Metro Bank continues its 'challenger' marketing

This post updates the preview and closer look at Metro Bank in Chapter 11

Metro Bank's marketing has, from its founding in 2010, encouraged customers to 'join the revolution'. This means, for example, an emphasis on retail hours that are convenient for customers, with lively and colourful branch interiors that have an attractive retail ambiance. It also means offering safety-deposit boxes when competitors are closing branches and eliminating boxes.

Despite intense competition, Metro Bank, as a challenger bank, has become profitable and is expanding its branch network, although a bit less aggressively than previously planned. The acquisition of a home loan portfolio is another way Metro Bank has added new customers in pursuit of growth. On the other hand, rising interest rates are putting pressure on profit margins.

Understanding that many customers want e-banking as well as retail banking services, Metro Bank has introduced a 'developer portal' for third-party developers who are creating apps to complement and enhance bank services.

At the same time, Metro Bank University is providing apprenticeship training to prepare new employees for delivering quality customer service in its busy branches--service that Metro Bank sees as being a differentiating factor in its competition for customers.

What's happening to the bank branch?

If you're banking with Virgin Money UK, you don't walk into a branch, you walk into a lounge. Above, a map showing some of the Virgin Money lounges open to customers who want to play billiards, listen to a jukebox, watch a movie, enjoy free coffee or complete a financial transaction.

Each lounge is unique, because the design and amenities fit the building. In Wales, the lounge is located in a former pizza restaurant. Naturally, Virgin Money is serving free pizza to customers.

If you're banking with Metro Bank UK, you don't walk into a branch, you walk into a store. The company keeps its stores open late and on weekends to allow customers plenty of time to have coins counted or bring dogs in for free water or even open a new account.

And despite the growing popularity of digital banking, branches still attract customers. Metro's data show that 55% of its customers go to its stores. Of course, its customers also use mobile banking and online services.

Yet looking at the UK bank industry overall, more than 700 bank branches around the UK were closed in 2017--the largest number of closures ever recorded in one year. Are banks going to carefully tailor branches for each community rather than have one-size-fits-all banking? Or will they shrink the size or number of branches to reduce costs while offering selected in-person services? Let's see what happens in 2018.

This post updates the Metro Bank example in Chapter 11 of Essential Guide to Marketing Planning.

Which is the future of banking?

What is the future of banking? One bank marketing exec points out: 'if banks want to stay relevant, financial marketers need to stop selling and start problem-solving'.

So is the future of banking personalised customer service, a problem for many? Convenient service in neighborhood branches ('stores') has been fueling Metro Bank's UK growth since 2010. Metro Bank is poised for full-year profitability and has attracted 1 million customers with 48 branches.

As a 'challenger bank', Metro Bank is targeting individuals and businesses who aren't satisfied with the established banks. To induce switching, Metro Bank keeps its branches open 7 days, with extended hours for evening transactions. The branches look more like cheerful retail stores than stuffy banks. And it's connecting with customers on social media: Metro Bank has 13k Twitter followers and 24k LinkedIn followers.

Or is the future of banking in technology, speeding transactions without face-to-face service? Between more sophisticated cash machines and smartphone banking functionality, do customers want or need to visit a branch these days? Customer behaviour is shifting as more people adopt on-the-go banking using apps. Pockit is a startup financial services firm that offers app-based transactions such as remittances.

Sometimes cash is needed for everyday transactions. NCR, which makes video-capable ATMs, notes that such automation is 'a bank in a box', ideal for locations where a bank wants to serve its local customers, with or without a branch.

Inside the marketing plans of UK challenger banks

Challenger banks are recently-founded banks challenging the traditional UK high-street banks. As some high-street banks close branches and adapt IT systems to multichannel requirements, challengers begin with the latest technology and lessons learned by studying the established competitors.

Monzo is a challenger bank targeting digital-savvy customers. Originally named Mondo, Monzo operates no branches but instead delivers services electronically. Its marketing plan involves continuous customer input--asking for feedback on products for cocreation, and even soliciting ideas for the brand name Monzo. It hosts periodic get-togethers for customers to meet each other. 'People in corporates roll their eyes when startups talk about values and vision, but the brands who succeed are those who can define that for the people on the journey with them', says Monzo's head of marketing.


Another challenger is Metro Bank, founded by the experienced bank entrepreneur Vernon Hill, with retail branches that are open for extended hours every day of the week. Looking at the UK bank industry, he observes: 'There had been no entrepreneurial tradition in banking. Maybe there was 50-100 years ago, but there certainly hadn’t been one here for a long time'. So Metro bank's marketing plan is based on competing with convenience and friendly service, as well as multichannel marketing to allow customers to bank when and where they choose.

Also competing as a challenger bank is Atom Bank, which is digital-only, no branches. Its marketing plan relies on differentiation via customer focus. Customers can choose a personalised look for their Atom Bank app and even call the bank whatever they wish. Atom's CMO says: 'The traditional old banks constantly reference their relationship with its customers, but our brand strategy is about us helping people understand money much better'.

Keeping up with key performance indicators (KPIs)

Key performance indicators (KPIs) are specific financial and non-financial measures that a company, governmental agency or NGO uses to determine whether its marketing strategy is moving the organisation in the direction of its short- and long-term goals.

Different industries rely on different KPIs to assess marketing performance. Banks--including Metro Bank, based in London--want to increase the number of account-holders, increase the number of services utilised by each customer, increase deposits and retain customers for years. Performance is measured by KPIs that indicate progress towards those goals.

Metro Bank, a 'challenger bank' competing with long-established banks on the high street, differentiates its neighborhood 'stores' on the basis of responsive, in-person service while offering online and mobile banking for customers who want tech options. Measuring the results of Metro's marketing strategy requires KPIs that link back to the goals, such as growth in customer deposits. Another KPI is profitability--so far, a goal that Metro Bank is moving towards but has yet to achieve.

What about KPIs for retailers? Online grocery retailer Ocado seeks to increase customer spend, among other goals, which translate into KPIs such as growth in average order size. As the above table from Ocado's recent results indicates, other KPIs include average number of orders per week, average deliveries per van per week and on-time delivery performance. Product wastage is not just a financial measure--it affects Ocado's sustainability performance, as well.

Marketing Metro Bank in year four

'We believe customers simply want a better experience from their bank, the kind they typically get from a great retailer and that's what we intend to give them'.

The chairman of Metro Bank said this in 2010 when opening the firm's first London 'store' (what other banks call a 'branch'). The marketing plan called for opening customer-friendly stores with convenient hours and amenities--at a time when traditional banks are closing branches to cut costs and encourage online banking. Metro Bank's long-term goal is to have more than 200 stores open by 2020--an expensive and aggressive target, but important for reaching a larger customer base and achieving economies of scale. Location, location, location is key.

By now, Metro Bank has attracted 400,000 customer accounts. It still keeps its stores open Monday through Sunday, even on bank holidays. One of its fun features is the open invitation to bring dogs into the store for fresh water and treats.

Although online banking costs less to operate, Metro Bank believes in face-to-face service and wants customers to walk into a nearby branch. Yet because so many customers like the convenience of electronic banking, Metro Bank has its own app and online banking site. Profitability remains on the horizon, perhaps by next year.

To reinforce its connection with the metro London area, the bank has reserved one of the scarce .London dot-com addresses. It has nearly 6,000 Twitter followers and its website actively invites comments and complaints from the public.

This post updates the Metro Bank example of customer service as a point of differentiation in Chapter 10 of Essential Guide to Marketing Planning.

Metro Bank aims for market share

Remember Metro Bank's 2010 debut? It's a built-from-the-floor-up, new kind of bank that offers convenient hours and customer-friendly services to UK customers. But gaining market share with so many strong, entrenched competitors is a big (and expensive) challenge.

In three years of operation, Metro Bank has spent £100 million readying info systems, hiring employees and opening high-street branches month after month. The marketing plan emphasises new customer acquisition. In fact, its customer base is growing at a double-digit rate, a good indicator of progress.

A key element is the colourful storefront branches, which are open every day of the week. The bank is also introducing drive-through teller service, a point of differentiation that demonstrates its commitment to customer convenience. 'Dogs rule' is another point of differentiation: free water and dog treats are available at each branch.

In 2010, Metro Bank set a five-year goal of having 60 branches open around the country. Now, in the middle of 2013, it's approaching 20 branches and expects to have a total of 25 by yearend. Still, having dozens of branches or even a few hundred might not be enough to mount a serious challenge to the thousands of branches operated by the big high-street banks.

You can follow Metro Bank on Twitter or check out its website.
 

M&S + HSBC = M&S Bank

From July, Marks & Spencer and its partner, HSBC, will be opening a series of bank branches in high-street locations.

Earlier, M&S Money was purchased by HSBC and remains a joint venture, offering loans, credit cards and other financial services.

The new M&S Bank will be customer-oriented in the tradition of retailing, as this quote from M&S chief executive Marc Bolland indicates:

This bank will be built on M&S values; putting the customer at the heart of the proposition and delivering the exceptional service that sets us apart from the competition.

Initially, M&S Bank will operate one branch in the store's Marble Arch branch. Within months, more branches are planned for other areas, including Wales.

M&S is not the first UK retailer to expand into banking. Tesco has been involved in banking for some time, first with RBS and now as a separate banking business. Sainsbury's banking division is run as a joint venture with Lloyds Banking Group.

Competition is becoming more intense. Metro Bank opened in 2010 as a retail-oriented bank, the first new high-street bank in 100 years--and now it's expanding, with seven new branches in the works. How will M&S Bank do in this very competitive environment?

Marketing Metro Bank

London's first new bank in a century, Metro Bank, now has two high street branches, one in Holborn and one in Kensington. Within five weeks of opening, the Holborn branch had met its new account goals for the year.

Vernon Hill, the marketer behind Metro Bank, is a big believer in customer service. His earlier US banking venture, Commerce Bank, competed against much bigger banks like Citibank and JP Morgan Chase by opening its 'stores' (branches) early, closing them late, offering weekend hours, and streamlining tedious chores like establishing a new account to speed up service. His long-term goal for Metro Bank is to have 200 branches in and around London by 2020.

Although good locations in busy downtown areas are expensive, being visible is the best way to attract customers and bring in deposits. The more deposits, the more profitable a branch will be. And Metro Bank is highly visible--its 'stores' don't look like banks. Instead of the formal, subdued look of an old-fashioned branch, Metro Bank stores have an informal retail atmosphere, with bright colours, friendly staff and open, airy spaces.

The banking industry is highly competitive, however, so Metro Bank will have to maintain very high standards of customer service to win customers away from their current banks and meet its aggressive growth goals. The bank's adverts use the catchy strap line: Love your bank at last! Will customers love Metro Bank? So far, the answer is mostly yes.

PS -- Please read Jeffry Pilcher's comment, below. He's right, loans are more profitable than deposits. However, as a former banker, I know that current accounts in particular are profitable because banks pay little or no interest on them and, with efficient info systems, these accounts need not be expensive to service. Clearly, gathering deposits through branches in densely-populated areas is a relatively cheap way to bring in money to loan.

The Fortune article about Vernon Hill is worth a look, especially the part where he talks about competing against Citi and other banking giants in New York City, one of the toughest markets in the world. Of course London isn't exactly like NYC, but Metro Bank is bringing new rivalry to the market and I expect that other banks will respond.

What's new in retailing

As Marketing Week reported not long ago, retailing is putting renewed focus on the customer experience to add value and compete more effectively. The customer experience includes channel choices--allowing buyers to decide how and when and where they want to buy--and service choices. Here are a few examples:

• Ocado offers an iPhone app (Ocado on the go) to make food shopping convenient and easy for customers
  
• Metro Bank, debuting its first London store (branch) next week, will open accounts in just 15 minutes and operate on customer-friendly retail hours instead of limited banking hours.
  
• Union Market, just open in London, is a fresh approach to food retailing, a high street-type farmers' market store packed with local fresh foods and beverages.

Retailers have to differentiate themselves to attract customer attention these days, and these three companies are doing just that.