A revolution in banking
A first direct case study

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Page 4: Decision making

First Direct 2 Image 4The first stage in developing any new product is to thoroughly understand the business environment in which the product will be sold, as well as the nature of the market and details of the customers and their requirements. An organisation needs information about each of these three areas. Such information will help to reduce risks in decision making. The whole success of the marketing process will depend upon the quality of the information obtained and how this information is used.

Derived from this information is a wide range of products that are easy to use and value for money. For example, First Direct offer two types of mortgages, fixed rate and variable rate, they are both built to last, offering good value in the long term rather than short term discounts. This is what customers have asked for and is one reason why “What Mortgage?” magazine voted First Direct “Best Centralised Lender” over both two and five years in 1995 and 1996. This example shows how some lenders may have confused their customers by offering short term low interest or cash back incentives, when all customers really want is a value for money, uncomplicated product. This policy is reflected in all First Direct’s products, including:

The changing marketplace

When a new business idea is developed, it is important that it is established immediately, because in today’s marketplace the best ideas are quickly copied. It has, therefore, been important for First Direct to establish itself as a leading force in telephone banking and then to strengthen this position by detailed analysis of customer requirements, in order to continuously improve the services it offers.

In 1996, First Direct had a 1.4% share of the current account market. This is a considerable achievement in light of its recent entry to the banking sector. First Direct’s share of its primary target market, i.e. ABC1 21-54 year old customers, now stands at 4%. More importantly, given First Direct is primarily in the ‘switching’ market, (i.e. those customers who move from one bank to another) it gains approximately 25% of the yearly ‘switching’ market.

First Direct’s major achievement has been in revolutionising customers’ perceptions of banking operations and how these should be carried out. By 1996, 20% of the population with a bank account undertook some of their banking by telephone, with about 3% performing all of their banking direct. First Direct captured 58% of the telephone banking market in 1996 and has been able to sustain this market leadership, despite intense competition from a growing number of competitors.

First Direct has been able to stay ahead of new entrants by developing a market research focus, which has helped preserve its competitive advantage. The market research is on-going. The results of consumer surveys are used to evaluate current performance and to identify future direction. In July 1996, First Direct carried out a survey of 2,000 main account holders, 686 replies were received which represented a 34% response rate. Such surveys are undertaken at regular intervals.

first direct | A revolution in banking