For an organisation of your choice and using the concepts covered in unit 9, critically assess the marketing challenges facing the organisation and how it has sought to assess them.
One of the most significant developments in banking marketing in recent years has been the use of technology in creating new channels through which customers can transact their accounts and interact with their bank. Electronic banking (e-banking) has developed rapidly and become a mainstream channel for many high street banks, but concerns have been raised about the ability of banks to manage customer relationships, including the management and security of private data, effectively through this new channel.
As such, I intend to assess the marketing challenges facing Egg Bank Plc. (Egg), the online banking service launched by Prudential in 1998, as not only does this organisation have to cope with the issues and fears over security, but also, since its launch, many other banks have recognised the operational and customer benefits of online banking, providing ever-more flexible products for borrowing, and marketing them under their own brands. As a result, analysts are now increasingly viewing Egg as a business failure, due to the faster improvements in marketing of the online services of commercial banks over Internet banks in Great Britain. The facts seem to back this up: Egg made pre-tax losses of £107m in 2004, despite having over three million customers, of which two and a half million have Egg credit cards. Thus, Egg’s main marketing challenge is to reinvent itself, in order to compete with the high street banks, which have strong bricks-and-mortar bases giving them extra support, and thus an image of security among customers. (Turner, 2005)
When Prudential launched Egg, it was described as a “groundbreaking finance brand” (Bold, 2004) and its communications were described as fresh and loaded with attitude. Unfortunately, great product innovations tend to be adopted by competitors: in this case by a plethora of similarly positioned online banking brands. Even high-street bank chairmen are now able to discuss the Internet option with their customers, and the credit card and savings markets have become far more competitive. Despite Egg’s leadership in the market, consumers could be forgiven for thinking that they’re all the same and as a result, Egg is beginning to look like a follower, rather than a leader, and is in danger of losing its footloose, financially savvy customer base. Equally, Egg’s inconsistent advertising strategies in the interim have done little to help.
Egg clearly needs to innovate fast if it is to mirror the success of its credit card in other product areas, but product and service innovations will not yield sustainable advantage. As theorists have stated: the internet provides a “level playing field”, (Open University Business School, 2005, p. 280) enabling new and existing business competitors to make the same cost savings and reach the same customers, and the reduction in traditional switching costs has meant that any advantage that can be gained is increasingly transient. As such, Egg is faced with one of the most difficult of marketing challenges: it must differentiate itself from so many other similar offerings, which customers find very hard to distinguish tangible differences between, which can copy each others’ innovations rapidly, and which have virtually no switching costs.
However Egg does have one advantage: “what is different about Egg is the experience of banking with it; it is straightforward and customers are treated like (intelligent) individuals.” (Bold, 2004) There is evidence that Egg has begun to market itself using these criteria, in an attempt to overcome the challenges it currently faces: in the middle of 2004, Emma Byrne was appointed by Egg to the new role of chief brand and communications officer. Byrne, previously group corporate communications director, was handed the top marketing role at the bank, in order to better develop Egg’s brand, advertising and research functions, using the knowledge of the customers she has gained from working for the company. (Marketing (UK), 2004) Following on from this appointment, in early 2005, Egg’s plan to adopt a more integrated approach to its marketing lead to the launch of a £1 million direct marketing campaign designed to mirror it’s advertising, and thus give a coherent message across several channels, differentiating Egg from it’s competitors. The campaign comprised direct mail, emails, inserts and press advertising, and feature adapted versions of the ‘scam-artist characters’ from Egg’s TV ads, who explained how they make money by ripping people off, reinforcing the message that Egg is willing to deal with its customers in an upfront, honest way, treat them as intelligent people, and not hide anything from them.
Indeed, all across the board, Egg has begun to focus its marketing communications on its core strengths, including its high levels of customer service, and has also concentrated on product innovation, whilst ensuring that cross-selling remains focused on what products would best suit the individual. However this is not necessarily completely sufficient: there is also evidence that Egg is beginning to recognise the need to use advertising to communicate the breadth of its products and services, and highlight ways in which it can tailor mortgages, savings and insurance to individuals’ needs, whilst also making its trademark simple, innovative and competitive offers to the financially literate across a broader range of financial products than it currently offers. If Egg can also develop a consistent brand message, which appeals to the financially aware, rather than simply to the youth, as well as deliver communications that elevate the short-term advantages of products to statements about its core values, then Egg will have the means to become a powerful consumer brand once again.
However, there is one other challenge that faces Egg, as well as all the rest of its competitors: that of online security. Most of the current marketing of e-banking, despite its growing popularity, is negative: “Stories about security appear in the media almost every day – about the vulnerability of credit-card data, personal details and business confidentiality.” (Open University Business School, 2005, p. 265) While the need to manage customers, and their concerns, privacy and data, far more holistically is recognised by the vast majority of the market, very few banks have managed to achieve this in practice, and even fewer have managed to convince customers of their security in the wake of various concerns over online security. Hackers targeted Egg itself in 2000, and although no money was stolen, no accounts were breached, and the hackers were eventually caught, oft overblown consumer concerns over security are among the main marketing challenges in the banking sector.
Cybercrime and security issues are certainly real but generally quite rare, and their main impact is to compound the failure of Internet banking to deliver the potential benefits for both consumers and institutions that it should be providing. From Egg’s point of view, this problem is compounded by the fact that it cannot effectively differentiate itself from all the other Internet banking services available: the bank issued a written statement in which it used the incident to highlight its security savvy. “Our recent close working relationship with the police has illustrated both the way in which the Internet can actually be instrumental in tracing and preventing fraudulent activity, and the industry-leading detection technology we have,” (Ptacek, 2000)
However, the Egg incident came in the wake of a late summer security breach at Barclays Bank, in which customers found that they were able to gain access to other customer’s accounts as a result of a software glitch. Unfortunately, whilst Internet-only banks actually have a higher level of security than brick-and-mortar, nothing can make them 100% immune to hackers, and many consumers fear the insidious and invisible hackers much more than having their local bank robbed. Unless Egg can successfully differentiate itself from the other Internet banking offerings available, both in terms of its service and its security, then it will continue to be viewed as being as unsafe as the other banks.
In summary, Egg is competing in a fairly homogeneous marketing environment, where its first mover advantage has long since disappeared, and any technological or service innovations it makes will only provide very short term benefits. As such, the marketing challenge it faces is firstly to ensure that its overall level of service remains higher than other offerings, and secondly to successfully differentiate itself from these offerings. Egg appears to have assessed these challenges well, and is moving towards a more extended and integrated marketing campaign, which, if implemented properly, should see it re-establish itself as a profitable and successful online bank, and become the market leader once again.
References:
Bold, B. (2004) Egg. Marketing (UK); p. 20.
Marketing (UK) (2004) Egg fills head of marketing post. p. 2.
Open University Business School (2005) Marketing in a Complex World.#
Ptacek, M. (2000) Hack Attack Scrambles U.K. Web Bank, Egg. Bank Technology News; Vol. 13, Issue 10, p. 17.
Turner, C. (2005) Egg beaten at its own game. Marketing Week (UK); Vol. 28, Issue 27, p. 26.