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Customer Loyalty in Financial Services - UK - April 2011

The financial crisis has seen many firms shifting their focus. In the boom years, there was an emphasis on customer acquisition, often using aggressive pricing in order to bring in new business. The crisis, though, prompted firms to look again at their tactics.

  • When consumers were asked which kind of firm best rewards loyal customers, supermarkets were way ahead. Of the ten types of firm that Mintel asked about, financial services filled the three bottom places.
  • Across industries, the link between consumers’ loyalty and their perceptions of how well rewarded they are for that loyalty is tenuous. Mintel's brand research shows, for example, that although people feel that supermarkets are good at rewarding loyal customers, that loyalty is not reciprocated - very few people remain faithful to one brand.
  • Most loyalty-based marketing in the financial services industry revolves around rewarding people for taking out additional products, but consumers themselves have a very different view of loyalty. They overwhelmingly see how long you have been with a company as the best measure of loyalty, not how many products you hold with the firm.
  • On one measure, people appear to show real loyalty to their main bank. Most have maintained the relationship for more than a decade. However, this statistic needs to be viewed in conjunction with the level of cross sales, which are far less impressive, especially among better-off customers.
  • Long-standing customers are particularly cynical. People who have been with their main bank for more than a decade are the least likely to believe that financial services firms offer better deals to their loyal customers.
  • On the whole, people don't think that the financial services firms with whom they deal show any loyalty to them. In return, few say that they feel any loyalty to these firms.

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Table of contents

  1. Introduction

    • Executive Summary

        • Putting financial services firms in context
          • Consumers rate supermarkets as being best at rewarding loyalty
            • Figure 1: Firms that best reward customer loyalty, March 2011
          • Share of wallet and length of primary banking relationship
            • Most people have been with their bank for at least a decade
              • Figure 2: Length of time with main bank, March 2011
            • Share of wallet
              • Figure 3: Product ownership, March 2011
            • The affluent are much more likely to look beyond their main bank
              • Figure 4: Repertoire of product ownership with main bank, by household income, March 2011
            • Reasons for staying loyal to financial services firms
              • Familiarity and convenience key to the main banking relationship
                • Figure 5: Reasons for staying with main bank, March 2011
              • Signs of changing attitudes towards loyalty
                • Views on rewarding loyalty
                  • Cynicism over financial firms’ approach to loyalty
                    • Are firms rewarding the right kind of loyalty?
                      • What we think
                      • Issues in the Market

                          • Are people loyal to the firms that reward their loyalty?
                            • What do financial services customers mean when they talk about loyalty?
                              • How can financial services firms improve their reputation for rewarding loyal customers?
                                • Do people care about whether or not financial services firms reward their loyalty?
                                • Future Opportunities

                                  • Time to slow it down?
                                    • Learning from the supermarkets
                                    • The Financial Services Industry In Context

                                      • Key points
                                        • Supermarkets are by far the best at rewarding loyalty…
                                          • Figure 6: Firms that best reward customer loyalty, March 2011
                                        • …but how loyal are supermarket shoppers?
                                          • Figure 7: Brand loyalty in food retailing, August 2010
                                          • Figure 8: Brand loyalty in the current account market, April 2010
                                        • Loyalty schemes are only a minor consideration for food shoppers
                                          • Figure 9: Factors considered for choice of a particular supermarket for main weekly shopping, May 2010
                                        • The contrast between banks and mobile phone networks
                                          • Figure 10: Length of time spent with current mobile phone provider, 2006-10
                                      • What Defines Loyalty?

                                        • Key points
                                          • What does loyalty mean?
                                            • Customers define loyalty in terms of time, not product holdings
                                              • Figure 11: Most important measure of loyalty, March 2011
                                            • Cross-generational agreement
                                            • Existing Loyalty Schemes

                                              • Key points
                                                • The growth of customer-only deals
                                                  • Santander attempting to increase current account sales through a loyalty-based approach…
                                                    • …and restructures its current account charges to reward loyal customers
                                                      • Banks and building societies launch a raft of customer-only savings products
                                                        • Supermarkets leverage their existing reward schemes
                                                          • Card rewards are a powerful draw for consumers...
                                                            • Figure 12: Features desired in a credit card, April 2010
                                                          • …but for most, loyalty should mean better rates
                                                          • Length of the Primary Banking Relationship

                                                            • Key points
                                                              • Until death do us part?
                                                                • Figure 13: Length of time with main bank, March 2011
                                                              • Loyalty across providers
                                                                • Figure 14: Length of time with main bank, by main bank, March 2011
                                                              • The challenge of chasing ‘high-value’ customers – in terms of age…
                                                                • …and affluence
                                                                  • Figure 15: Length of time with main bank, by socio-economic group and household income, March 2011
                                                                • Even recent switchers believe it is how long you’ve been with a bank that counts
                                                                  • Figure 16: Most important measure of loyalty, by length of time with main bank, March 2011
                                                              • Share of Wallet

                                                                • Key points
                                                                  • Cross-sales are important in most sectors…
                                                                    • Figure 17: Product ownership, March 2011
                                                                  • …but people still hold most of their products with other providers
                                                                    • Figure 18: Repertoire of product ownership with main bank, March 2011
                                                                  • What is holding back cross-sales?
                                                                    • The difference between cross-sales and share of wallet
                                                                      • Figure 19: Repertoire of product ownership with main bank, by gender, age and household income, March 2011
                                                                    • Lloyds TSB leading the way at increasing product holdings
                                                                      • Figure 20: Repertoire of product ownership with main bank, by main bank, March 2011
                                                                    • The link between long-standing customers and multiple product holdings
                                                                      • Figure 21: Repertoire of product ownership with main bank, by length of time with main bank, March 2011
                                                                    • For multiple account holders, loyalty is measured by time, not ownership
                                                                      • Figure 22: Most important measure of loyalty, by repertoire of product ownership with main bank, March 2011
                                                                  • Loyalty and General Insurance

                                                                    • Key points
                                                                      • General insurance is notoriously lacking in loyalty
                                                                        • Lack of loyalty most pronounced in the motor sector
                                                                          • Figure 23: Insurance product ownership, by length of time insurance products held, August 2010
                                                                        • Even the ‘loyalists’ keep an eye out for a better offer
                                                                          • Figure 24: Car insurance renewal behaviour, January 2011
                                                                        • The trade-off between price and loyalty
                                                                          • Figure 25: Renewal premium experience, by car insurance renewal behaviour, January 2011
                                                                        • Loyalty through niche cover
                                                                          • A return to preferential treatment for loyal customers
                                                                            • Insurance led the way in driving churn – can it lead the way in pricing for loyalty?
                                                                              • Share of wallet or length of policy?
                                                                              • Long-term Investments and the Advice Market

                                                                                • Key points
                                                                                  • Collectives show huge levels of churn
                                                                                    • Figure 26: Gross and net retail sales of OEIC and unit trusts, 2010
                                                                                  • The switching incentive…
                                                                                    • …and the risk of consumer detriment
                                                                                      • Some attempts to build loyalty in the pensions industry…
                                                                                        • …but it’s not free of controversy
                                                                                          • Is loyalty to the adviser, or the adviser firm?
                                                                                            • Adviser/provider loyalty undermined by new technology
                                                                                              • Still scope to increase contact with IFAs
                                                                                                • Figure 27: IFA usage, March 2011
                                                                                            • Loyalty: Affection, Habit or Convenience?

                                                                                              • Key points
                                                                                                • The comfort of the familiar
                                                                                                  • Figure 28: Reasons for staying with main bank, March 2011
                                                                                                • The hassle factor
                                                                                                  • Maintaining the traditional options
                                                                                                    • Figure 29: Reasons for staying with main bank, by age, region and socio-economic group, March 2011
                                                                                                  • Santander: better interest rates helping maintain share
                                                                                                    • Figure 30: Reasons for staying with main bank, by main bank, March 2011
                                                                                                  • Is four years the tipping point for loyalty?
                                                                                                    • Figure 31: Reasons for staying with main bank, by length of time with main bank, March 2011
                                                                                                  • When a firm’s best interests clash with its customers’ opinions...
                                                                                                    • ...and when first impressions can be misleading
                                                                                                      • Figure 32: Reasons for staying with main bank, by repertoire of product ownership with main bank, March 2011
                                                                                                  • Do People Think Financial Firms Show Loyalty?

                                                                                                    • Key points
                                                                                                      • Consumers question financial firms’ loyalty...
                                                                                                        • Figure 33: Attitudes towards loyalty in financial services, March 2011
                                                                                                      • ...but the feeling is mutual
                                                                                                        • No preferential treatment for loyal customers means a fairer deal for all
                                                                                                          • You get back what you put in
                                                                                                            • Figure 34: Main bank, by attitudes towards loyalty in financial services, March 2011
                                                                                                          • Idealism among the young...
                                                                                                            • Figure 35: Attitudes towards loyalty in financial services, by gender, age and household income, March 2011
                                                                                                          • ...while higher earners are most likely to dismiss the concept
                                                                                                            • The loyalty paradox: long-serving customers least likely to think loyalty pays...
                                                                                                              • Figure 36: Length of time with main bank, by attitudes towards loyalty in financial services, March 2011
                                                                                                            • ...and product holdings do not seem to translate to a perception of loyalty
                                                                                                              • Figure 37: Repertoire of product ownership with main bank, by attitudes towards loyalty in financial services, March 2011
                                                                                                            • Short-term payoff, long-term cost?
                                                                                                              • Some encouragement: people tend to think their custom is valued...
                                                                                                                • Figure 38: Agreement with the statement ‘I feel my bank values my custom’, March 2011
                                                                                                              • ...and Nationwide comes out strongly again
                                                                                                                • Figure 39: Main bank, by agreement with the statement ‘I feel my bank values my custom’, March 2011
                                                                                                              • The thrill of the new
                                                                                                                • Figure 40: Length of time with main bank, by agreement with the statement ‘I feel my bank values my custom’, March 2011
                                                                                                              • CRM systems show their worth
                                                                                                                • Figure 41: Repertoire of product ownership with main bank, by agreement with the statement ‘I feel my bank values my custom’, March 2011
                                                                                                            • Rewarding Loyalty

                                                                                                              • Key points
                                                                                                                • Eight in ten feel that loyal customers should get better deals...
                                                                                                                    • Figure 42: Attitudes towards rewarding loyalty in financial services, March 2011
                                                                                                                  • ...but less than a fifth think that it actually happens
                                                                                                                    • Little difference across the main banks’ customers
                                                                                                                      • Figure 43: Main bank, by attitudes towards rewarding loyalty in financial services, March 2011
                                                                                                                    • The grass is always greener
                                                                                                                      • Figure 44: Length of time with main bank, by attitudes towards rewarding loyalty in financial services, March 2011
                                                                                                                    • Reaping the rewards of cross-sales
                                                                                                                      • Figure 45: Repertoire of product ownership with main bank, by attitudes towards rewarding loyalty in financial services, March 2011
                                                                                                                    • The Faustian pact
                                                                                                                      • Is loyalty an outmoded concept?
                                                                                                                      • Appendix – Main Financial Provider

                                                                                                                          • Figure 46: Main bank, by demographics, March 2011
                                                                                                                      • Appendix – The Financial Services Industry in Context

                                                                                                                          • Figure 47: Firms that best reward customer loyalty, by demographics, March 2011
                                                                                                                          • Figure 48: Firms that are least good at rewarding customer loyalty, by demographics, March 2011
                                                                                                                      • Appendix – What Defines Loyalty?

                                                                                                                          • Figure 49: Most important measure of loyalty, by demographics, March 2011
                                                                                                                      • Appendix – Length of the Primary Banking Relationship

                                                                                                                          • Figure 50: Length of time with main bank, by demographics, March 2011
                                                                                                                      • Appendix – Share of Wallet

                                                                                                                          • Figure 51: Repertoire of product ownership with main bank, by demographics, March 2011
                                                                                                                      • Appendix – Loyalty: Affection, Habit or Convenience?

                                                                                                                          • Figure 52: Reasons for staying with main bank, by demographics, March 2011
                                                                                                                      • Appendix – Do People Think Financial Firms Show Loyalty?

                                                                                                                          • Figure 53: Attitudes towards loyalty in financial services, by demographics, March 2011
                                                                                                                      • Appendix – Rewarding Loyalty

                                                                                                                          • Figure 54: Attitudes towards rewarding loyalty in financial services, by demographics, March 2011

                                                                                                                      Companies Covered

                                                                                                                      • Alliance & Leicester
                                                                                                                      • Aviva Plc
                                                                                                                      • Barclays Bank plc
                                                                                                                      • Financial Services Authority (The)
                                                                                                                      • Grupo Santander Central Hispano S.A.
                                                                                                                      • HSBC Holdings plc
                                                                                                                      • Lloyds Banking Group
                                                                                                                      • Nationwide Building Society
                                                                                                                      • NatWest
                                                                                                                      • NFU Mutual
                                                                                                                      • Norwich Union
                                                                                                                      • Royal Bank of Scotland Group plc
                                                                                                                      • Tesco Plc
                                                                                                                      • Yorkshire Bank PLC

                                                                                                                      Customer Loyalty in Financial Services - UK - April 2011

                                                                                                                      £1,995.00 (Excl.Tax)