Agency: Leo Burnett Author: Jocelyn Horsfall

Bradford & Bingley Building Society: Building Business Through Advertising

INTRODUCTION

This case history sets out to demonstrate the effectiveness of advertising in generating short-term investment business for Bradford & Bingley Building Society in an extremely competitive and price-sensitive market environment in 1985. It shows that television advertising, as well as having an important awareness and image-building role, can be specifically and directly used to stimulate short-term traffic and funds through the branches, if and when the society has a particularly competitive savings product on offer.

The analysis shows that a specially developed tactical TV campaign for Bradford & Bingley, featuring a 'premium rate' product message, had a critical effect on new account openings in the High Street. In addition, the specific effect of this tactical TV advertising on consumer savings can be set alongside external factors such as interest rates and earnings, and compared with complementary advertising support such as press, and more image-based TV, each of which has its own particular role to play in the market.

BUSINESS BACKGROUND

The market

The 1980s will be seen as a period of immense change for financial markets in general and building societies in particular, with increasing competition from all sides and new legislation opening up further challenges to come. For the building societies, the early 1980s saw a significant slowing in the natural market growth that was previously enjoyed, with membership approaching probable saturation at well over 60% of the UK adult population, and rapid branch expansion a thing of the past. Not only were the societies' traditional market horizons narrowing, but investment funds were under severe attack from other financial institutions. The government's privatisation plans, targeted at the small investor, were a specific threat (British Telecom in particular); in addition, the introduction of composite rate taxation at source for the banks was forcing them to develop and market more efficient savings schemes in order to compete directly alongside building society net rates; also, National Savings were effectively left with a monopoly on attractive gross interest rate payments with which to encourage investors.

With market growth diminishing, building societies themselves were becoming more active and aggressive in competing with each other for the investment money they needed to fund a buoyant mortgage market. Traditionally, societies held most of their balances (about 80%) in Ordinary accounts, paying a basic rate of return for complete flexibility and accessibility in using the account. In 1980 Bradford & Bingley introduced the first Extra Interest account, paying a higher rate of interest (at the time 0.75% above Ordinary account rate) for 28 days' notice of withdrawal of money. This gave consumers a better return but without having to tie up their money for several years as in the then Term Share accounts. By the end of 1984, 64% of building society balances were in these expensive Extra Interest products and, with many now offering instant access as well, the money was becoming increasingly volatile. The industry was effectively trapped in a potentially damaging price war, with the need for ever-increasing rates squeezing profitability and encouraging consumer switching.

The consumer

Against this background of increasing activity and noise, consumers were was changing too. Previously content just to let their money sit idly in their local friendly building society, with little knowledge of interest rates or other opportunities, they were now becoming increasingly aware and informed, and much more sophisticated in their financial dealings. A new breed of knowledgeable, active investors was emerging, who were beginning to 'shop around', using branch window displays and the financial pages of the press to glean their information. By 1984 interest rates were becoming known almost to two decimal places, and products had to be very competitive indeed to attract custom; the consumer was acquiring a good nose for the best deal.

The Society

Bradford & Bingley, a middle-rank society at number nine in the league table, was in fact in quite a strong position in the early 1980s, with the following advertising and marketing factors all playing their part:

  • An intrusive TV campaign in the late 1970s ('Mr Bradford and Mr Bingley') had given the Society a very high level of awareness (third behind the two giants, Halifax and Abbey National, in spontaneous, top-of-mind recall from 1980 on).
  • Although well-branded, this campaign did not provide a great deal in the way of positive image values. In 1983/84 it was therefore built on with advertising that sought to develop more of a long-term added-value message about the Society's benefits. This was based on tapping into the opportunities provided by building societies at all the different stages of consumers' lives, to create the thought that Bradford & Bingley would look after their needs throughout life.
  • The Society has always prided itself on an excellent product portfolio, including, for example, the development of unique high-return, insurance-linked products as well as the introduction of the popular Extra Interest/Access range, which clearly had a significant short-term effect on business. Further products (eg Children's Savings) were also developed to fill any gaps in the consumer life-cycle.
  • Bradford & Bingley also has highly-trained branch sales staff, who have been very efficient at actually selling additional accounts across the product portfolio, once consumers enter the branch at whatever stage in the life-cycle they are.

However, by the end of 1984, with the market in such a competitive rate war, Bradford & Bingley needed to develop a strategy that continued to add values to the Society as a whole, yet enabled it to compete effectively on products (ie rates) in the short term, particularly against the new, sophisticated, active consumer.

MARKETING AND ADVERTISING OBJECTIVES

For 1985 and beyond, Bradford & Bingley was looking for profitable growth, that is, to increase both membership and monetary assets in an affordable and cost-effective way. In simple terms, a building society operates by attracting as much money as possible in through investments in order to lend out again as mortgages. Its trading picture, however, comes from the cost of obtaining this money as investments (product interest rates and promotional marketing costs) set against the income received from the same money lent as mortgages. For growth, attracting the money is critical, and both product and promotional components will clearly have an effect. The Society needs to balance the cost of these against the likely return it would be all too easy to go all out on the product side, and pull money in with a very high interest rate, but impossible to lend it out again at the necessary mortgage rate. Thus the promotional and hence advertising component is crucial to the operation.

In such a complex market, advertising can play many roles. With Bradford & Bingley, four key roles were identified:

  • To maintain 'front-of-mind' awareness of the society: an important criterion, as most consumers tend to feel happier with a 'known' (ie big) society.
  • To stimulate branch traffic to ensure recruitment, and to provide maximum opportunities for selling across the product portfolio: critical given the strong conversion factor shown by Bradford & Bingley branches.
  • To promote specific competitive investment products to potentially active consumers: whenever the rate was good, as much mileage as possible should be made from it.
  • To create a distinctive image of a building society that would meet consumers' financial needs at all stages of life: a longer-term task, providing the important emotional commitment to the society that would effectively husband the consumer and help pre-empt choice in the future.

These last two areas served to identify the key short- and long-term marketing opportunities, with the more general awareness and traffic issues being potential benefits of both. This paper is concerned with the short-term opportunity and response, although advertising which was developed to address the longer-term image values also has a part to play.

Marketing objective

The specific objective was therefore to generate short-term traffic and funds when the society had a particularly competitive investment product.

Underlying this objective was the need to maximise the impact and coverage, and therefore the response, so that the potential returns would justify the marketing effect. In a fast moving marketplace it would be important to assess a likely 'edge' very quickly; it could come from one of several products, although likely to be in the Extra Interest/Access spectrum; it would certainly be short-lived.

In addition, of course, a rates message from Bradford & Bingley would also have a less tangible benefit it would help to convey a general Society message of 'a good place to invest'.

Advertising strategy

ObjectiveTo convey (when appropriate) that Bradford & Bingley offers better rates
than other building societies with one of their key accounts.
TargetPrimary: 'Active' investors, ie adults with existing building society
savings account of reasonable size (£1000+) who are interested/involved
in making their money work for them.
Secondary:All potential building society account holders.
Key thoughtBradford & Bingley's Extra Interest/Premium Access/Real Gold account
gives you a better deal than any other society.
SupportInterest rates.
Tone/characterAssumptive.

ADVERTISING IMPLEMENTATION

Media

Television was chosen as the main medium, for impact and fast, effective coverage build in a fast-moving market. This meant a degree of flexibility required in laying down the budget, with broad timings agreed for bursts across the year, but the exact deployment of the particular tactical execution (as against the image campaign also running) often not finalised until the last moment. In the end, the rates message was run exclusively in January and February 1985 and as part of the bursts in May and June 1985 and September and October 1985, delivering a total of around 1,700 30-second equivalent TVRs.

In addition, there was a continuous press campaign, directed specifically at the key target of active investors in the money pages of selected newspapers. This was their kind of environment, and where they went for information. Whilst a continuous dialogue was felt to be important, the opportunity could be taken for a particular product or rates message when appropriate. The total press spend was just under £1 million, of which specific tactical rates messages accounted for around 80%.

Creative

A very single-minded better deal message was created in a 40-second commercial called 'Early Closing', using the idea of even other building society managers wanting to put their money with Bradford & Bingley. It was shot very distinctively in black and white Ealing comedy style, with the whole ad having an involving, humorous feel to it. Very importantly, on a practical note, it was made and shot in such a way that the interest rates, and indeed the product itself being featured, could be changed at short notice.

The press advertising running alongside this incorporated a number of different executions conveying the rate message.

CAMPAIGN EVALUATION

The results of Bradford & Bingley's tactical rates advertising ('Early Closing') in 1985 have been evaluated via indirect as well as direct effects on the business. The indirect measures cover consumer response to the campaign in terms of the awareness generated and the opinions formed from the advertising, using continuous, quantified tracking data from Millward Brown and ad hoc qualitative research from Consumer Connection. The direct sales effects are assessed in terms of the contribution made by the advertising to total new account openings, taking account of the influence of other factors as well. Finally, a monetary value is attached to the effect identified.

Indirect evaluation Tracking

The first conclusion to be drawn about the advertising is the fact that it had great impact, and was associated with significantly increased advertising awareness for Bradford & Bingley. A computer analysis showed a clear correlation between TVRs and awareness, defined in terms of a base, or underlying level of knowledge, and an awareness index giving the percentage increase generated per 100 TVRs.

This represented an improvement on the previous year, and confirmed Bradford & Bingley's position behind only the mighty Halifax (awareness index of eight) and the Woolwich (awareness index of seven), ahead of many much larger, higher-spending societies. Although difficult to completely disentangle 'Early Closing' from the other image advertising in the later bursts of the year, the tactical execution was the one that achieved the highest recall in all periods.

In addition, the advertising was associated with a high top-of-mind awareness of the Society itself across the year, with Bradford & Bingley maintaining their key competitive advantage of being the third best-known building society despite being the ninth in size (see Figure 1).

Moving into a more detailed response to the advertising execution itself, the tracking study data showed that all those recalling the tactical campaign were taking out of it a very clear and single-minded message of 'better interest' at Bradford & Bingley (Table 1).

TABLE 1: ADVERTISING COMMUNICATION

Base: all recalling 'Early Closing'362
%
More/better interest/better returns59
Save/invest with them15
Source: Millward Brown

Over and above this, it was clear that the execution was itself very well liked, and found to be enjoyable and humorous, which had clearly helped make it noticeable and watchable. Furthermore, when our primary target of active investors were examined (defined in this instance as those who were attitudinally disposed to switching their money around), it was encouraging to see that the message was indeed getting through to them and making them relatively more interested in Bradford & Bingley (Table 2).

TABLE 2: PROMPTED OPINIONS OF ADVERTISING

Average
Activeof top ten
Totalinvestorssocieties
Base: All recalling 'Early Closing'36287
%%%
I enjoyed watching it403730
It was quite humorous565329
It made me more interested in the Society81512
Source: Millward Brown

Indirect evaluation Qualitative

Qualitative research in the form of group discussions among active investors towards the end of 1985 also provided further encouragement as to the way the advertising had been received in the market. 'Early Closing' was certainly seen to be clever and humorous, and distinctive in style from the run of building society advertising. The appeal and watchability of the commercial had given the Society a very strong visible presence on TV, and prompted a shift in imagery: Bradford & Bingley was seen as moving into the big league, but with important warmth and human values to counterbalance a somewhat dry, old-fashioned image legacy from the past.

Direct evaluation Sales

In order to provide a more definitive assessment of the effect of tactical advertising on Bradford & Bingley's business, an econometric analysis of sales was undertaken. This involves developing a model of the market which establishes a numerical relationship between sales and a number of variables which could have had an effect on them. The computer analysis determines the degree to which these factors (individually or in combination) do have an effect in explaining or matching historical sales data. In this way the advertising component in the mix can be isolated and quantified.

In this instance, sales were taken as total new account openings per week at Bradford & Bingley, which was felt to provide a good overall measure against which to assess the effects of the advertising. More specific data on individual accounts was felt to be misleading, as one of the featured products was withdrawn, and one newly introduced over the period in question. Perhaps more importantly, there is often an interrelationship between products (ie a positive effect on one can impact negatively on another), so an overall measure has more meaning. In addition, total account openings would enable the branch staff's ability to cross-sell additional products (not just the one being promoted) to be taken into account.

The analysis period was taken as both 1984 and 1985 (in order to provide a fuller picture, and obtain an evaluation of the year in question in the context of what had gone before) and the explanation of sales or new account openings was examined on the basis of the following variables:

  1. Tactical (ie 'Early Closing') TV advertising expressed as weekly 30-second equivalent TVRs.

  2. All other (image) TV advertising again expressed as weekly 30-second equivalent TVRs.

  3. Press advertising in the form of weekly expenditure (£000s).

    N.B. All the advertising components were converted into a notional effective advertising weight in any given period (termed 'adstock'), in order to take account of the decay effect of advertising ie that it has both an immediate effect and a (diminishing) subsequent effect. The computer analysis determines the most appropriate decay rate in this instance, equivalent to the total effect of any advertising being half over in four weeks.

  4. Average Earnings index of average earnings in the economy in Great Britain on a monthly basis (Department of Employment). A measure of total income was felt to be a factor in the amount of discretionary savings money available, and hence society account openings.

  5. Interest Rates some measure of the rates Bradford & Bingley were offering in general, and on their Extra Interest/Access accounts in particular, was clearly important. It did, however, prove impossible to isolate a Bradford & Bingley competitiveness scale, which took account of both the rate offered and the conditions attached (eg notice period) in any comparison with other societies. In the end, competitiveness was assumed (Bradford & Bingley would not have advertised if it was not offering a good deal), and a general measure of building societies' rates as they stood in the market was therefore used.

    Traditionally this has been taken as the difference between the Building Society Association (BSA). Ordinary account rate and the Local Authority three-month deposit rate. Interestingly, in our analysis a more useful diagnostic was the difference between BSA rates and those paid by commercial banks on their small deposit accounts, indicative of the increased direct rivalry here.

  6. Seasonality apart from January and February, when the market is traditionally buoyant, account openings have shown very little underlying seasonality in the last few years, with short-term factors such as privatisation issues having far more effect. While Bradford & Bingley did have one of its bursts of advertising at a seasonal peak, the others were not specifically tied in to a market movement. In the event, a specific January/February effect was not isolated, but a variable corresponding to the very low sales in the last week of the year was needed.

  7. Distribution the incidence of new branches added to the network could clearly have had an effect on account openings. However, an examination of the data showed that the number of branches remained practically constant over the period, so this was not a factor put into the model.

The analysis of all this information proved extremely interesting. A model was obtained which provided a reasonable explanation of actual accounts opened (R² = 0.67, ie 67% of the variation in sales being explained), based on the equation overleaf (and shown in Figure 2).

New accounts = 484.74*interest rate differential + 117.79*average earnings + 56.36*tactical

TV + 22.54*image TV + 0.037press 4459.76*week 52 seasonality factor 13920.98.

This equation means that the general building society interest rate and average earnings are both very important in determining whether any new accounts are opened up or not, which clearly makes sense. More important for Bradford & Bingley, however, is the fact that all the different elements of its advertising mix can be identified as having a positive effect on account openings, but the tactical 'Early Closing' advertising makes the biggest contribution, with press and image advertising having a somewhat smaller effect, as explained below:

  • Tactical: The advertising here has a very respectable elasticity of 0.11, meaning that a 1% increase in TVRs would produce a 0.11% increase in accounts. Put more simply, an increase of one (30-second) TVR per week with this campaign would produce an additional 56 accounts per week.

  • Image: As one might expect, a longer-term campaign of this sort produces less direct sales response. There is an effect identified, however, corresponding to an additional 23 accounts per week for an increase of one (30-second) TVR per week (elasticity 0.05).

  • Press: Here, on a slightly different basis, a response equivalent to an additional 37 account openings a week would be the result of an extra £1000 spent per week.

Clearly, Bradford & Bingley's advertising, and its strong tactical rates advertising in particular, has been shown to have had a direct effect on sales. Indeed, the model demonstrates very specifically the degree to which the different kinds of advertising have a role to play in generating short-term business for the Society, which has important implications for future planning. Obviously, in developing an optimal advertising policy, one needs to take account of the potential longer-term effects of advertising as well, in contributing to the overall standing and image of the society.

Finally, in order to appreciate fully the extent of the advertising effect identified here, an attempt has been made to translate this into a monetary value. The standard measure of business success in the savings market is in the form of incremental sales, or net surplus of funds into the society (ie total income minus total withdrawals across all accounts). Bradford & Bingley's total new account openings in 1985 provided a surplus of £240 million over the whole year, with a simple calculation showing that each account on average contributed around £400. Using the advertising effects identified above, it can be seen that for 'Early Closing' alone, an incremental 100 30-second equivalent TVRs (average cost in 1985, £120,000) provided an average net gain of 100 TVRs x 56 accounts x £400 surplus = £2.4 million. This is clearly a very impressive rate of return, and underlines the critical contribution of advertising to Bradford & Bingley's business success.

CONCLUSIONS

This analysis has shown that Bradford & Bingley has been successful in generating short-term traffic and income through advertising. In particular, the use of a highly impactful, amusing and involving TV commercial to tell a 'premium rate' product story when appropriate, was crucial in attracting business in an extremely competitive and price-sensitive market.

Furthermore, an interesting lesson for the future has been learnt in terms of the complementary roles of tactical and image-based TV campaigns and the use of press alongside them. Clearly, each has a part to play in generating immediate business, as well as contributing to the standing and perceptions of the Society in the longer term.

NOTES & EXHIBITS


Bradford & Bingley Building Society: Building Business Through Advertising

FIGURE 1: BRADFORD & BINGLEY SPONTANEOUS BRAND AWARENESS

Source: Millward Brown

Bradford & Bingley Building Society: Building Business Through Advertising

FIGURE 2: BRADFORD & BINGLEY NEW ACCOUNT OPENINGS