First Direct

Strategic Marketing Plan

MARK6024 Advance Marketing Strategy

Take Home Final Exam Assignment
Semester 1 (T1B) 2010
8 June 2010
Presented by:
Yang Liu
3303788
EXECUTIVE SUMMARY

This strategic marketing plan is to identify the strategic orientation and development marketing plan to realise

the mission and objectives for First Direct.

I. MISSSION AND OBJECTIVES

First Direct wants to know how much of the market will gravitate and could even supplant its parent HSBC

among the Big Four in United Kingdom as their new mission. To achieve those they have to maintain high

customer satisfaction and recommendation rating, increase market share and realise revenue growth.

II. SITUATION ANALYSIS

In macro environment, the global financial crisis has been influencing the entire economy of UK. Customer

spending, investment and savings have been changed by the global financial crisis, most negatively.

However, PWC (2010) points out that people should see gradual upturn in business investment growth in

2011 by UK Economic Outlook Report of PWC.

In micro environment, First Direct competes with four big bank and some direct competitors. However their

customer-orientation strategy makes them distinctive.

III. TARGET SGEMENTS

Primary target segments are experienced business owners and high income workers.

Secondary target segments are business starters and mid income workers.

IV. MARKETING STARTEGIES

Referring to the market map and Ansoff’s product market growth matrix, the marketing strategy should focus

on seeking revenue growth and offering new service/product to existing customers and new customers.

V. FINAL RECOMMENDATIONS

The final recommendations are focusing growth young affluent customers including business owners and

high income workers. Providing customisation and personalisation product and service will realise revenue

growth and then achieve market share increase.

Contents

EXECUTIVE SUMMARY ............................................................................................................................ 2

BACKGROUND .......................................................................................................................................... 4

MISSION STATEMENT .............................................................................................................................. 4

CORPORATE OBJECTIVES...................................................................................................................... 4

SITUATION ANALYSIS .............................................................................................................................. 5

ENVIRONMENTAL ANALYSIS ................................................................................................................................................................... 5

COMPETITIVE ANALYSIS .......................................................................................................................................................................... 5

MARKETING ANALYSIS............................................................................................................................................................................. 6

COMPANY ANALYSIS ................................................................................................................................................................................ 8

SWOT ANALYSIS ...................................................................................................................................................................................... 9

KEY ASSUM PTIONS ............................................................................................................................................................................... 10

MARKETING STRATEGIC PLAN ............................................................................................................ 11

STRATEGIC ORIENTATION ..................................................................................................................................................................... 11

THE MARKETING MAP AND ANSOFF’S PRODUCT MARKET GROWTH MATRIX .......................................................................... 12

MARKETING OBJECTIVES AND STRATEGIES .................................................................................................................................... 12

MARKETING STRATEGIES FOR SEGMENTS ....................................................................................................................................... 13

FINAL RECOMMENDATIONS ................................................................................................................. 14

REFERENCES .......................................................................................................................................... 15

APPENDIX ................................................................................................................................................ 16

First Direct Strategic Marketing Plan page 3

BACKGROUND
First Direct was launched on 1st October 1989 as the UK’s first 24hour telephone banking service and it is

an arm of HSBC. First Direct provides multi-channel transactions as a multi-channel service provider. It

acquires enviable figure for customer satisfaction and recommendation ever since 1989. First Direct is one of

UK’s most successful consumer brands, which is now making healthy profits to go with its countless awards

for customer service.

First Direct has built up a base of around 1.2 million customers in 2007, with profitable operations since

1995. Its customers are served by 3,400 employees working from two sites in Leeds and Hamilton, and

along with its initial current account offering it now provides a wide range of products including mortgages,

personal loans, credit cards, insurance, and investment product such as ISAs and share dealing.

First Direct is now confronting three strategic options (refer to appendix): first option is seeking profit growth

by moving its call centres offshore, but it seems counterproductive. Second option is seeking revenue growth

by moving into the small business market. And third option is seeking revenue growth by developing a face-

to-face channel to deliver investment advice to high income customers. Seeking revenue growth seems

more promising. First Direct needs to find out where to go would be the best.

MISSION STATEMENT
First Direct’s original mission statement is ‘pioneering amazing service’ (The Times 100, 2009). As a service-

led company, First Direct wants to know how much of the market will gravitate and could even supplant its

parent HSBC among the Big Four in United Kingdom as their new mission.

CORPORATE OBJECTIVES
Based on their original mission statement and what they want to realise, they need:

 To maintain high customer satisfaction and recommendation rating

 To increase market share

 To achieve revenue growth

First Direct Strategic Marketing Plan page 4

 SITUATION ANALYSIS

ENVIRONMENTAL ANALYSIS

As the fifth largest economy in the world, the UK has a gross domestic product (GDP) of US$2,674 billion

(World Bank, 2008) and is forecast to have the strongest business environment of all major European

economies for the period 2007 to 2011 (EIU, 2007). With a population of 61.4 million (World Bank, 2010) and

unemployment well below the EU average, the UK has a strong workforce to support the economy (UK

TRADE & INVESTMENT, 2010).

However following the global financial crisis, a financial bubble burst in 2008. The extent of this problem has

been influencing the entire economy of UK. Customer spending, investment and savings have been changed

by the global financial crisis, most negatively. However, PWC (2010) points out that people should see

gradual upturn in business investment growth in 2011 by UK Economic Outlook Report of PWC.

COMPETITIVE ANALYSIS

HSBC Bank plc is one of the major clearing banks in UK and is the only one of Britain’s Big Fours to hold

more deposits than loans (Wikipedia, 2010). This has led to the bank being seen as a less risky proposition

than other banks by investors and customers, as it is able to fully fund its own operations (Wikipedia, 2010).

Although First Direct is an arm of HSBC Bank plc, but they separately operate. However, in a sense they are

competitors.

1. Big Four bank in UK

The traditional Big Four banks are HSBC Bank, Royal Bank of Scotland Group, Lloyds Banking Group and

Barclays (Wikipedia, 2010). Santander UK now ranks in the actual top four (Moya, 2010). The major

products and services are listed in the following table:

First Direct Strategic Marketing Plan page 5

 Banks Products

Finance Insurance
Royal Bank of Scotland Group
Consumer Banking
(Wikipedia, 2010)
Corporate Banking

Lloyds TSB Banking

(Wikipedia, 2010) Insurance

Retail Banking
Commercial Banking
Barclays
Investment Banking
(Wikipedia, 2010)
Investment Management
Private Equity.

Santander UK
Financial Service
(Wikipedia, 2010)

2. Telephone and Internet banks in UK

Online banking and telephone banking is light spot of First Direct. Although First Direct is the most

recommended bank, but there are many challengers and followers. The competitive environment is quiet

fierce. The major competitors are Egg, Cahoot, Intelligent Finance and Smile. They are all offering

telephone and internet banking and doing well in this area.

MARKETING ANALYSIS

1. Segmentation of customers

First Direct’s profiles of their customers are: average age 43, 80% ABC1, evenly split between the genders,

typically urban, busy and affluent, with a bias towards the Home Counties, digital natives. Based on this

profiles, First Direct should look for customers who want to take control of their own finance and have

positive potential saving and investment ability and also have positive and good customer behaviour (i.e. be

a good customer). Referring to existing and potential banking customers of characteristics, the customer

segments are described in Figure 1:

First Direct Strategic Marketing Plan page 6

 positive bank
credit of segmetn 1
monthly deposit of history
above £1500 negetive bank
credit of
perfer use online history
or telephone
banking positive bank
business
owners
credit of segment 2
perfer go to monthly deposit of history
branches below £1500 negetive bank
credit of
history
positive bank
credit of segment 3
monthly deposit of history
above £1500 negetive bank
credit of
perfer use online history
or telephone
banking positive bank
workers credit of segment 4
perfer go to monthly deposit of hsitory
branches below £1500 negetive bank
Figure 1 credit of
history

Segments Description

Segment 1 Experienced business owners, prefer to use online or telephone banking channel,
monthly deposit of above £1500 (i.e. they have good cash flow) and have positive bank
Experienced credit of history. They have great potential to do cross-selling and up-selling (i.e.
business business investment advice, financial advice and so on).
owners

Segment 2 Business starters, prefer to use online or telephone banking channel and monthly
deposit of below £1500 and have positive bank credit of history. They are potential
Business customers with investment ability.
starters

High income workers prefer to use online or telephone banking channel and monthly
Segment 3 deposit of above £1500 and have positive bank credit of history. They have great
High income potential to do cross-selling and up-selling (i.e. professional individual investment
workers advice, financial management and so on).

Segment 4 Mid income workers, prefer to use online or telephone banking channel and monthly
deposit of below £1500 and have positive bank credit of history. They are potential
Mid income customers.
workers

First Direct Strategic Marketing Plan page 7

 2. Target customer segments

Primary target segments

 Segment 1--experienced business owners

 Segment 3--high income workers

Secondary target segments-

 Segment 2—business starters

 Segment 4—mid income workers

COMPANY ANALYSIS

1. First Direct value proposition

First Direct’s value is exhibited in two principal ways: the first is through breaking down the ‘us and them’

barrier between customers and staff. The second is through a policy of offering ‘a fair deal’. First Direct’s

proposition is clearly on customer intimacy and ease of use.

2. First Direct service quality

First Direct had the largest number of satisfied customers of any UK bank and high customer

recommendation rating for last 13 years. They build multi-channel that is internet, telephone, mobile phone

text message, direct mail and person recommendation to let customers choose what most convenient way is

for them. That provides a seamless customer experience. They also encourage customers to buy online

through one-off incentive campaigns and provide a prize to activate more online activities. All those actions

are based on confidence and get customers’ trust and engagement. On the other hand, the service recovery

and complaint are taken seriously by First Direct. Referring to all of above, First Direct is doing more than

that. It is not just maintaining the high service quality, but acquiring new customers as well.

3. First Direct product mix

Currently First Direct has six ranges of products (see Figure 2):

First Direct Strategic Marketing Plan page 8

 Mortgages

Insurance Loans

First Direct

Investments Credit Cards

Savings

Figure 2

SWOT ANALYSIS
Strengths Weaknesses
 24/7 telephone banking service  ‘Low involvement’ product has high sales
 Offering a range of integrated channels for volume.
customer service  Outbound telephone calls play no part in
 Using multi-channel to acquire new recruiting new customers
customers  Costly in call centre
 Lowering acquisition costs considerably
 Ease to use
 Using CRM system
 Customer-oriented service strategy
 Good internal marketing and promotion
 Great brand awareness

Opportunities
 Internet using growth
 High customer recommendation rating
 High customer satisfaction level
 Most successful consumer brand in UK
 Using HSBC’s retail branch network.
Threats
 Many imitators emulate the customer focus
and service levels and channel strategy
 Risk with charging banking transaction fee
 New competitors use aggressive pricing
and direct service to attack the customer
database
 Some customers don’t have confidence in
using online banking

First Direct Strategic Marketing Plan page 9

KEY ASSUMPTIONS
Four key assumptions have been made as a background. Since those factors will be critical to the success

or failure, the four key assumptions have to be made to support this plan.

Assumptions Implications

1. Charging banking fee will directly influence Get negative buzz from customer and lose market
customer satisfaction and recommendation. share, customer and reputation.

Industry recession and negative influence on

2. The entire economy is still in recession.
customer investment, saving and spending.

Offering product/service for business investment will

3. Business investment is in gradual upturn
be the good opportunity for First Direct’s next step
growth
growth.

4. Other competitors offer better products or Losing customers and influence market share and
services revenue.

First Direct Strategic Marketing Plan page 10

MARKETING STRATEGIC PLAN

STRATEGIC ORIENTATION

Strategic options Implications

It can save cost, but this maybe potentially dilutes what marks the bank
Profit Moving call centres distinctive. Usually phone calls deal with important issues or complicated
growth offshore offers. If moved offshore it may be hard to control the service quality, and
finally lose customers and reputation.

Small business is a growing group and they already have 50,000-100,000

customers. Referring to First Direct reputation and high customer
Moving into small
recommendation and multi-channel service, there is a good opportunity to
business
offer a range of products or service to convert traditional money
management business into an e-business framework.
Revenue
growth
Developing face-to- Investment advice to the high income profiles will get more up-selling and
face channel to cross-selling opportunities, but this service needs to associate with
deliver investment branches. The face-to-face channel is costly, referring to First Direct’s use
advice to the high of HSBC’s retail branch network, and they can co-operate with HSBC
income profiles. branches.

Consequently, the strategic orientation should focus on seeking revenue growth and looking at both small

business and high income profiles. Based on the results of the SWOT analysis, great reputation will be the

key to engaging affluent customers (i.e. business owners and high income workers). That is an effective way

to realise the mission and objectives.

First Direct Strategic Marketing Plan page 11

THE MARKETING MAP AND ANSOFF’S PRODUCT MARKET GROWTH MATRIX

£
Product/ Service
Diversification growth
Present New

Present
Integrative growth
Market Product
Penetration Development

Markets
Profits

Intensive growth Integrative

Market and

New
Development Diversification
Growth
0
Time

Referring to the market map and Ansoff’s product market growth matrix, we should achieve our mission and

objectives in three aspects.

1. Market Penetration: Exploiting cross-selling strategy and up-selling strategy to selling more to

customers that will realise maximum sales volume and increase revenue.

2. Product/ Service Development: Increasing sale potential by developing extension products or

services (i.e. face-to-face advice for high income people and e-business management advice) that

will raise market share.

3. Market Development: Increasing sales potential by current products towards new market of

segmentation description (i.e. business owner and high income people).

MARKETING OBJECTIVES AND STRATEGIES

Objectives Strategies

1. Developing e-business framework to engage small business group

2. Developing personal face-to-face finance advice for high income profile
Achieving
3. Cross-selling strategy
revenue growth
4. Up-selling strategy
5. Developing extension service for target segments
1. Developing extension product or service to acquire new customers
Achieving market 2. Increasing accessibility for new customers
share growth 3. Engaging competitors’ customers
4. Creating more value to customers

First Direct Strategic Marketing Plan page 12

 1. Maintaining current service quality
Maintaining high 2. Improving service recovery
service quality 3. Developing complementary services
4. Developing personalised services

MARKETING STRATEGIES FOR SEGMENTS

1. Experienced business owners (segment 1)

Strategy: offering e-business strategy intent of converting traditional money management business into an e-

business framework.

Description: based on multi-channel advantage and integrating other advantages create a range of electronic

financial services to help business manage their assets. The purpose of this strategy is to provide extension

and customisation service for business and combine up-selling and cross-selling strategy to acquire new

customers, and engage competitor’s customers and gain more market share.

2. High income workers (segment 3)

Strategy: offering face-to-face personal finance advice for high income people.

Description: providing investment advice, financial management advice to associate with high income

people to manage their financial portfolio. This face-to-face channel has to co-operate with HSBC branches.

That can be a win-win situation for both banks. The purpose of this strategy is to offer personalisation service

for high income people and combine up-selling and cross-selling strategy to acquire new customers, and

engage competitor’s customers and gain more market share.

3. Business starters and mid income workers (segment 2 and 4)

Strategy: maintaining high quality service to engage those potential customers.

Description: based on personal recommendation to engage those two segments of customers into ‘low

involvement’ product and gain high sales volume. Also they have got potential growth ability.

First Direct Strategic Marketing Plan page 13

FINAL RECOMMENDATIONS
From analysing the internal and external situation I have found that First Direct has very high level of

customer satisfaction and reputation. They also have great customer acquisition performance and successful

multi-channel of communication strategy. But their most sales of volume are low involvement products, such

as 43% of sales volume by e-channel accounts products. In facing extremely competitive environment, they

need differentiate themselves with other imitators and Big Four banks.

Therefore the final recommendations are focusing on growth of young affluent customers including business

owners and high income workers. Providing customisation and personalisation product and service will

realise revenue growth and then achieve market share increase. In addition, maintaining current advantages

helps keep the distinctive strength. First Direct needs to review this strategic marketing plan every year to

assess progress and alterations as the banking progresses to make sure it is under control and working

effectively.

The purpose here is not to find new ways to make profit and to do business. It is to realise maximum value

for First Direct and its customers to achieve sustainable long-term growth.

First Direct Strategic Marketing Plan page 14

REFERENCES
 The Time 100, 2009, using customer service to position a business, June 1 last visited,
http://www.thetimes100.co.uk/case-study--using-customer-service-to-position-business--129-367-
2.php

 Global Issues, 2009, Global Financial Crisis, June 2 last visited,

http://www.globalissues.org/issue/1/trade-economy-related-issues

 UK TRADE & INVESTMENT, 2010, UK economy, June 2 last visited,

http://www.ukinvest.gov.uk/UK-economy/en-GB-list.html

 THE WORLD BANK, 2010, Data GDP (current US$), June 2 last visited,
http://data.worldbank.org/indicator/NY.GDP.MKTP.CD

 THE WORLD BANK, 2010, Population of United kingdom, June 2 last visited,
http://www.google.com/publicdata?ds=wb-
wdi&met=sp_pop_totl&idim=country:GBR&dl=en&hl=en&q=uk+population

 RIU, 2007, June 2 last visited, http://www.eiu.com/index.asp?rf=0

 Wikipedia, 2010, Big Four Banks, June 2 last visited,

http://en.wikipedia.org/wiki/Big_Four_(banks)#United_Kingdom

 Wikipedia, 2010, HSBC Bank (Europe), June 2 last visited,

http://en.wikipedia.org/wiki/HSBC_Bank_(Europe)

 Moya Elena, 2010, Santander may float in UK if it buys Williams & Glyn’s branches from RBS, The
Guardian. Retrieved 28 February 2010, June 2 last visited,
http://en.wikipedia.org/wiki/HSBC_Bank_(Europe)

 PricewaterhouseCoopers, 2010, UK Economic Outlook March 2010, PricewaterhouseCoopers LLP.

First Direct Strategic Marketing Plan page 15

APPENDIX
First Direct strategic options

Seeking profit growth Seeking revenue growth

Moving call centres offshore Developing face-to-face Focusing small

channel to deliver business
investment advice to the
high income profile

First Direct Strategic Marketing Plan page 16