Searching for sustainable business growth? The (customer) feeling is mutual…

The following article argues that the UK building society (mutual) sector continues, despite challenging economic circumstances, to deliver business growth in large part due to its relentless customer focus, including its commitment to the Financial Conduct Authority #Consumer Duty. This is an opinion piece and the views expressed are my own – I’d love to hear your comments!

In today’s challenging global macroeconomic environment and unstable political climate, business growth is, for many businesses, challenging. Some of the most prestigious global organisations, including the major consultancy firms have recently announced significant reductions in workforce and there is no doubt that Financial Services businesses around the world also have been hit hard, having been forced to drive further operational efficiency and reduce costs. In 2023, the average national debt to GDP ratio across G7 countries is a staggering 128%. Given the pressures on both businesses and governments to invest for growth, no wonder that growth ain’t easy…

Zooming in on the UK retail banking sector, the economic climate also remains tough. First-time buyers are struggling to borrow to pay for their first home and many working people are find it hard to cope with rising debt. Overall, it’s a pretty grim situation which has a knock-on effect on both borrowers and savers.

Despite all the doom and gloom, however, there are some good news stories. Especially when we consider recent performance by the UK building society sector (aka “Mutuals”). Towards the end of 2023, the Building Societies Association (BSA) reported very solid sector performance. The BSA pointed out that whilst Building Societies have increased new mortgage lending by ￡6.1bn in 2023, mortgage balances at other lenders (including the major high street banks) has decreased by ￡4.5bn, as borrowers repaid more than these mortgage providers lent out in the period. It also cites the fact that building societies have proportionately few loans in arrears compared to other lenders (even if the number of arrears is slightly increasing).

Another key remark in the BSA report is that building societies accounted for 38% of high-street retail banking branches, increasing from 17% in 2014. At the treasury select committee on 20th March 2024 Parliamentlive.tv - Treasury Committee, CEOs of the top 4 high street banks were quizzed by Harriett Baldwin about the reasons for the apparent rise in bank closures. The primary reason for such closures was put down to consumer choice – i.e. that customers are increasingly opting for digital experiences over face-to-face interactions. Consumer choice, or cost-cutting? You decide.

Clearly there are many measures of business success, but when it comes to growth – the UK Building Society sector is, despite all economic and political headwinds, performing well. So what is the secret of the success of this sector? I am convinced, not least because I have seen it first hand at Newbury Building Society, ?that this is ultimately, is down to a relentless focus on the customer – which manifests itself across every aspect of the business.

In the building society sector, the fundamental building block of customer-focus starts with the structure of the business, namely the fact that mutuals are owned and answerable to their customers, i.e. to members, not to shareholders. Mutuals are arguably more able to make business and financial decisions for the medium-term to long-term benefit of its customers, rather than having to deliver short-term returns to shareholders. Here’s a nice explanation of the structural differences.

But relentless focus on the customer goes much further than business structure. It’s also related to the customer-led culture and the experience provided by the business to its customers. In a recent study by Forrester , both Mutuals and challenger banks are outperforming traditional banks when it comes to #CX. What challenger banks offer in slick digital experiences, building societies can match with an effective “bricks and clicks” approach and personalised, human-to-human customers interactions in branch and over the phone. And all this helps drive business growth.

In addition, building societies are, on the whole, taking the Consumer Duty | FCA very seriously. Whilst this isn’t saying other Financial Services companies aren’t taking it seriously, the Duty seems to naturally lend itself to the member-based structure and accountability. Consumer Duty is the FCA’s mandate to all regulated FS companies to put the customers at the centre of everything they do and deliver #good customer outcomes.

So how does a relentless focus on the customer lead to sustainable growth? Check out this webinar with Fred Reichheld (#NPS inventor) which I conducted prior to joining Newbury Building Society: Earned Growth: How the C-change diagnostic can help you – The C-change Diagnostic (cchangediagnostic.com). His argument is that sustainable (or as Fred calls it, “earned” growth) comes from happy customers that they recommend your company to their friends, family and peers. This is in contrast to “bought” growth which is an expensive and inefficient form of growth requiring a disproportionate investment in sales and marketing. And, in today’s #customereconomy, it ultimately fails to produce the same sustainable business results over a medium to long-term basis.

I’ve seen this theory play out in spades at Newbury Building Society . Much of Newbury’s new business comes through recommendation, either via customers or brokers. You only need to read the Smart Money People reviews to find out why: Newbury Building Society reviews - Smart Money People To find out more about Newbury’s commitment to the customer, watch recording from the webinar on 25th April 2024 from the Institute of Customer Service between Newbury’s CEO Phillippa Cardno and ICS CEO Jo Causon : https://www.instituteofcustomerservice.com/h2h-phillippa-cardno/

I’ve been leading, with the help and support of the executive team, Newbury’s Consumer Duty programme since November 2023. At Newbury, the Consumer Duty is viewed as an opportunity to build on the company’s incredible and long-standing customer-focused culture. For further information about Newbury’s response, see this recent article in the local newspaper. In short, Newbury has considered the Duty truly from an end-to-end perspective and partnered with great companies like Investor in Customers Ltd and Elephants Don't Forget to deliver on that mandate.

But even if the Consumer Duty doesn’t apply to your business, the chances are that growth is still an important strategic imperative for you! So if the feeling is mutual, and you’re looking for genuinely sustainable business growth, consider a truly relentless, organisation-wide focus on the customer.

Chris

P.S. If you’re looking for some fresh ideas about how to achieve that, why not read the Customer Catalyst. Or if you’re looking to measure and drive customer transformation, try out the C-change diagnostic for free.