It’s pensions freedoms day. Time to disrupt the industry?

Pension Wise, pension freedoms

There has been much discussion in the press and the pensions industry about George Osborne’s new Pension Freedoms that come into force today on April 6th.

The debate fluctuates from how the freedoms could create a whole series of new mis-selling scandals to a broad welcome that people are being given more control over their own pension money, rather than being told by government what they should and should not do.

The pensions industry generally welcomes the move, but the discussion seems focus on what others (govt and customers?) can do rather than on how the industry can change in ways that would help customers. The debate revolves around what the public and the government might be doing wrong, rather than whether pensions companies can develop new products to provide what people need.

I believe these freedoms are very welcome, they provide a trigger for change, it is a real opportunity for the industry to create new products that will help customers and transform this business. Until the industry focuses on what it can do to help customers rather than talking about why customers should save more or governments can provide advice and regulation, the public will not be properly served. This post discusses and analyses the opportunity for the pensions industry to develop new products

First: what are the concerns about the new freedoms?

The expert commentary largely revolves around three serious concerns. These concerns add up to a serious worry that the public could be worse off.

  1. If people withdraw all their pension pots in one go in one year they are still subject to a 25% tax which will be a windfall for the treasury but at the expense of the public’s ability to create income for themselves in the future.
  2. There are not enough quality advisors available to help people decide what to do and be sure it is in their best interests. And for many the cost of advice is simply not affordable. the government is offering free advice, but this is very limited in scope and seems to be fraught with implementation problems.
  3. Annuities are still the best option for some people as they ensure they do not run out of money. But they have have been criticised for being poor value. They have a bad press and may be dismissed by people for the wrong reasons and people will end up worse off.

Clearly these are all risks. Problems will happen to some degree.  There are things the government and the industry can do to minimise and mitigate these risks. But do these problems add up to an argument that these pension freedoms are a mistake? I believe it is not a mistake, because the move to giving people pension freedom was the only way the government could break a system in which a restrictive tax regime had been exploited by pensions firms who offered products that delivered poor value. And importantly since the products on offer no longer provide an adequate income in retirement, something had to change.

Second: Pensions industry is too focused on itself and not on customers

The Pensions industry seems to operate with three observations about the general public

  1. First, people do not save enough for their retirement needs. This is largely motivated by a desire to have things now rather than be prudent and save. The implication is that people are being foolish.
  2. Second, that saving and investing for income are complex matters that can only be grasped by professionals, this is made harder to understand by taxation complications. In addition products are generally complex and difficult to understand.
  3. Third, everyone’s situation is different and we all need personalised advice.

Now some of this may be true in some cases. But are people really that irrational that they ignore their future needs?  Are people all so different that everyone needs bespoke expensive advice?  It is distinctly possible that the problem is the products are too complex and unattractive rather than customers’ foolishness.

Why is that pensions and investment products are so complex and impenetrable to the average person?  I think it starts with the purpose behind pensions products.  The products are designed to make money for the provider and pass on the risk to the customer.  Most pensions firm products that have a cost structure that guarantees income and profit to the pension firm and leaves the customer with all of the risk. This structure and risk share is very off-putting to customers.

Third: it is time to disrupt the industry

Pensions is one of the few industries that has not been disrupted by insurgent newcomers. It is dominated by established players. Many industries are being disrupted by people creating better products that help customers. e.g.

  • EasyJet offered an easier way to book airline tickets at a better cost
  • Google are transforming the advertising and media businesses by making it easier to access for smaller businesses.
  • Apple and Samsung have pretty much destroyed other mobile phone makers with products that do what people want (and do much that people could never imagine they wanted)
  • Amazon are working their way through most retail industries with simpler easier lower cost customer service.
  • Airbnb are transforming hotels and travel.

There is an opportunity for someone in pensions to provide both accumulation and decumulation products that are designed to help customers first rather than be designed first to secure an income for the asset managers and product providers and only give secondary thought to how the product helps customers.  A few early thoughts are that a new better product would

  • Be easy to understand
  • Be managed online
  • Have fair and transparent charging (including risk share)
  • Be segmented to satisfy the majority of the population’s needs
  • Not need independent expensive financial advisers
  • Would be endorsed by the regulator

When someone does this (when not if!) the population will return to investing in pensions, ordinary people will be able to exploit the pension freedoms and be more more secure in their retirement. Whilst the current paradigm is maintained, then many will either avoid pensions, will make mistakes and will be poorer in retirement.

How to design such a product?

start by reading this article on AttractiveThinking

Better products vs better persuasion?

creating better pensions productsI have been spending some time with pensions professionals who are grappling with how to make pensions work better for the whole population. There is clearly a problem for many of us.  Many people will not have adequate provision for income in their old age.  This kind of customer problem presents an opportunity for the industry to do some better persuasion and better marketing.  But it also offers an opportunity to create better products.

I have noticed that the debate about better pensions highlights two different ways you can approach trying to solve a problem for your customers.

The first is to try and persuade people to behave differently

The focus here is how to get people to buy what you provide or sell.  This is what many business leaders are trying to do in different industries.  It is an important activity to get growth.  This seems to be the main focus in pensions.

Much of the pensions industry discussion is about getting people to take pensions more seriously. It is about getting people to save in a responsible manner.  This is manifest through the government’s auto enrolment scheme; by advocating the provision of independent advice via IFA’s; via the development of training and financial education for people.

The implication of this approach is that people are behaving irrationally.  We just need to change our ways.  We are not looking after ourselves and need educating and coercing into investing so we have a pension.  Then we need advice to take income from a pension fund in a responsible way rather than blowing it all away on holidays. Then we will have a better retirement.  This financial education and advice sounds very worthy and well intentioned.

Now I can see that much of this analysis and the need for different behaviours is true. Many people are headed for a poor retirement as a result of their inaction. But I would argue it is blinkered to concentrate only on trying to persuade people to behave differently.  Most of my experience says that trying to educate people to behave differently is very hard, it is an uphill slog with few rewards.

Alternatively, it can be much easier to create something that people actually want, that they see as solving a real problem for them.  That way they will be attracted to the solution rather than feeling badgered into it. So …

The second way is to create better products

Is the pensions problem just that people are behaving badly?  Or maybe the products on offer could be better?  Maybe the problem is not just that people are behaving stupidly, but that the products and services that are available just do not meet the real needs of ordinary people all that well and that the industry could also help people by developing better products?  It is clear from the National Association of Pension Funds’ Workplace Pensions Survey October 2013 that there is a perception amongst many ordinary people that pensions cannot provide for their future.  There is a lack of trust.

In my experience, when there is a lack of trust then educating or marketing alone will be very hard work and may not be effective.  We need better products.

What are better products?

Better productsWell “better” usually means things like

  • easy to understand – so you know what you are buying
  • easy to access – online often does this, or being in the right shops
  • deal direct with the customer, no intermediaries – intermediaries often add cost and slow things down, they need paying and do not have the same priorities as the customer (think of travel agents)
  • better value for money –
  • solves a real problem for a customer – (Tesco click and collect service)
  • does not exploit the laziness or ignorance of the customer (utilities often do exploit this)
  • takes care of the customer (First Direct)

Online solutions often deliver a lot of these elements which is why there is so much growth in online products and services.

An good example of an industry transformed by better products is to try and remember the short haul airline industry before Easyjet, Southwest Air and Ryan Air. The airline industry has been transformed by these game changers. Look at how much better it is for customers today. Easyjet and RyanAir were Game Changers.

An easy mistake to make is to think your industry is more complex and more difficult than the industries where game changers have created change and that better simpler products are not possible.

The pensions industry knows it has unique challenges and is more complex than the airline industry was. That may well be true. But the top executives of traditional national airline carriers British Airways, Lufthansa, American Airlines all thought their business was complex and did not really innovate until the low cost carriers arrived with better products.

Come to our event on 29th May

Game-Changers-2-wordsWe are running an event next week that looks at how the most successful leaders have created better products and services to deliver real real game changers in different industries. The event is called Game Changers and is on 29th May at 1400 at Campus London in Bonhill St Shoreditch (see details here)

One of our headline speakers is Mike Harris who is the original financial services game changer. Mike created First Direct and the Egg card internet banking business.  Mike will talk about what it takes to be a game changer.  Mike will share some insights on how to do this.

Another speaker is John Scriven from South Bank University, Marketing Science and the Ehrenberg Institute.  John has some surprising and ground breaking insights under the title How brands grow – what marketers don’t know?  John will share insights that are used by many of the worlds top companies on how to present better products to customers.

More information about the event is here Tickets are free.  It is just 3 hours during the afternoon.  there will be some debate around the case studies and examples.

If you have any thoughts or comments on this please add them to this article which is posted in the GameChangersUK linkedin group.  This is an online group that will continue the debate.

Four reasons people do not buy your product or service

I was reading through some posts in our mentoring support forum the other day.   I saw a comment from Mike Harris.  (Mike was the CEO who launched First Direct banking, he went on to transform Mercury Telecoms, then created the EGG bank and started up and sold Garlik, the personal internet security firm).

For reference, here is Mike talking about value propositions at our recent EGL event

Mike Harris CEO First direct at EGL event

Insight from Mike Harris

In the forum post he made an observation about why corporate deals and negotiations can fail at the last hurdle.  Mike highlighted that when corporate deals fail this is usually for a number of reasons.

  1. The value proposition isn’t strong enough for the corporate
  2. The value proposition hasn’t been communicated effectively to or within the corporate
  3. They don’t believe you can deliver
  4. They don’t believe the economics

I was struck immediately by the parallels between this thinking and what EGL does for our clients.  Mike’s thinking can be converted to help you in your approach to creating products and services that customers want to buy.

How to convert this thinking to action in your business?

Mike’s comment does not only apply to corporate deals, it explains why people buy from you or not. For those of you thinking about your products and services and your position and value in the market, you can take each of these points and turn them into an insight about why people DO NOT buy from you.  You can translate this into the four reasons people do not buy from you.

  1. The value proposition isn’t strong enough for them ( your product or service does not solve their problem)
  2. The value proposition hasn’t been communicated effectively to them (they don’t think your product or service will solve their problem)
  3. They don’t believe you can deliver (not sure you have the ability or resources to solve their problem)
  4. They believe thay can get something else good enough for a lower price (someone else can solve their problem)

Have a think about a prospect or consumer that did not buy your product or service and identify which of these thoughts might have been true for them?  This should lead you to an action that will help you win the customer next time around.

Where do I get great advice about branding?

There is much talk about branding. To me, some commentators seem to make it more complex than it needs to be or the discussion seems divorced from the realities of why customers actually buy things.

This post is to share my thoughts on creating great brands

Great brands offer products and services that customers want to buy, because great brands solve real problems that customers have. My approach to brand strategy is based on helping marketers first create things that customers want to buy and then market them to customers in a way that makes it easy for them to buy from you.

The more relevant and attractive your brand is to customers, the easier it will be to market it and attract more customers.


There are a number of seminal works that guide this approach and prove it is the most effective way to build a business and a brand.

Mike Harris – Iconic Brands (my business mentor) shows us how high performing businesses always have value propositions that are strong and sufficiently differentiated, communicated with sufficient power, completely and consistently delivered AND basic economics that work. The brand management task is to create that value proposition and build a plan the business is convinced will work.

Byron Sharp – How Brands Grow shows us that the biggest and most successful brands only get growth when they increase market penetration. Growth cannot arise by selling more stuff to the same number of customers (empirical fact). To grow you have to get more customers. This is because customers have repertoires of choices. The brand manager’s job is to put the brand in repertoire. Brand loyalty can be a misleading concept.

Peter Field and Les Benet in Marketing in the Era of Accountability and The Long and Short of It prove that building your reputation in the long term is more profitable than getting sales through short term promotion.

The Marketing Society UK – I worked with the society to create The Marketing Manifesto. This work demonstrates that delivering this is not just about creating the customer proposition and the marketing plan. It is about engaging the internal business in your mission and winning support for the plan from within the business. Without this the plan will fail. Successful marketing teams always focus on three different areas.

  1. Create and pursue a purpose – successful businesses have a purpose that goes beyond making more money. This purpose must include creating profitable sustainable growth. The brand is there to helps the organisation deliver this purpose.
  2. Championing customers – this means get your insight, shape the customer experience based on insight and find creative ways to engage customers and go beyond what they expect
  3. Mobilise the organisation – this means collaborate and communicate with colleagues, bring the voice of the customer into the boardroom and most importantly quantify and measure.

The 5 step EGL framework

A brand manager’s task is to build products and services customers want to buy and create a plan that the organisation is convinced will work (i.e. deliver profitable growth). There is a lot of theory talked about this but we bring it back to 5 questions.

PINPOINT – Who are your customers and what problem do they have that you can solve?
POSITION – How does your brand solve it better than others?
PERFECT – What is your story? How do you design a product to deliver this?
PROMOTE – How will customers find out about your brand and how do you make sure it is the right place so they can buy it when they need it?
PITCH – How do you convince customers, the board and the business this works for them?

EGL workshops introduce these ideas through case studies and then go on to provide a practical framework to apply them to your business. The workshop is a combination of lecture content, a 5 step framework and workshop session where teams create a plan for their team and their brands. This is grounded in evidence and what works as well ideas and imagination.

What is your customers problem? And how will you solve it?

Have you noticed that you only get your credit card out to buy something when you have a problem you need to solve? You don’t buy something just because you like it, or because you think it is clever or beautiful. Funnily enough, your customers behave in the same way.

People only buy things when the product or service helps them solve a problem that they have. 

Only once they realise they have a problem they need to solve do they choose the one they like or think is clever or beautiful. As a business leader you need to understand the customer’s problem that your product or service will solve. The product most likely to be chosen is the one that does this the best.

Often marketers explanations of a brands success or failure does not discuss whether the business is really helping to solve customer problems and does not consider the real motivations that cause people to want to buy products and then how they go on to choose your brand. Emotional engagement or appeal may well draw customers to choose one brand over another when there is little difference between the choices, but it cannot persuade people to repeatedly buy things that do not offer good solutions to the issue. Emotional engagement tends to be stronger with brands and products that do the best job. It is hard to have a strong emotional engagement with someone who does not help you in some way.

‘Banks should forget about profits and focus on service…’

In Marketing Week last week (6th June 2013), Anthony Thomson, founder and former chairman if Metro Bank develops on this thinking further by focussing on the needs of the customer before the needs of the bank; ‘profit should be a by-product of giving customers a better product, service or experience, not the reason for being in business…’

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Likewise Google’s dominance could be driven by the functional experience delivered to customers.  Their search engine strives to do a better job for customers than the others. They apply this principle not just to search results but also to the display of paid for advertising. They do not allow advertisers to be at the top of the page just by paying more money for the ad. The pay for click ads at the top of the list is the best available ads that deliver the best answers to search queries. In contrast Yahoo, Microsoft and Overture all have allowed advertisers to buy their way to the top of the list. Advertisers and search engine optimisers often appear on the press and on web forums debating the fairness or wisdom of Google’s policies for advertisers and for producing search results. Their analysis often assumes Google wish to maximise short term revenues rather than enhance the user experience. But really advertisers wish to manipulate the system to their advantage. Despite the fact that advertisers are the paying client, Google resist this.  What Google seem to keep remembering is that consumers of the search engine are who they must please the most.

What this insight shows us is the value of being a truly customer led business that never loses sight of its mission to deliver the best customer experience.

To read more about customer insight and how to effectively apply this to your business visit

What the election results can tell you about what is important to your customers

The European elections are all over our screens today (Monday 8th June).  This is a pretty big poll of public opinion (15m voters).  I have been having a look to see if the results provide any useful insights for business leaders and marketers.
At Differentiate we say you must understand what drives customers to choose one product over another product.  We call these drivers "Power Attributes".  This insight from Power Attributes analysis helps you develop products, services and marketing messages that are more attractive to customers.
These Power Attributes do not shift every month or even every year, but they do change over time as external factors influence what is important to customers.  2009 seems to be one of those times when big changes are affecting customer motivations.  The recession, the banking crisis and the UK political row over politicians expenses seem to have had an effect on what matters to customers compared to just one or two years ago.
Studying the aftermath of the European elections suggests that the themes that arise and we need toi explore are grouped into three A's – Apathy, Apprehension and Anger
Apathy and detachment is demonstrated by the fact that no party got more votes than last time.  Labour lost because they got a lot fewer votes.  It seems that Labour voters could not only not bring themselves to vote Labour but they also did not want to vote for anyone else either!
Apprehension and fear comes from uncertainty regarding our personal financial futures (will I have a job? will I have a pension? I have lost 40% of my savings etc.)
Anger seems to be directed at banks for rewarding themselves whilst squandering our money and politicians for giving even banks even more money and then fiddling their own expenses at the same time.

How is this relevant to marketers and business leaders? 

These emotions are out there and real.  They affect what really matters to people.  These kind of macro changes and customers' emotional responses means it is highly likely that the drivers of how customers choose what to buy in your market have changed in the past 12 months.
We have been looking for some indicators of what might be changing.  Exploring the Google search terms database is just one way to do this.  Here are some examples, we have compared May 2009 with May 2008.
What is up
Grow your own +500%
Best buy +20%
Green +12%
Good school +10%
Healthy +5%
What is the same
Value is level
Chocolate is the same
What is down
Organic is -25%
Holiday in France -23%
Gardening -20%
Luxury -15%
Banks -15% (a long term trend which has accelerated this year)
Cheap -14%
Security -6% (long term trend)
This brief analysis suggests a return to more basic human and community values and decreased interest in fripperies.  Whilst on the other hand, it shows that some basics will always endure like chocolate and value for money.
Making sure you understand how the fundamental drivers of choice are changing is one important tool to survive the recession.

Do you promote what you do well or what matters to customers?

If you want to discover the Power Attributes that
drive your customers
to choose your brand rather than the
competition, you have to have start by generating a list of possible
attributes.  When we help clients do this, we get the initial attribute list
from talking to the customers.  You can only really rely on customers to think
like customers.    However, the business team can think of attributes that
customers cannot even begin to imagine, so we also get some valuable attribute
ideas from the client management team.

We do
this through our facilitated workshop approach. 
These workshop
events often attract a senior audience.   When we work with these knowledgeable
and experienced managers we often find that the list of attributes is a list of
features or things that the company does well.   But that is not always what we
need.  We know that what will be powerful for the customer is a specific benefit
or a special way the business helps the customer solve a problem. 

for example the director of a financial services firm tells us that what really
matters to the customers is "we give independent
  which we translate  into a more customer focused
benefit "has independent advice I can trust", but when we talk to the customers,
this is still not good enough, the most powerful attribute turns out to be "makes my business more successful"

Time after time, we discover that the hot
power attributes are all about the customer
and the cold
attributes are all about the business and the brand.

Experience this week
brought this home to me and showed that directors
may not always be the best choice when we are generating potential insights
about what matters to customers.

In one of our current
projects we are trying to discover some Power Attributes in a whole new category
for the business.  We ran a workshop this week where we wanted to generate a
list of candidate attributes that we plan to investigate with customers.  The
investigation and consumer research will establish which attributes are most
powerful in influencing customers to choose a product. 

The project is being led by the sales director who helped
us bring a fresh approach.
Rather than directors, he invited a
number of the PA’s and front line team to the session and this proved to be an
inspired choice.  They seemed to think more like customers and in a more natural
way.  As a result, we have come up with a list I am confident is much closer to
what customers will suggest.  This means when we do workshops with the customers
we are already part of the way there and we will be able to spend time
discovering why the attributes are powerful rather than just generating the

Our ezine always aims to deliver practical advice, so I would
suggest you can take two things out of this When you are thinking about what is
important to your customers,

1.    always
challenge yourself to think "is this about the brand or about the customer" 
I can pretty much guarantee that if it is about the brand it
will not be that important to the customer.
2.    go and ask some customers or at least a few "real"
around the office, they might just shed some insight on
your thinking.

Our Power Attributes paper discusses how you can come up
with this insight in more detail click here

Give your customers a New Year Present

Happy New Year! There may not be a tradition of New Year presents but you can get your 2008 growth plans off to a great start by giving your trade customers a present.

I’m not suggesting you "re-gift" those socks from Auntie Dot at Christmas but rather you share some knowledge, free, with no strings attached, and no proposal at the end that you want them to agree to.  After all, these are the people who stand between you and your product getting into the hands of the people who use or consume it.  Why wouldn’t you give them a present!

In days gone by their critical role in the success of your business might have been recognised by a lavish gift.  All your competitors did the same.  That sort of behaviour is no longer tolerated but there is no ban on giving knowledge "gifts" that benefit the organisation rather than the individual.  And your competitors probably aren’t doing this which means it increases the relative value of your relationship with the customer.

Most of you will have gathered all sorts of new knowledge during 2007 whether from research, attending conferences or visiting other countries (and as an aside if you haven’t then you are behind the game because everyone else in your market has!).  You will have diligently figured out how to use this to best advantage to persuade your customers that your new initiatives will transform their business.  In the process you will have carefully screened out anything that will distract from the laser beam of logic that leads towards the inescapable conclusion of your desired outcome.  Whether your customers believe you rigged the research or not will depend on their preconceptions of the initiative in question.

This is of course a huge missed opportunity. The customer thinks you are only interested in your own business.  While in reality you have lots else you could share that they might find really valuable in the development of their own business.  And of course it is no bad thing to help them grow their business because if it grows then yours probably grows too. 

The knowledge or insight is best packaged as a single digestible thought rather than a long detailed analysis or report.  The real gift is making the insight useful and easy to assimilate.  This doesn’t take a lot of time; it is more of a mindset shift.  It doesn’t need formal presentations with all the expectations that this creates, often a simple email can be more powerful.  Something that reads: Hi, we were doing x, found out y that we thought might interest you, here’s some detail, hope business is good, see you soon.  It’s short, simple and shows you care about their business

Imagine the impact of doing this over time. Instead of always struggling to get meetings you might actually get an invite when they want to know more.  It might enhance the credibility of the research and insight evidence you use when you next have an initiative you want to implement.  And they might start to ask your view on more than just your narrow product expertise.  In other words they would value the relationship more and while a valued relationship doesn’t guarantee revenue growth, one that isn’t valued certainly hinders it.

This is a goal worth pursuing so, as sales and marketing teams, why not start the New Year with a new attitude towards customers.  Think not just about what you want them to do for you, but also what you know that might help them – and start handing out those presents.