Home Loan Wars
This blog could very well be called “And then all of a sudden something magical happened”, because that appears to be the current NAB banking strategy.
It’s no secret that NAB has decided that it’s going to have to change tack in the Australian banking landscape. That languishing so far behind CBA and Westpac (WBC) in market share and locked out of further mergers by the Government, the bank is required to reinvent itself.
So here’s the theory which has clearly had sign off at the highest levels of the board room: If we change tack, become the people’s friend and by doing this get lots more customers – we’ve got a reasonable shot of putting a sprint on in terms of customer growth and affection and staying in touch with the CBA and WBC.
So the bank spends millions on the “we’ve killed the asterisk campaign,” then launches its home loan wars campaign, spending a rumoured $5 million to try to get people to switch to NAB.
Then it waits to see what happens.
What happens is that the other banks, at least WBC and the CBA, respond vigorously – WBC only waited a day, attacking the NAB with double page ads in the Daily Telegraph and the Herald Sun promoting its low cost offers, and the CBA only three days, later diluting the message that NAB was a bank that is the people’s friend.
The upshot of this is great news for the consumer – at least those that are taking out new loans (there is no loyalty bonus at work here apart from the fledgling offer being made by NAB offshoot Ubank) because the banks are competing on price, making it cheaper to get a loan.
The question is, will it really work? In the past eight years of customer research CoreData has no real evidence that, within tolerances, price alone is a significant driver in home loan market share.
Rather, CoreData finds that what really drives your ability to get share is the effectiveness of your sales channels (direct, branch, third party, mobile, online – whatever you choose) and the clarity of the utility of your offer to the market place.
Utility in homeloans is a function of three core drivers: security (that is the idea that you are doing business with a provider that is secure, which is really important in this post GFC environment); that the price is good (again within tolerances – very cheap usually implies risk in the customers’ mind) and how quickly you can get the deal done.
Now the NAB is in a curious bind with this offer. The offer is good (in truth some of the NAB packages – especially the bundled offers are really very good) but now the bank is not really the cheapest loan in the market (consumers by and large think that’s the CBA), it isn’t the fastest home loan processor (that’s CBA too – 20 days on average to settlement as far as our data goes) and it isn’t the best distribution team – that award goes for the second year in a row to CBA Mortgage Innovators – who has something of (ahem) a mortgage on that spot after wrestling the title from Mortgage Choice in 2009.
In fact you can split the mortgage market into neat little bundles: on the retail side its CBA and WBC slugging it out at the top, both seen as secure and good distributors of product with pretty efficient in branch teams, then NAB and ANZ.
ANZ, after dominating the in branch sales processes from 2006 – 2009 have let that mantle slip and now appears to be the destination of choice for complex loans for the broker market, once the preserve of the NAB.
But there are some signs of positive news for NAB; CoreData’s Mortgage and Cash tracking reports show that the bank is actually gaining share in the market – that the message is resonating – but the question now remains at what cost?
The cynics among us would argue that by stripping what is reported to be $200 million from the bank’s income base by getting rid of fees and now adding cost by paying people to churn to NAB – the bank has seriously attacked its income base and that unless something changes – that money will never return.
In which case, the next line of the board plans had better be “and then something magical happened”.
One Comment on “Home Loan Wars”
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bindi says:
Anyone within the home loan market will tell you that – yes – Nab/Homeside have well priced products, but their levels of service are woeful!