Page 4: Mass marketing
Much of the competition lies with having access to customers and selling the widest range of services to them. Traditional insurers are increasing their range of business to include banking and mortgage products. Direct operations (e.g. Direct Line) have emerged, who sell their product over the telephone or by post, rather than face-to-face in a high street branch or by employing a salesman to call on customers at home. Also, non-financial services companies (e.g. Marks and Spencer and Virgin) have entered the market applying their retailing expertise of consumer brands to financial services products.
Financial services players now need to be a minimum size to be able to compete effectively. It is often the case that the larger an organisation is, the more cost-effective it can be as administration and selling costs become lower due to the fact that they are shared across a wider product range. A mutual society, unlike a plc, does not have access to the equity market to raise capital if required. This means that if it has ambitions to expand, a mutual will have to provide the funding from its own resources i.e. expand by organic growth.
Another method of expansion is through acquisitions, which are seen by PLCs as a fast track to growth with duplicated services being stripped out and a more efficient organisation emerging. An example of this option is the merger of Royal Insurance and Sun Alliance. This method of growth, however, requires access to a large capital base and so may not be open to some mutual organisations. CIS believes that to survive in the financial services market of the future, a financial services provider will need to successfully achieve a number of standards. It must:
- provide competitive, value for money financial products;
- deliver the best in customer service;
- invest in new technology.