(Details courtesy of Forrester Research; The UK’s Nationwide Puts Its Members First; 2007. A complete copy can be downloaded here)

Background

For mutual organisations like building societies, its shareholders are its customers and are often referred to as members. As the largest remaining mutually owned building society in the UK, the Nationwide Building Society was under pressure from some of its members (customers) to convert into a publicly listed bank, which would result in a one-off windfall profit for its members. Nationwide set out to prove to its 11 million members that they were better off with a building society.

Objective

Improve the customer experience in every aspect of the organisation – products, pricing, marketing and customer relationship management (CRM) – and by doing so differentiate the building society from other financial services providers and boost customer profitability.

Strategy

Nationwide chose not to just talk about differentiation but implement Experience-Based Differentiation *, a systematic approach to interacting with customers that consistently builds loyalty, including:

• The introduction of ‘fair pricing’ such as standardising rates for existing and new customers, deducting credit card payments from the debt with the highest interest – the reverse of typical banking practice, and eliminating foreign ATM charges
• Championing consumers in fights against fees and for transparency
• Investing in new CRM systems to improve customer experience – using Portrait Software to aggregate all the different customer information databases into a single view including recent contact history, recent offers and outstanding customer service issues
• Emphasising its differentiation with marketing campaigns – adopting slogans better off as a building society and proud to be different to emphasise the benefits of mutuality

Execution

Experience-based differentiation was implemented according to three principles:

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1. Obsess about customer needs

• From every routine interaction staff are prompted to ask for missing information – adding accuracy to the customer profile and relevancy to future offers
• Actively seeking and acting on customer feedback with monthly member surveys

2. Reinforce brand with every interaction

• The Nationwide Portrait system offers real-time intelligent prompts at the point of customer interaction – in the branch, at the inbound call centre or on its web pages. Avoiding sales conversations with customers who already have a product, aren’t eligible for it, or have already said they don’t want it improves each customer experience
• Using technology to push intelligent, relevant, personalised prompts and messages to thousands of customers per day, even during inbound interactions
• Thirty percent of the personalised messages are service related, like prompting employees to check whether credit cards arrived safely
• Nationwide deliberately excludes a control group from every campaign run as part of its CRM program so it can track the results
• Developed a comedy sketch style brand new customers only TV campaign that ridiculed the apparently anti-consumer business practices of its commercial rivals — tapping into consumers’ sense of being treated unfairly by big financial firms (see an example at here and below)

3. Treat customer experience as a competence

• Nationwide mounted a significant internal marketing campaign to promote the society’s new values and win employee support
• Research showed that customers prefer to deal with call centers based in the UK so all call centres stayed in the UK
• Aligning metrics and incentives with the strategy, including front-line employees’ goals with the customer experience strategy
• Nationwide regularly invites members to take part in question-and-answer sessions with senior executives, such as the chief executive and chief operating officers

Results

Results have shown Nationwide achieved its aim of increasing customer loyalty and standing out from the crowd, as shown by:

• Half of Nationwide’s customers regard the society as a customer advocate that puts their interests ahead of its profits
• More than half of Nationwide’s customers will consider it for their next purchase of a financial product, compared with only 40% of customers at other banks
• Incremental product sales in excess of 200% of the original targets
• Marketing campaigns on inbound interactions have yielded up to 10 times the results of traditional direct marketing campaigns, saving Nationwide an estimated £250,000 (A$610,000) in direct marketing costs alone each year
• More than doubled its current account customers, from 1.9 million to 4.1 million in 12 months
• More than tripled its credit card portfolio from 400,000 to 1.4 million by 2007
• Grown savings balances from £55 million to £87 million (A$212 million)
• Cut its cost/income ratio from 65% to 57% and doubled its annual profits from £326 million in 2002 to £669 million(A$1.6 billion) in the year to March 2007

* Experience-Based Differentiation is a Forrester term.

More details can be viewed in the paper from Forrester Research; The UK’s Nationwide Puts Its Members First available for download here.