One of the most inspiring stories at The Marketing Society Conference was told by Vernon Hill, founder of Metro Bank. This is the first new high street bank to open in the UK for over 100 years. They have 4 branches in London so far, with a target of 200.
Vernon's talk was about how to create a high growth business in a low growth category. He's seeking to repeat the success he achieved in the USA, where he grew his bank from 27 locations and $24 million cap in 1990 to $1.5 billion market cap and 500 locations in 2007. He made $400million when he sold his shares. That got us all listening ;-)
Here's some of the learning from Metro Bank.
1. There are no commodity categories. Only commodity thinking
Service from banks in the UK is poor. A whopping 42% are dissatisfied with their bank, rising to 67% for Santander. The dominant logic is that all customers care about is getting a good rate, with service not important.
Vernon refuses to accept that banking is in effect commoditized. He believes people will trade slightly lower savings rates for a better experience. He has his US experience to prove this can work. His bank was rated number 1 on service out of 8000 banks by JD Power. And he achieved an eye-popping 67% net promoter score, a measure of how much positive word of mouth a brand generates. He calls this having fans not consumers.
2. Service brands are about 100 little things
Metro Bank is a great example of service being about lots of little things done well, rather than one single killer benefit. Its about a unique customer experience, not a unique selling proposition.
A key difference is banking hours that suit you. Many banks close at 5pm and are not open at weekends, the times when we want to bank. In contrast, Metro Bank opens 8am-8pm, 7 days a week. And there are lots of smaller service features, such as free coin counting machines to turn that stupid pile of change hanging around into notes.
3. Hire for attitude, train for skills
Like every service business, Metro Bank aims to deliver great service. But they have several things in their favour. First, they are building a culture from the ground up, not trying to change an existing one. Second, like other successful service companies, they are hiring people with the right attitude, and then training them to do the job. Third, every employee will own stock in the company, an approach that is key to the success of the John Lewis Partnership. Finally, Metro Bank will have a "Buy-in or opt-out" approach, parting company with the "brand vandals" who don't want to deliver the right service.
4. Everything must sell
Vernon is a genius at making his brand "buzzable". Like Robert Stephen at the Geek Squad, he makes each bit of the service experience work hard at selling the brand and helping it stand out.
- Rather than tying pens down like most banks, Metro Bank gives away free pens as a brand building tool. They now give out 28 million pens a year in the USA. That's 28 million extra GRPs!
- Instead of banning dogs, they welcome them with free dog biscuits and a bowl of water
- The money changing machines mentioned earlier invite you to guess how much your pile of coins is worth, and give you a prize if you guess right. 6 million people a year use these machines in the USA.
The power of this approach is shown in the photo that accompanied an article in The Guardian: a dog playing on the coin changing "Magic Money Machine"!
5. Challenge the dominant logic
The dominant logic in banking suggests "the branch is dead" and online banking is all that matters. Metro Bank are seeking to break this logic, and quote research on the key factors people use when choosing a bank. Top is "a branch near me" with 29% and second is "Family recommendation". "Rates" come much lower down with only 7%.
In conclusion, Metro Bank is an inspiring example of how to create a distinctive business model and value proposition, and then bake buzzability into each bit of the brand. I will watch Vernon's progress with interest and report back next year to see how they get on.