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Product appeal and a healthy return

It is always acknowledged that competition is a positive and beneficial factor in the market, be it in financial services or otherwise. It is entirely logical that where there are a number of suppliers comp-eting for consumers’ attention, they will do their utmost to differentiate themselves, be it through the specification of their product, simple pricing or through the quality of their service delivery.

In the boom years, mortgage suppliers found that they had to compete furiously for all their business and we saw a huge range of products, often at a price that very much favoured the consumer. Price and product design were not enough on their own and levels of service were also promoted, driving up service standards across the industry.

The past two years have seen a very marked change in market conditions and providers find they can now sell all the product they desire on terms much more beneficial to them-selves. A shortage of lending capacity means that the positive effects of a competitive environment are no longer present.

The consumer has less choice, has to pay a higher price and often can expect a lower quality of service. As the high levels of complaints demonstrate, consu-mers are far from happy about this.

Lenders will point out that the figures reflect their market share but for any business to have such big numbers of unhappy customers cannot be healthy in the long term.

Even though there are many individuals who are perfectly happy with their providers, a good business will always nurture its customer base, seeing it quite rightly as the seed-corn for future profitability. It has been shown many times over that customer retention is much less costly than customer acquisition.

Financial services continues to get a bad press on all manner of fronts and many consumers are voting with their feet, turning their backs on savings and protection, even though the need for such products is well proven. Ways have got to be found to deliver products which have real appeal to the buyer while still allowing the provider to show a return for their investment.

It is only by creating a savings culture that we will be able to ensure that the majority of people are able to maintain a reasonable standard of living throughout their lifetime.

Obviously, to bring about the changes needed, it will be necessary to change the public perception of the industry. We may have become slightly bored with the constant reference to “casino bankers” and “the bonus culture” but there can be little argument that self-interest has driven the behaviour of some individuals and some have forgotten that the success of their business relies ultimately in having the trust of their customers. High standards of ethical behaviour must also be adopted.

The issue around complaints volumes must be addressed, propositions must be developed to appeal to those who currently find savings and protection products unattractive and the culture within the industry must be such that the public know that it operates for their benefit.

Richard Fox is chief executive of the Char-tered Insurance Institute’s Society of Mortgage Professionals

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