Building a local retail strategy

A Yorkshire Building Society case

study
Page 1: Introduction

In the 21st century, consumers really do matter and businesses that wish to prosper must address
their needs. This case study illustrates the high level of modern forms of customer service by
showing how the Yorkshire Building Society has reshaped its retail activities around customer
requirements. The study focuses on the development of a retail strategy based on identifying
different customer needs and on devising ways of meeting these different needs.

Prior to this initiative, all branches of the Yorkshire Building Society had been more or less identical
in appearance, style and way of operating, whatever their location. Now, Yorkshire Building Society
is looking to match the appearance, amenities and functions of individual branches more closely to
the needs of their own local customers.

Page 2: Creating a High Street retail environment

This new way of thinking includes providing the right sort of retail environment immediately a
customer enters a branch. Until recently, the emphasis in the Yorkshire Building Society has not only
been on providing a pleasant customer reception area, but also providing "office space" for staff to
carry out administrative tasks. This often led to what looked like an office environment in which
building society employees appeared to be office workers, rather than approachable customer
service staff.

Page 3: A retail strategy to make best use of existing branches

In order to create an effective customer service environment, Yorkshire Building Society needed to
examine the ways in which it operated. One of the most important issues was to consider how it
could make best use of its existing branches to meet the needs of existing and potential customers in
the local market. In order to do this it needed to find out what types of customers used its individual
branches.

This consisted of identifying:

the branch's existing customer base

the position of the branch in relation to the local financial services competitors

the current performance of the branch in comparison to its perceived potential.

The vital task of profiling customers was carried out through demographic profiling. To create the
demographic profile, Yorkshire Building Society used a classifying system that is widely used by
providers of financial services for purposes of market research, known as Financial Acorn. Acorn
breaks down populations into clearly defined segments. Financial Acorn divides customers into
twelve segments.

Page 4: Customer characteristics

Financial Acorn was used to profile each branch in terms of existing and potential opportunities.
Yorkshire Building Society was not surprised to find that branches varied considerably. For example,
some branches had a high percentage of "comfortable investors", while others had a comparatively
high percentage of "younger spenders". The profile found that there was a mix of all of the different
customer classifications in each branch and that all branches contained each classification, to a
greater or lesser extent.

This type of classification is very helpful in giving a view of the financial requirements of customers in
different building society branches, in different parts of the country. For example, in some areas
there are a larger number of people who have a greater potential to save and invest because they
have surplus cash. In contrast, some areas have larger numbers of young, affluent, single people
who borrow money to invest in property or lifestyle.

Page 5: Identifying market share

The next step in the research exercise was to examine the market share held by individual branches.
In particular, this involved identifying whether a branch had a greater or smaller share of the market
than would be expected, given its customer profile. Some branches had a higher share of the market
than would have been expected, which indicated their strength. Others, however, had a lesser share
of the market than would be expected, and so provided an opportunity for improvement.

Page 6: Identifying categories of branches

The exercise identified three main categories of branches, according to their particular
characteristics. Not all branches fitted a category perfectly, of course, some were 'a little bit of this,
and rather more of that'. Some branches were found to have many existing customers, giving a
higher market share than would be expected. Customers in these branches typically buy a wide
range of products. These branches operate in markets in the Society's heartland where it is very well
known.

Other branches were found to have significant opportunities for growth, largely because the Society
currently has a low market share and the brand is less well known. In the final category Yorkshire
Building Society was found to have a relatively high market share but customers might typically buy
only one or two products from the Yorkshire Building Society (eg a mortgage and house insurance).
This under-buying opens up significant opportunities to engage in additional cross-selling of new
products (saving schemes, holiday insurance, etc).
Page 7: Choosing appropriate strategies for the different categories

Having identified different categories of branches, it was easier to identify strategies that best suited
the types of customers using these branches.

For example:

In branches with high percentages of existing customers it is possible to build on existing

relationships through staff training and through communications that reassure customers that they
have chosen products wisely. Many of these branches can be found in the 'heartland' of the
Yorkshire Building Society, and have many long-standing, loyal customers. Today, the main focus of
these branches is to continue to grow the business and customer base as well as generate
opportunities for cross selling. These branches provide a benchmark towards which other branches
can aspire.

The main focus for branches with significant growth potential will be to attract new members
through the entire product range.

The main focus for branches with a high market share, but a high percentage of sales in particular
product areas will be to:

generate cross-selling opportunities for the existing loyal customer base

attract new customers through local marketing and mailing programmes

develop customer relationships.

To meet its customers' needs in a more sophisticated fashion, Yorkshire Building Society has
compiled a Financial Acorn profile based on the catchment area of each of its branches.

Page 8: A pilot programme

To make sure the strategy works, it is first being piloted in selected branches across the UK. The
selected branches are representative of the main categories of branch, and are located in the North-
East, London and on the South Coast.

The pilot tests have involved:

changing the branch layout

adjusting the roles of branch personnel away from administration

testing new sales approaches and using promotional materials.

Page 9: Branch layout

All of the Yorkshire Building Society branch layouts have been redesigned to be more customer
friendly, not just through their products, but also in design and facilities. Creating a retail
environment within a building society is not just about selling more products. Branches in the pilot
programme have adopted approaches to branch design and layout, which maximise their ability to
meet customer needs. Zones have been created within the branches which are dedicated to
browsing, information, fast cash and customer contact. The emphasis placed on these zones has
been in response to the needs of that particular branch. For example, in an area where fast cash is
more heavily used, more space has been dedicated to fast cash. Sofas for browsing and personnel as
"meeters and greeters" have all played a part in creating a customer focused retail environment.

Page 10: Personnel

In order to achieve a more customer-focused approach, staff have been trained in new operational
methods. This has largely been achieved through staff development programmes and management
training. Empowering individual branch managers to make decisions concerning their clients has
given employees ownership of the change programme and therefore, has contributed to its success.

Page 11: Media

In addition, the effectiveness of various types of local media in attracting sales into the branches is
being evaluated. It is important to pilot different media in this way because a national advertising
campaign is very expensive and can run into millions of pounds. This will also help Yorkshire Building
Society maximise the effectiveness of its expenditure on advertising and marketing in the future.

There are also a variety of marketing methods being trialled. In areas with an emphasis on
mortgages, for example, the marketing tools being used include local advertising using billboards
and posters, as well as the local press, radio and the sides of buses and taxis. The principal message
conveyed in these adverts focuses on the brand and on mortgages.

In contrast, in areas where the emphasis is on savings, direct mailing is the main marketing tool and
the message focuses on the brand and on savings. The mailings have been categorised into two
groups:

mailing existing customers, focusing on key products from the Yorkshire Building Society savings
range
potential new customers are targeted based on a profile of existing customers who have already
taken up the Yorkshire Building Society savings accounts.

The advertising and marketing strategies have been carefully designed to reach particular audiences
in particular areas. For example, in areas where there are high percentages of "better off borrowers"
the rears of buses have been used to advertise, as most of the target population will be car drivers.

Page 12: Conclusion

Yorkshire Building Society recognises the importance of targeting its resources at better serving the
needs of individual customers by creating more differentiation between branches, and by providing
a more welcoming retail environment in which customers feel valued. This case study provides an
interesting example of sophisticated marketing techniques that help an organisation to find out far
more about its target market in order to provide a better, more focused service.