3
Contents
EXECUTIVE SUMMARY ............................................................................................................................ 2
BACKGROUND .......................................................................................................................................... 4
MISSION STATEMENT .............................................................................................................................. 4
CORPORATE OBJECTIVES...................................................................................................................... 4
SITUATION ANALYSIS .............................................................................................................................. 5
ENVIRONMENTAL ANALYSIS ................................................................................................................................................................... 5
COMPETITIVE ANALYSIS .......................................................................................................................................................................... 5
MARKETING ANALYSIS............................................................................................................................................................................. 6
COMPANY ANALYSIS ................................................................................................................................................................................ 8
SWOT ANALYSIS ...................................................................................................................................................................................... 9
KEY ASSUMPTIONS ............................................................................................................................................................................... 10
MARKETING STRATEGIC PLAN ............................................................................................................ 11
STRATEGIC ORIENTATION ..................................................................................................................................................................... 11
THE MARKETING MAP AND ANSOFF’S PRODUCT MARKET GROWTH MATRIX .......................................................................... 12
MARKETING OBJECTIVES AND STRATEGIES .................................................................................................................................... 12
MARKETING STRATEGIES FOR SEGMENTS ....................................................................................................................................... 13
FINAL RECOMMENDATIONS ................................................................................................................. 14
REFERENCES .......................................................................................................................................... 15
APPENDIX ................................................................................................................................................ 16
First Direct Strategic Marketing Plan page 4
BACKGROUND First Direct was launched on 1st October 1989 as the UK’s first 24hour telephone banking service and it is
an arm of HSBC. First Direct provides multi-channel transactions as a multi-channel service provider. It
acquires enviable figure for customer satisfaction and recommendation ever since 1989. First Direct is one of
UK’s most successful consumer brands, which is now making healthy profits to go with its countless awards
for customer service.
First Direct has built up a base of around 1.2 million customers in 2007, with profitable operations since
1995. Its customers are served by 3,400 employees working from two sites in Leeds and Hamilton, and
along with its initial current account offering it now provides a wide range of products including mortgages,
personal loans, credit cards, insurance, and investment product such as ISAs and share dealing.
First Direct is now confronting three strategic options (refer to appendix): first option is seeking profit growth
by moving its call centres offshore, but it seems counterproductive. Second option is seeking revenue growth
by moving into the small business market. And third option is seeking revenue growth by developing a face-
to-face channel to deliver investment advice to high income customers. Seeking revenue growth seems
more promising. First Direct needs to find out where to go would be the best.
MISSION STATEMENT First Direct’s original mission statement is ‘pioneering amazing service’ (The Times 100, 2009). As a service-
led company, First Direct wants to know how much of the market will gravitate and could even supplant its
parent HSBC among the Big Four in United Kingdom as their new mission.
CORPORATE OBJECTIVES Based on their original mission statement and what they want to realise, they need:
To maintain high customer satisfaction and recommendation rating
To increase market share
To achieve revenue growth
First Direct Strategic Marketing Plan page 5
SITUATION ANALYSIS
ENVIRONMENTAL ANALYSIS
As the fifth largest economy in the world, the UK has a gross domestic product (GDP) of US$2,674 billion
(World Bank, 2008) and is forecast to have the strongest business environment of all major European
economies for the period 2007 to 2011 (EIU, 2007). With a population of 61.4 million (World Bank, 2010) and
unemployment well below the EU average, the UK has a strong workforce to support the economy (UK
TRADE & INVESTMENT, 2010).
However following the global financial crisis, a financial bubble burst in 2008. The extent of this problem has
been influencing the entire economy of UK. Customer spending, investment and savings have been changed
by the global financial crisis, most negatively. However, PWC (2010) points out that people should see
gradual upturn in business investment growth in 2011 by UK Economic Outlook Report of PWC.
COMPETITIVE ANALYSIS
HSBC Bank plc is one of the major clearing banks in UK and is the only one of Britain’s Big Fours to hold
more deposits than loans (Wikipedia, 2010). This has led to the bank being seen as a less risky proposition
than other banks by investors and customers, as it is able to fully fund its own operations (Wikipedia, 2010).
Although First Direct is an arm of HSBC Bank plc, but they separately operate. However, in a sense they are
competitors.
1. Big Four bank in UK
The traditional Big Four banks are HSBC Bank, Royal Bank of Scotland Group, Lloyds Banking Group and
Barclays (Wikipedia, 2010). Santander UK now ranks in the actual top four (Moya, 2010). The major
products and services are listed in the following table:
First Direct Strategic Marketing Plan page 6
Banks Products
Royal Bank of Scotland Group
(Wikipedia, 2010)
Finance Insurance
Consumer Banking
Corporate Banking
Lloyds TSB
(Wikipedia, 2010)
Banking
Insurance
Barclays
(Wikipedia, 2010)
Retail Banking
Commercial Banking
Investment Banking
Investment Management
Private Equity.
Santander UK
(Wikipedia, 2010) Financial Service
2. Telephone and Internet banks in UK
Online banking and telephone banking is light spot of First Direct. Although First Direct is the most
recommended bank, but there are many challengers and followers. The competitive environment is quiet
fierce. The major competitors are Egg, Cahoot, Intelligent Finance and Smile. They are all offering
telephone and internet banking and doing well in this area.
MARKETING ANALYSIS
1. Segmentation of customers
First Direct’s profiles of their customers are: average age 43, 80% ABC1, evenly split between the genders,
typically urban, busy and affluent, with a bias towards the Home Counties, digital natives. Based on this
profiles, First Direct should look for customers who want to take control of their own finance and have
positive potential saving and investment ability and also have positive and good customer behaviour (i.e. be
a good customer). Referring to existing and potential banking customers of characteristics, the customer
segments are described in Figure 1:
First Direct Strategic Marketing Plan page 7
Segments Description
Segment 1
Experienced business owners
Experienced business owners, prefer to use online or telephone banking channel, monthly deposit of above £1500 (i.e. they have good cash flow) and have positive bank credit of history. They have great potential to do cross-selling and up-selling (i.e. business investment advice, financial advice and so on).
Segment 2
Business starters
Business starters, prefer to use online or telephone banking channel and monthly deposit of below £1500 and have positive bank credit of history. They are potential customers with investment ability.
Segment 3
High income workers
High income workers prefer to use online or telephone banking channel and monthly deposit of above £1500 and have positive bank credit of history. They have great potential to do cross-selling and up-selling (i.e. professional individual investment advice, financial management and so on).
Segment 4
Mid income workers
Mid income workers, prefer to use online or telephone banking channel and monthly deposit of below £1500 and have positive bank credit of history. They are potential customers.
business owners
perfer use online or telephone
banking
monthly deposit of above £1500
positive bank credit of history
segmetn 1
negetive bank credit of history
monthly deposit of below £1500
positive bank credit of history
segment 2
negetive bank credit of history
perfer go to branches
workers
perfer use online or telephone
banking
monthly deposit of above £1500
positive bank credit of history
segment 3
negetive bank credit of history
monthly deposit of below £1500
positive bank credit of hsitory
segment 4
negetive bank credit of history
perfer go to branches
Figure 1
First Direct Strategic Marketing Plan page 8
2. Target customer segments
Primary target segments
Segment 1--experienced business owners
Segment 3--high income workers
Secondary target segments-
Segment 2—business starters
Segment 4—mid income workers
COMPANY ANALYSIS
1. First Direct value proposition
First Direct’s value is exhibited in two principal ways: the first is through breaking down the ‘us and them’
barrier between customers and staff. The second is through a policy of offering ‘a fair deal’. First Direct’s
proposition is clearly on customer intimacy and ease of use.
2. First Direct service quality
First Direct had the largest number of satisfied customers of any UK bank and high customer
recommendation rating for last 13 years. They build multi-channel that is internet, telephone, mobile phone
text message, direct mail and person recommendation to let customers choose what most convenient way is
for them. That provides a seamless customer experience. They also encourage customers to buy online
through one-off incentive campaigns and provide a prize to activate more online activities. All those actions
are based on confidence and get customers’ trust and engagement. On the other hand, the service recovery
and complaint are taken seriously by First Direct. Referring to all of above, First Direct is doing more than
that. It is not just maintaining the high service quality, but acquiring new customers as well.
3. First Direct product mix
Currently First Direct has six ranges of products (see Figure 2):
First Direct Strategic Marketing Plan page 9
SWOT ANALYSIS
First Direct
Mortgages
Loans
Credit Cards
Savings
Investments
Insurance
Strengths Weaknesses
24/7 telephone banking service
Offering a range of integrated channels for
customer service
Using multi-channel to acquire new
customers
Lowering acquisition costs considerably
Ease to use
Using CRM system
Customer-oriented service strategy
Good internal marketing and promotion
Great brand awareness
‘Low involvement’ product has high sales
volume.
Outbound telephone calls play no part in
recruiting new customers
Costly in call centre
Opportunities Threats
Internet using growth
High customer recommendation rating
High customer satisfaction level
Most successful consumer brand in UK
Using HSBC’s retail branch network.
Many imitators emulate the customer focus
and service levels and channel strategy
Risk with charging banking transaction fee
New competitors use aggressive pricing
and direct service to attack the customer
database
Some customers don’t have confidence in
using online banking
Figure 2
First Direct Strategic Marketing Plan page 10
KEY ASSUMPTIONS Four key assumptions have been made as a background. Since those factors will be critical to the success
or failure, the four key assumptions have to be made to support this plan.
Assumptions Implications
1. Charging banking fee will directly influence
customer satisfaction and recommendation.
Get negative buzz from customer and lose market
share, customer and reputation.
2. The entire economy is still in recession. Industry recession and negative influence on
customer investment, saving and spending.
3. Business investment is in gradual upturn
growth
Offering product/service for business investment will
be the good opportunity for First Direct’s next step
growth.
4. Other competitors offer better products or
services
Losing customers and influence market share and
revenue.
First Direct Strategic Marketing Plan page 11
MARKETING STRATEGIC PLAN
STRATEGIC ORIENTATION
Strategic options Implications
Profit
growth
Moving call centres
offshore
It can save cost, but this maybe potentially dilutes what marks the bank
distinctive. Usually phone calls deal with important issues or complicated
offers. If moved offshore it may be hard to control the service quality, and
finally lose customers and reputation.
Revenue
growth
Moving into small
business
Small business is a growing group and they already have 50,000-100,000
customers. Referring to First Direct reputation and high customer
recommendation and multi-channel service, there is a good opportunity to
offer a range of products or service to convert traditional money
management business into an e-business framework.
Developing face-to-
face channel to
deliver investment
advice to the high
income profiles.
Investment advice to the high income profiles will get more up-selling and
cross-selling opportunities, but this service needs to associate with
branches. The face-to-face channel is costly, referring to First Direct’s use
of HSBC’s retail branch network, and they can co-operate with HSBC
branches.
Consequently, the strategic orientation should focus on seeking revenue growth and looking at both small
business and high income profiles. Based on the results of the SWOT analysis, great reputation will be the
key to engaging affluent customers (i.e. business owners and high income workers). That is an effective way
to realise the mission and objectives.
First Direct Strategic Marketing Plan page 12
THE MARKETING MAP AND ANSOFF’S PRODUCT MARKET GROWTH MATRIX
£
Profits
0 Time
Referring to the market map and Ansoff’s product market growth matrix, we should achieve our mission and
objectives in three aspects.
1. Market Penetration: Exploiting cross-selling strategy and up-selling strategy to selling more to
customers that will realise maximum sales volume and increase revenue.
2. Product/ Service Development: Increasing sale potential by developing extension products or
services (i.e. face-to-face advice for high income people and e-business management advice) that
will raise market share.
3. Market Development: Increasing sales potential by current products towards new market of
segmentation description (i.e. business owner and high income people).
MARKETING OBJECTIVES AND STRATEGIES
Objectives Strategies
Achieving revenue growth
1. Developing e-business framework to engage small business group 2. Developing personal face-to-face finance advice for high income profile 3. Cross-selling strategy 4. Up-selling strategy 5. Developing extension service for target segments
Achieving market share growth
1. Developing extension product or service to acquire new customers 2. Increasing accessibility for new customers 3. Engaging competitors’ customers 4. Creating more value to customers
Product/ Service
New
New Present Diversification growth
Integrative growth
Intensive growth
Pre
sent
Integrative and
Diversification Growth
Product
Development
Market
Penetration
Market
Development
Mark
ets
First Direct Strategic Marketing Plan page 13
Maintaining high service quality
1. Maintaining current service quality 2. Improving service recovery 3. Developing complementary services 4. Developing personalised services
MARKETING STRATEGIES FOR SEGMENTS
1. Experienced business owners (segment 1)
Strategy: offering e-business strategy intent of converting traditional money management business into an e-
business framework.
Description: based on multi-channel advantage and integrating other advantages create a range of electronic
financial services to help business manage their assets. The purpose of this strategy is to provide extension
and customisation service for business and combine up-selling and cross-selling strategy to acquire new
customers, and engage competitor’s customers and gain more market share.
2. High income workers (segment 3)
Strategy: offering face-to-face personal finance advice for high income people.
Description: providing investment advice, financial management advice to associate with high income
people to manage their financial portfolio. This face-to-face channel has to co-operate with HSBC branches.
That can be a win-win situation for both banks. The purpose of this strategy is to offer personalisation service
for high income people and combine up-selling and cross-selling strategy to acquire new customers, and
engage competitor’s customers and gain more market share.
3. Business starters and mid income workers (segment 2 and 4)
Strategy: maintaining high quality service to engage those potential customers.
Description: based on personal recommendation to engage those two segments of customers into ‘low
involvement’ product and gain high sales volume. Also they have got potential growth ability.
First Direct Strategic Marketing Plan page 14
FINAL RECOMMENDATIONS
From analysing the internal and external situation I have found that First Direct has very high level of
customer satisfaction and reputation. They also have great customer acquisition performance and successful
multi-channel of communication strategy. But their most sales of volume are low involvement products, such
as 43% of sales volume by e-channel accounts products. In facing extremely competitive environment, they
need differentiate themselves with other imitators and Big Four banks.
Therefore the final recommendations are focusing on growth of young affluent customers including business
owners and high income workers. Providing customisation and personalisation product and service will
realise revenue growth and then achieve market share increase. In addition, maintaining current advantages
helps keep the distinctive strength. First Direct needs to review this strategic marketing plan every year to
assess progress and alterations as the banking progresses to make sure it is under control and working
effectively.
The purpose here is not to find new ways to make profit and to do business. It is to realise maximum value
for First Direct and its customers to achieve sustainable long-term growth.
First Direct Strategic Marketing Plan page 15
REFERENCES
The Time 100, 2009, using customer service to position a business, June 1 last visited, http://www.thetimes100.co.uk/case-study--using-customer-service-to-position-business--129-367-2.php
Global Issues, 2009, Global Financial Crisis, June 2 last visited, http://www.globalissues.org/issue/1/trade-economy-related-issues
UK TRADE & INVESTMENT, 2010, UK economy, June 2 last visited, http://www.ukinvest.gov.uk/UK-economy/en-GB-list.html
THE WORLD BANK, 2010, Data GDP (current US$), June 2 last visited, http://data.worldbank.org/indicator/NY.GDP.MKTP.CD
THE WORLD BANK, 2010, Population of United kingdom, June 2 last visited, http://www.google.com/publicdata?ds=wb-wdi&met=sp_pop_totl&idim=country:GBR&dl=en&hl=en&q=uk+population
RIU, 2007, June 2 last visited, http://www.eiu.com/index.asp?rf=0
Wikipedia, 2010, Big Four Banks, June 2 last visited, http://en.wikipedia.org/wiki/Big_Four_(banks)#United_Kingdom
Wikipedia, 2010, HSBC Bank (Europe), June 2 last visited, http://en.wikipedia.org/wiki/HSBC_Bank_(Europe)
Moya Elena, 2010, Santander may float in UK if it buys Williams & Glyn’s branches from RBS, The Guardian. Retrieved 28 February 2010, June 2 last visited, http://en.wikipedia.org/wiki/HSBC_Bank_(Europe)
PricewaterhouseCoopers, 2010, UK Economic Outlook March 2010, PricewaterhouseCoopers LLP.
First Direct Strategic Marketing Plan page 16
APPENDIX First Direct strategic options
Seeking profit growth Seeking revenue growth
Moving call centres offshore Focusing small business
Developing face-to-face channel to deliver investment advice to the
high income profile