Why shouldn’t marketing be expected to do better every year?

After the cost-cutting binge of the last two years, financial institutions now need to work at maintaining and growing customer revenues.

However, the commoditisation of financial products and services means that all players are subject to strong pricing pressures. So rebuilding margins is at least as important as growing volume.

Marketing is often seen as an act of faith, with unhelpful arms races between competitors.

But marketing cannot be immune from the discipline of demonstrating a measurable contribution to desired business outcomes.

In these constrained times, the cost-effectiveness of marketing matters more than ever.

OCP and Blonay have collaborated in a research initiative aimed at deepening insights into the effectiveness of marketing in the retail financial services industry.

Our approach, based on structured discussions with industry players, replicated OCP’s research into wrap propositions, published in in FTfm in 2007 and repeated in 2008.

Read more about our research note on Demonstrating marketing effectiveness in financial services.

GOM is moving....

... because his carers are relocating to Greycoat Place in Westminster.

Conveniently adjacent to the fire station, not far from Channel 4 television and a brisk walk to Buckingham Palace.

Find out more.

Don't get on one of Boris's bikes....

... unless you're sure you can find an empty docking space at your destination.

Yesterday's trial experience involved an enjoyable 5 minute ride from Bank to Holborn Circus, followed by a 20 minute search of four docking stations until I found one with an empty space.

Apparently this is because all of Boris's bikes migrate to the centre of London early in the morning - as illustrated well by http://oobrien.com/vis/bikes/

Rather defeats the object - and makes 30 minutes' charge-free use rather notional.

The Sovietisation of the United States

Bob Dudley, Managing Director of BP, and the man with the unenviable job of overseeing the mopping up of the Gulf of Mexico, might be experiencing a moment of deja vu.

It was in the role of Chief Executive of BP’s joint venture in Russia that he came under enormous pressure from a state determined to pursue its own interests even if that flew in the face of natural equity and conventional commercial practice.

And now the US government, in effectively threatening to sequester BP’s assets, might be accused of pursuing its own interests in a rather similar fashion.

Where will Mr Dudley go next? North Korea?

Ratings and rantings

So if I understand it correctly (my nurse sometimes gets these things wrong) the very same US rating agencies that connived in the promotion of America’s toxic debt have now downgraded BP’s credit rating.

And the President of a country that has ruined the world’s economy though its export of that toxic debt is now demanding extraordinary levels of compensation from a UK registered company.

This may bring BP to its knees. Were the same rules to be applied to Wall Street it wouldn’t just be Lehman’s and AIG going down the tube.

I could get very cross.

Public sector efficiencies are easy enough to find, but taking out the cost will be more of a challenge

Anyone who understands how the public sector works knows that it can carry a fair amount of fat. Cost pressures have been more evident in local government than in central, and the former tends to be leaner as a consequence.

Government agencies (with or without a capital “a”), with their clearer focus on delivery, also tend to have put more effort into the pursuit of efficiency in their operations, but this is not a universal picture. Meanwhile the central civil service, with one or two notable exceptions, has struggled to manage productivity energetically and consistently. It carries poor performers, tolerates high levels of absenteeism and has mostly yet to introduce the simple disciplines of Operational Management.

And now our new government is challenging the value added by policy makers and score keepers – a large chunk of the staffing of the central departments. The exam question now is not just “can we do the same for less?” but “do we need to do it at all?”.

Finding the potential for efficiencies will therefore not be hard, particularly in central government.

In the back office good operational management might be expected to reveal over-staffing in the region of 15 – 20%, and that is before the policy wonks and score carders are sidelined.

In most of the more politically sensitive areas of front line services, there is still scope for greater productivity to be derived from simple Operational Management, sensible management structures and intelligent procurement of third party services.

But how will the over-staffing be translated into actual savings, when this means cutting staff numbers?

There surely must be a plan. Since a Conservative majority was forecast from 2008 to the end of 2009, we can all be confident that Tory party advisers, and the civil service strategists and HR people will have been developing a staff reduction plan. And it has to be a cunning plan, since:

• the traditional severance schemes tended to be generous, ie very expensive for the paymaster, the taxpayer
• the costs of severance, in the central civil service at least, are borne by current revenue, not accumulated funds, and this exposure would include lump payments – who knows whether a rapid programme of staff cuts would be affordable in the current cash strapped economy?
• Departmental budgets hold no provision for such large scale severance costs
• in any case the new arrangements being proposed - the Civil Service Compensation Scheme - are currently the object of dispute with the PCS and are likely to meet legal challenge, and the trade unions are likely to resist significant staff reductions with considerable energy.
  

And of course, taking people off the public sector payroll does not produce a simple saving, even after severance costs are included; it will reduce the tax take, add to the benefits load and might depress the economy.

So we can presumably safely assume that in the two years available to them these strategists have developed a plan that operates at both the macro and micro level.

At the macro level the big picture must ensure that the speed and costs of severance are affordable and produce real overall savings, not just a transfer of cost (and at the risk of being slightly alarmist not a significant stimulus for a second economic dip).

At the micro level there might need to be a new mechanism for cutting through the Gordian knot of Departmental funding constraint. The public that voted for small government will not be impressed to see progress impeded by Sir Humphrey style procrastinating disputes between Departments and Her Majesty’s Treasury.

Provided the payback calculations work, and since it’s all our money anyway, we taxpayers will probably not have a problem with severance being paid out of a central pot.

And the trade union resistance will have to be overcome, with the minimum of disruption to essential front line services.

I can’t wait to see this carefully crafted plan - that we can confidently assume to have been in development since 2008 - can you?

It would be a very unpleasant surprise to discover that there is no such plan after all, not least because it would indicate an unforgivable degree of ostrich-like behaviour within the civil service, and more importantly because it will delay by a very considerable period the achievement of democratically targeted savings.

OCP predicted a hung parliament in 2007

OCP's February 2007 newsletter gave our view of the possible implications of a hung parliament for the public sector, including:

• less frantic law-making
• a more intelligent approach to performance monitoring
• a renewed focus on productivity improvement, and
  
• greater understanding of the interaction between front, middle and back office activity across Government and its agencies.
  

Trouble is, we made our predictions pre-Northern Rock, Lehmans and AIG.

So we didn't entirely anticipate the extent of the fiscal reconstruction required.

But we do think there's still a need to think hard about the interaction between the front office activities serving the public, the middle office layer which defines policy in response to political whims and the opportunities for increased productivity in the back-office factories.

Managing reputations (or not)

Several organisations are trying to protect or enhance their reputations at the moment. Sadly their efforts seem to be back-firing.

Try matching the following descriptions to the organisations listed.

• Organisation A. Far from convincing a concerned world of its traditionally positive values it is actually promoting an image of protectionism, denial and deceit.

• Organisation B. When this group desperately needs to convince the public of its probity and capability many of its individual members demonstrate the morals of the cockpit.
  

• Organisation C. While apologies have been reluctantly given, culpability is denied and behaviour is apparently unchanged.

• Organisation D. Fearful that the public is incapable of understanding the true complexity of its workings it actually suppresses information and denies access to it.

• Organisation E. Desperately needing public support in the face of rising levels of scepticism, this organisation continues to commit acts that directly contradict its stated aims.

The possible candidates?

• UK Parliament
• most international banks
• NATO in Afghanistan
• the environment lobby and related academic institutions
• the Catholic Church

Difficult, isn't it?

How long can the UK economy keep going, just doing the same old stuff?

Is the business case for doing something different beginning to stack up?

Restaurants are full, often with people shrieking with laughter. People are using their mobile phone tariff to the hilt, texting as they walk recklessly through the pelting traffic. And taxis with their yellow lights on are becoming increasingly rare.

That said, there's still not much evidence that pricing power is being restored. Although if you looked at the GBP price of imported BMW motorcycle components supplied as part of my recent annual service, your eyes would water.

So are people just flogging the same products and services, to the same customers through the same channels?

Most of the business cases for spending money that we've seen recently are about making more from what you've got already: releasing benefits from past investments; reducing costs; improving transparency & control (for example by getting better insight into the profit drivers, so that current spend can be better allocated)

How about doing something different? Would anyone actually be interested in finding new customers through new channels, entering new markets?

There's plenty of potential funding sitting on the sidelines.

But there's also a need to move carefully, de-risking any investment, and making change scaleable and modular.

Most Trusted Brands sponsor goes into administration

So Readers Digest UK, which sponsored the Most Trusted Brand Awards which voted LloydsTSB as Britain’s Most Trusted Bank for seven years running, has gone into administration.

Some small satisfaction there, methinks.

LloydsTSB was rated Most Trusted at a time when it was merrily mailing to its customers millions of unsolicited and highly toxic credit card cheques.

Virgin Media won the 2008 award for the most trusted ISP. And promptly had an ad campaign banned by the Advertising Standards Authority for misleading customers.

GOM always thought these Awards were flawed anyway. They were based on surveys of Reader's Digest subscribers - mostly dental receptionists and GP practice managers, I guess.