First Direct Case Study

Presented by:
Pulkit Goenka
Prashant Joshi
Danish Navaz Khan
 Outline
• Key points of the Case Study
• Questions for Discussion
• Relevant Theory
• First Direct
• Our Views
• Questions?
Case study: First Direct’s Innovative
Banking Channels

• Traditional Banking Structure and Channels

• Branches being the only point of contact
• Establishment of First Direct in 1989
• No Branches!!
• Personal response to calls 24x7x365
• Products offered are the same as competitors’
• Target Customers – Financially aware and independent
income earners
• Birth of a new breed of marketing channel – Telephone,
Online and Mobile Banking
• http://www.youtube.com/watch?v=HFma_Viu
if8&feature=player_embedded
 Questions for Discussion

1. Why is innovation in the marketing channels generally

difficult to achieve?

2. Why was First Direct different from its rivals? What gave it
differentiation when it first launched?

3. Why might some potential customers of First Direct have

reservations about the innovative nature of the service?
Price Product Promotion

Marketing Channels

Place
Conventional Marketing Channel
Producer •Physical PresenceDiscrepancies
Alleviating
of a bank
(depicts heritage, security and
traditional
Creating
Utility
values)
Wholesalers • Time taking transactions
• Cost levied on of transactionsStandardising
Transactions

• Service in person at the

Retailers counter(nature
Facilitating
Exchange
of services)
Efficiencies

Providing
Consumers Customer
Service
 Factors Influencing Distribution Channels

• Organisational Objectives and Resources

• Market Characteristics
• Product Attributes
• Buying Behaviour
• Environmental Forces
 History
• Established on 1st October, 1989 by Midland Bank
“They were seen as heavy handed beaurocratic,
• Became a part of HSBC after it acquired Midland
unhelpful and umingainative. |We deliberately recruited
Bank
non-bankers from the Service industry. This was a bank
• Within
that5 yrs, bank
wasn’t was
run byserving more
bankers” – Sirthan
Kit McMahon
500,000 customers
(Chairman of Midland bank of that time)
• The bank launched Internet Banking in 1998 and
went on to launch Mobile Banking a year later
 Current Situation

• Has 1.16mn customers, 0.9 mn use Internet

Banking and 0.4mn use Text Banking
• 44% of First Direct’s sales is via e-channels
• Handles around 157,760 calls every week
• 29,000 calls a day Outside working hours
First Direct’s Marketing Channel:
Direct Marketing
Producer

Providing
Customer
Service

Consumers
1. Why is innovation in marketing channels generally
difficult to achieve?
Producer’s
Perspective
1. Why is innovation in marketing channels generally
difficult to achieve?
Competitor’s
Perspective
 2. Why was First Direct different from its rivals? What
gave it differentiation when it first launched?
• Market research by Mike Harris identified
the Opportunity
• UK’s first branchless bank in 1989
• First 24x7x365 Retail Telephone Banking
Service
• A bank FOR the Customers instead of FOR
the bank!
• Strict Core Values: Responsiveness,
Openness, Right First Time, Respect,
Contribution and Kaizen
• Economies of Scale due to HSBC merger
• Use of Customer Information Systems
 2. Why was First Direct different from its rivals? What
gave it differentiation when it first launched?...Contd
• Employees from Social Professions: Fast,
Efficient and Empathetic
• Low Cost: Wages & Rents in Leeds
• ‘Hot Desking’
• 641,000 customers in 1996: Employees –
2400.... A Branch would have reqd 4000!!!
• Niche Marketing – Target Customers: Affluent
and Regular Depositors
•“We
Technological Advancements:
have no ambition to beInternet
a mass market brand.
WeBanking, IPhone Banking, Weekly statements
know which customers will sit well with First
by Text
Direct. If we can attract more of them, then we are
open to that” – Collin Storrar (CFO of First Direct)
 3. Why might some potential customers of First Direct
have reservations about the innovative nature of
service?

• Real-world people-to-people interaction.

• Preference towards using checks and cash
• Psychological feeling of security of their
financial assets inside the brick-and-mortar
branches of banks
• Threat of identity theft and hacking of bank
accounts
http://www.live.firstdirect.com/