More on this customer-acquisition-cost business

I think I may finally have found something to say in conference presentations which gets some attention, and hopefully not in a Gerald Ratner way.

At the Platforum conference three months or so ago, I did a talk about the cost of acquiring customers, and particularly about the hopeless situation and brief life-expectancy of start-up financial services businesses with no customers and no money to recruit them with.  In this talk, I quoted the very first hard numbers that I learned in the world of financial services direct marketing a million years ago – that whatever your proposition, market sector, target market or media strategy, on the whole, as a universal average, at least for initial planning purposes, you’re doing OK if you can generate a lead for £30 and acquire a customer for £200.

Much has changed since I first learned these numbers – well, let’s face it, nearly everything has changed.  But at least for initial planning purposes, I’d say they still work.  (They certainly work a very great deal better than the ridiculous notion that in today’s world of social media you can recruit any number of customers for no money at all, except perhaps the bus fares of the intern you get to write your Twitter posts.)

What’s interesting – by which I mean both surprising and pleasing – is how much interest these numbers of mine have attracted, and indeed continue to do so.  For example, a new Finametrica report on the emerging robo-advice (bleurgghh) market quotes a typical customer acquisition cost of £200:  without paying £995 for the report I can’t tell whether or not they’ve nicked my number, but let’s just say it’s a funny coincidence if not.

The great thing about a figure like this, of course, is that you can build a whole business plan on it.  If you want 10,000 customers, it’ll cost you £2 million to acquire them.  100,000?  £20 million.  A million customers?  £200 million. And so on.

Of course there are lots of reasons why it’s not that simple.  Particular businesses have particular issues which will force their costs up or down.  There are many of these, and perhaps the most important are the economies of scale, or perhaps as I always say the diseconomies of lack of scale:  if you only wanted, say, 1000 customers then the full weight of your establishment costs would bear very heavily on them.  The figure will require some refinement in the light of your specific circumstances – and of course the best and most accurate refinements will be made in the light of real-life experience.

But still, it’s something.  And as a corrective to the view of all those clever people starting up new FS businesses of one sort or another who all seem to be assuming they can recruit their customer bases for nothing or next to nothing, it’s actually something quite important.

In Professional Adviser’s piece about the Finametrica report today, they mention various robo-advice start-ups tackling the customer acquisition cost challenge.  One of these named in the piece is that well-known deep-pocketed financial services giant which is “Rutland-based Echelon Wealthcare.”

When the history of the robo-advice market is written, and the names of the firms which made the crucial breakthroughs are listed in the roll of honour, I will be astonished – no, let’s make that totally bloody dumbfounded – if Rutland-based Echelon Wealthcare is among them.

In praise of idiosyncracy

I’ve written about this before, but not for a while.  And anyway, I’ve written about everything before, or everything I know about financial services branding and marketing at any rate.

This is the second blog to be sparked by the Financial Services Forum session about customer experience, and how as things are currently organised there is very rarely any attempt to differentiate it:  as we said in the meeting, those involved are all preoccupied with moving along the axis that goes from “bad” to “good,” but hardly anyone pays any attention to the axis which goes from “generic” to “different.”

All this reminded me of a theory which I used to feel quite excited about, that the differentiation of many of the strongest brands flowed, directly or sometimes indirectly, from the personal idiosyncracies, beliefs and even in some cases prejudices of the people responsible for them (and, most often, the business’s founder/s).

I’ve written before, for example, about the way that the emphasis on nutrition and food value in the Mars Bar brand stems not from clever research insight into ways to help consumers feel less guilty about consuming them, but rather from the deeply-held personal views of the eccentric food scientist Forrest Mars, back in 1920s America, about the dietary benefits of chocolate.  Or how McDonald’s achieved a role as the family restaurant of choice in 1950s America because the founders happened to have a thing about cleanliness and hygiene which made McDonalds acceptable to families in a way that greasier burger joints could never be.

There are loads of other examples, from Anita Roddick’s ideas about beauty without cruelty which gave the original Body Shop much of its distinctiveness, through to IKEA’s obstinate determination to stick to their Swedishness even when expanding into markets where half their product names sound like swear words or skin conditions.

Yes, it’s true, I’ve said all of this before.  But what I hadn’t realised until now was the extent to which a large, growing and successful part of the external consultancy marketplace is spending all its energies in helping clients manage their customers’ experience at best without any regard to this kind of idiosyncracy, and at worst with a view to stamping it out wherever they can find it.

The result may be (I say “may” because I’m not at all sure) customer experience which is gradually getting a bit better, but it certainly isn’t customer experience which is getting any more different.

It would be unfair to blame the customer experience industry for not getting brand, or indeed for not getting idiosyncracy as a major component of brand.  It’s not a big issue in their world, or in the worlds of the clients who hire them.

Look at it the other way round, though and it’s a very different picture.  Customer experience is a huge thing in my world, and in the world of anyone who cares about brands in service industries.  It’s up to us to get our point of view across to the people who haven’t got it yet.

Oh dear, I wonder if I’ve just discovered the fatal flaw in my thinking

Actually, I think I may have had a bit of a road-to-Damascus moment – but in an entirely bad way, as any experience involving roads going anywhere near Damascus tends to be at the moment.

Exhibit A:  the universally-held belief held by people in my kind of line of work that brands in service industries like financial services are overwhelmingly experiential, and so are built in people’s minds out of the sum total of their experiences of the brand in question.

Exhibit B:  my own empirical observation, that while some financial services businesses provide good service, some are mediocre and many are terrible, hardly any provide a kind of service which could in any way be described as distinctive or specific to what their brand is supposed to stand for.  (There are a few exceptions to this, but not many.)

Exhibit C:  the observation by my old friend Christopher Brooks, agency man now turned customer experience consultant, at a Financial Services Forum event on this subject yesterday, that in his experience when FS businesses are working on aspects of their customers’ experience, “invariably brand simply isn’t at the table.”

Hmm.  Taken together, these exhibits are distinctly alarming.  At worst, they suggest that no-one important on the client side has ever bought a single word of what I’ve been saying for the last god-knows-how-many-years:  they simply don’t seem to accept that designing customers’ experiences in a brand-minded way is worth the bother.

Why is this?  Is it because they don’t accept that service-sector brands are indeed very largely experiential?  Is it because they just don’t care about their brands and can’t be bothered to build them?  Or is there a third reason which makes me feel a bit less miserable?

I think there might be. Imagine if you will a four-box grid about service quality, with the south/north axis going from “Bad” to “Good” and the west-east axis going from “Generic” to “Distinctive.”  My proposition – much confirmed, I must say, by the discussion at yesterday’s event – is that at most organisations, most of the time, the overwhelming priority seems to be to move up the bad/good axis, ironing out some of the truly abysmal service failings that are still endemic in our industry.

For as long as that’s the case, no-one is much worried about moving positively along the west/east dimension, building experiences which are distinctive, hard to copy and specifically designed to build the intended brand perceptions.  In short, when your inbound calls are waiting an hour or more to be answered, no-one’s too bothered about the tone of voice of the poor sod who eventually picks up the phone to another infuriated customer.

I get that – it makes perfect sense.  But, in my brand-centric terms, it’s still not ideal.  My preference – in heading towards that top-right box where we all want to be in four-box grids – would always be to move diagonally upwards.  Yes, move from bad to good by all means.  But, at the same time, move from generic to distinctive too.  In my book, brand considerations are always part of the agenda, even when you are dealing with abysmal service failures in urgent need of improvement.

It looks, though, as if those currently responsible aren’t seeing it that way, and this discovery gives me a useful sense of a focus – or a proposition – for my customer-experience-oriented activities.

And at the same time it gives me a nice clear objective for my lobbying on the subject – trying to find a place for that chair marked Brand at that Customer Experience table.

“Money On Toast targets high earners,” says the newsfeed. Targets how, exactly?

Money On Toast’s You Tube film has had 801 views.  On Twitter, they have just over 700 followers, nearly all of them as far as I can see either IFAs or industry people of one sort or another.  They have about 150 likes on Facebook, which is kind of surprising because there is very, very little to like on their extremely dreary page.

I’ve never seen a Money On Toast ad, online or offline, and although it’s always dangerous testing these things on oneself I am pretty much right in the middle of their target market, as defined in the article appearing beneath the trade press headline quoted above.

You’ve heard me grumble before that the new world of direct, D2C online investment services is never going to happen until a number of the leading players start spending some proper money on marketing communications.  It doesn’t look as if Money On Toast are anywhere near doing so.

Happy to have wasted a morning in court today

My headline is serious, not ironic.  Here’s why.

18 months ago, a lorry scraped along the side of my car while it was parked outside my house.  While the car was being repaired, my insurers fixed me up with a replacement vehicle for a couple of weeks – not, I’d have said, being a car snob, quite on the like-for-like basis promised in my policy, but a perfectly satisfactory upper-mid-range Mercedes.  A couple of weeks later my car was fixed, I gave the Merc back and I thought no more about it.

Until a year later, when a firm of solicitors based in Bromley got in touch and asked if I’d fancy being the claimant in a small claims court case.  Apparently the other side’s insurance company, while admitting liability, were disputing the cost of the hire car and refusing to pay more than half of it.  And although I had no financial interest at all in the outcome, strictly speaking it was me who had signed the rental agreement and so technically I would have to be the claimant in any legal proceedings.

Of course I could have refused to take part, but actually I thought it was right that the case should be heard so I agreed.

Which is how I came to find myself in  Clerkenwell & Shoreditch County Court this morning, represented by a barrister called Jake with a fashionably voluminous Clerkenwell beard.

The case, disappointingly, was thrown out on a technicality.  I think it was the solicitors in Bromley who’d screwed up, or it might have been my insurers:  I won’t bore you with the details, but there was evidence to suggest that my insurers had in fact accepted a payment for a little under half the claimed amount in “full and final settlement,” and no evidence to suggest that they hadn’t.  Our judge chose her words with care, but it was clear that she was fairly pissed off with our side for bringing the case to court in this pretty hopeless condition.

End of.  Or not quite.  The one other thing I learned this morning was the amount of the disputed hire charge, which for two weeks in a mid-sized Merc was just over £5500.  And those who’ve read my angry tirades on the subject of rip-off charges in general insurance will know that on seeing this, the red mist began to rise.

Back at the office just now, I’ve checked on a couple of car-hire websites what I would pay if I went out this afternoon to rent a similar upper-mid-range Merc for a fortnight, and the answer is somewhere between about £900 and £1500.  Absolutely nowhere near £5500. (And actually, still a long way short of the £2000-odd that the other side’s insurers paid in full and final settlement.)

It may seem disloyal to take the “wrong” side in this little teacup-sized storm, but the fact is that the bill they were confronted with was yet another example of the preposterous overcharging that goes on in the hideously opaque and exploitative world of general insurance.  (And, by the way, eighteen months after the original accident, I have zero loyalty to my own insurers – when the policy came up for renewal nearly a year ago, I was of course obliged to switch to another firm to avoid being screwed by the kind of gigantic increases in premiums with which motor insurers typically “reward” loyal customers.

I’m sure my little court case will have no significance at all beyond the fact that on this one occasion, a preposterous invoice for a hire car didn’t stand up in court, and the amount actually paid wasn’t completely unreasonable.  But even if that’s all the other side achieved, I’m happy, or at least fairly happy, to have spent most of my morning in support of this worthwhile cause.


“Our focus is entirely on our customers.” Well, except when it isn’t.

Of course everyone wants to be customer-focused, or -centric, or whatever.  But sometimes a problem arises:  we find ourselves with a choice between focusing on our customers, or focusing on ourselves.

Many – including me – would say that it’s the choices we make at these moments which demonstrate whether we really are customer-focused, or whether it was all, quite frankly, bullshit.

In the financial world, TPAS – The Pensions Advisory Service – is arguably more customer-focused than most.  (As a non-profit organisation, it’s arguably easier for them than for many.)

Pensions Freedom has thrown up some great opportunities for TPAS to become bigger, better resourced and more important.  As one of the chosen providers of the Government’s famous “guidance guarantee,” it’s picked up a big chunk of new funding so that it can deliver.

However, from TPAS’s point of view, a very troubling development has now emerged.  In the light of new research showing that TPAS’s impersonal “guidance” doesn’t help consumers very much and may quite often leave them even more baffled and confused, there are now proposals that before making certain decisions about their retirement savings, consumers should be compelled to take full-fat financial advice from a full-fat financial adviser, thus bypassing TPAS and having no need for its services.

There are various real problems with this, like who’s going to provide this advice and how is it going to be paid for.  But still, in principle, from the perspective of the consumer, it’s very hard to argue that it isn’t a good thing.

Unless, of course, you’re TPAS.  Seeing a chunk of their customer base – and no doubt a chunk of their funding – in danger of falling away, they’ve come up with a super-convoluted argument as to why compulsory advice isn’t a good thing, and why it would be much better if consumers took full-fat advice not because they had to, but because TPAS’s guidance guided them in that direction.

The argument is nonsensical – so much so that to be honest I’ve forgotten it – and just about the most transparently self-serving that I’ve ever seen.  It’s difficult to believe that any allegedly-customer-focused organisation could put it forward with a straight face.

Unless of course it was one of those moments where its own future success and survival temporarily came first.

Brief but essential blog (not)

On the subject of language, there’s nothing more important than resisting the temptation to over-inflate expectations.

The investment trust arm of J.P. Morgan Asset Management publish a moderately interesting online newsletter every couple of months or so.  They distribute it as a PDF, attaching it to an email.  The email always carries the headline “Essential Reading for Investors.”  The attached reading is so obviously and irritatingly not essential that I delete it without a glance.  If the email headline said “Mildly Interesting Reading for Investors,” I’d probably have a look at it.

Copywriting should never lose contact with reality.  For some reason all this reminds me of the street where there were three cobblers.  The first put a sign in his window reading  “Best Cobblers In The Country,” and immediately became hugely successful.  The second put a sign in his window reading  “Best Cobblers In The World,” and promptly won all the first cobbler’s business.  The third cobbler thought about it all for a while and eventually put a sign in his window reading “Best Cobblers In This Street.”  He now won all the business from both the others – and he kept it.

Much as it grieves me to say so, better language is nothing like enough

I’m not sure what I can have been thinking of a year or so ago, in the early days of the pensions freedom thing.

I seem to remember giving a talk at a Pensions Network event in which I said that since millions of people now have new, important and difficult choices to make, and since most of them don’t have enough money to afford personal, face-to-face advice, providers were going to have to start speaking to them in fresh, clear, accessible new language so that they could make sense of their options.

Spending a day and a half in another Pensions Network event last week looking at the first six months of experience of pensions freedom in action, I realise that what I said last year was obvious bollocks.  You could express the choices now facing people in the language of Enid Blyton stories for four-year-olds, and no-one would be able to make head or tail of them.  It’s not about language, it’s about the substantive issues – which, even when you understand 100% of it, are horribly and frighteningly difficult.

Do you want an annuity that will give you a depressingly low income for life, and nothing to leave in your estate?

Do you want to go into drawdown, find the value of your fund plummets in the Great Crash of 2025 and throw yourself on the mercy of the State for your last 20 years?

Do you want a hybrid plan of some sort so that you suffer from both of the above major drawbacks?

Do you want, say, a drawdown plan with a longevity insurance solution that sadly doesn’t quite exist yet?

If your DC pot contains a typical amount at retirement which is either side of £40,000, does any of this matter when the sums involved are so pathetic?

And in any case, should you even be thinking about any of this in isolation when there are so many much bigger financial issues like to have an effect on you over the years to come?

I suppose that in such a hugely complicated and difficult situation, the best advice may well be not to overthink it.  It doesn’t really matter whether you understand all of it, some of it or none of it:  you’ll probably get it wrong anyway.

Thinking back to where I was a year ago, I’m not sure if I’d misread the situation quite as badly as I’m now saying.  The other point I made in the same Pensions Network talk was that as a result of all the changes, consumers would need much smarter solutions which would do what they needed them to do, and adapt and evolve over time, without the need for a lot of actions or inputs from consumer or adviser.

In this sense, I think I said, the role model was the way that auto-enrolment workplace pensions, such as Nest in particular, allow consumers to default their way to perfectly satisfactory outcomes in the accumulation phase – without ever making a single decision or taking a single outcome, you finish up in a pretty good place.

This was right, but expressed with about 1% of the necessary passion and conviction.  It is frankly bonkers beyond all imagining that within a few years of introducing such a consumer-friendly approach to accumulation, the same authorities should have created a new decumulation machinery which is so spectacularly far beyond the competence of anyone remotely ordinary to operate.  It’s as if, having equipped us with a stout pair of walking boots for an outward journey, we’re now being given a Jumbo Jet to fly ourselves back again.

Explaining in plain English what to do with all the dials, knobs, levers and switches scattered around the cockpit is all very well.  What we really want, though, is the location of the only two buttons we really need to press – the ones called Autopilot, and Satnav.


Formula One tank rides again

Of all the creative teams I’ve most enjoyed worked with, Colin and Alex come pretty high on the list.  Partly, that’s because they often came up with cracking ideas.  But also, it’s because they always came up with presentable ideas, cracking or otherwise.  It didn’t matter how woolly or complicated the brief, or how little time was available – if you briefed Colin and Alex, you could be sure that by the time the clients came in (even if that was hours or even probably minutes later), there’d be two or three ideas you could quite happily show them.

Mind you, in the interest of coming up with an impressively thick stack of layouts, the chaps were in the habit of padding the work out just a little – adding in one or two horribly unoriginal, pretty-much-entirely generic ideas which, at a push, you could just about defend as semi-relevant responses to any brief featuring any proposition and any product.

Of these – I am going somewhere with this, honestly – the most frequently-presented was the Formula One Tank – a visual of a tank, obviously, but in a Formula One racing livery, not camouflage. You can see how this works – it’s not just strong, or robust, or reliable, it’s also fast.  Or, at an even simpler level, it’s better than a Formula One car because it’s a tank, and it’s better than a tank because it goes like a Formula One car.  Colin and Alex invariably included this idea in the stack, and I invariably turned this idea down, which of course left Colin and Alex free to add it to the stack again next time.

That’s all a very long time ago now, and the last I heard Colin was living in Bulgaria.  Which, I suppose, makes it unlikely that they’re freelancing for the agency handling the rebranding/relaunch campaign for what until how has been MGM Advantage (and now apparently Retirement Advantage).

This is a bit personal for me, because not so long ago I was much involved in the rebranding/relaunch campaign for what until then had been MGM Assurance – which became, obviously, MGM Advantage.  If I say so myself, we did an excellent job.  The new identity was fresh, lively and original, and the launch communications were simple and strong.

None of which can be said for the new incarnation.  Everything about Retirement Advantage is crap, including the name.  But crappest of all is the advertising which – you’ve guessed it – actually does feature the Formula One Tank, or something very close to it.

Actually, it’s built around a useless generic idea about people being “better equipped,” visualised with pictures like several blokes pheasant shooting with shotguns, and one person on the moors with an anti-aircraft gun.

And since, by the way, one of the many problems with this idea is that photographing it would be unaffordably expensive, it’s only possible to run it as a crap drawing which makes it look as if they’ve decided to run the rough.

There are several other visuals in the campaign (not so far actually including a Formula One Tank among other tanks, but I live in hope).  I can’t actually remember any of them but it doesn’t matter because one of the acid tests for useless generic ideas is that you can think of a hundred more in an hour.

Anyway, I feel a bit guilty about giving this miserable stuff such a kicking, but at least it’s an opportunity to pay tribute to one of the best creative teams I worked with.

And if by any chance they have been freelancing for Retirement Advantage – well done chaps, you finally got it through.


Is half an explanation better than no explanation at all?

The financial industry is always in a state of mild anxiety about its ability to explain things to people, but from time to time something happens so that the mild anxiety wells up into a full-scale paranoia.

At the moment the thing that’s happening is all the Pensions Freedom excitement, which confronts a lot of people with a number of important new choices.  What pretty much everyone really needs is good, personal, individual advice on what they should do.  But for one reason or another this won’t be widely available, so the industry is massively hyped up about how consumers can be guided through the whole situation so that they understand it all well enough to make good decisions for themselves.

You can find an example of the kind of output that’s resulting from this paroxysm here:  It’s a little three-minute video made by the specialist communications consultancy Quietroom, which is an excellent company for which I have the highest regard.

I don’t, however, have much regard for this video.  I can’t say I’m keen on the patronising tone or the cliched imagery – as a creative director on investment accounts, I’ve turned down whole orchards-full of tired old metaphors about tending and growing crops and reaping harvests.  But that’s not important.  My real issue is that the whole issue of decision-making around pensions is so complicated, and so profoundly affected by individual circumstances, that I just can’t see how the tiny amount of insight provided by a little film like this makes any worthwhile difference.

In fact, I think I could argue that the potential for mis-understanding from points that are either not explained or explained too superficially is so great that on the whole, the film – even if carefully absorbed – is likely to do more harm than good.  It doesn’t explain, for example, that all of this only applies to people with DC pensions, not to those – I believe still the majority – retiring with DB pensions.  It doesn’t explain that for those with DC pots of less than, say, about £50,000 (some would say £100,000), which is in fact the huge majority of people, drawdown isn’t really a sensible option.  It doesn’t really explain a clear difference between the first  main option, drawdown, and the second, which is UFPLS (although it does rightly avoid using this term).  And it doesn’t explain how annuities are evolving – for example those now offering very long guaranteed periods – to deal with some of the aspects that people really don’t like about them.

I’m not blaming the film for any of this.  If I’m blaming it for anything at all, then it’s only for biting off more than it can chew.  But the point I do want to make – regular readers will have seen this coming – is that if we do want to make financial services easier for people to operate for themselves, we’re going to have to make it incredibly much easier for them to do so.  The whole idea of “educating” consumers – whether strategically, over years of classroom learning, or tactically, through little three-minute videos – is never, ever going to work.

After you’ve watched Quietroom’s little video – even though it only raises a small fraction of the things you ought to be thinking about – the only thing you feel is much more confused and unsure about what you ought to be doing.  I suppose this might be marginally useful if you had previously expected to take all your money out in cash and had failed to realise the tax consequences, but otherwise it’s hard to see how anyone will be better off.

I’ve grumbled before about the way that the financial industry – unlike any others – still believes it need to transform consumers’ levels of knowledge and understanding before it can successfully communicate with them.  This is a completely back-to-front way of thinking.  We have to do everything we do on the basis of a clear-sighted understanding of how consumers are, not how we’d like them to become.

All this pensions hoo-ha is just a horribly clear demonstration of how far away we still are from getting this.