Three years after National Australia Bank claimed it was ”breaking up” with its rivals, its strategy is undergoing a subtle but significant shift.
Nanjing Night Net

The 2011 marketing campaign centred on cuts in fees and a pledge to have the lowest advertised mortgage rates, but personal banking group executive Gavin Slater now stresses lending is not a ”commodity” business.

”Just to have a purely price-led strategy is dangerous,” Slater says. ”Price will always be important, but our experience is if you have an upset customer, they don’t leave you over price.”

Executives often say they would prefer to compete without cutting their profit margins, of course.

But at least among NAB bankers gathered at a function centre in suburban Melbourne, Mr Slater’s message appears to be filtering through to the frontlines.

He made the comments last week while visiting staff for the bank’s ”customer connect day”, where 15,000 NAB employees nationally put aside regular duties to phone up customers and non-customers, to say thanks or try to arrange a sales meeting. About 50,000 calls were made and there are hopes it will generate several billions of dollars in ”leads”.

It’s hardly a typical day at the office. Bankers turned up in fancy dress and BusinessDay was invited to observe. However, one theme is recurrent. Bankers are singing from the same song sheet as Mr Slater when it comes to how they compete for customers.

One recounts how he arranged a meeting with a business customer they are trying to wrestle from the Commonwealth Bank. Cost will inevitably come up in negotiations, he says, but he managed not to discuss interest rates on the phone.

Mr Slater, who also gets involved by calling up a 90-year-old customer who has been with the bank for 70 years, argues days such as this help to improve NAB’s culture of customer service. He says this can be just as important as the cost of a loan. ”I don’t want our staff to be dependent on having the lowest cost,” he says.

The contrast between this type of rhetoric and NAB’s previous pledge to offer the lowest standard variable mortgage rate is notable.

But just how much the emphasis on service really matters to customers is debated by analysts. Home loans are fairly homogenous products, after all. Fees and rates are the most important reasons customers left their financial institution, a 2012 survey by Nomura analyst Victor German found.

”Once you step outside the big four banks there are some major differences, but I think between the big four, price is the biggest driver,” Mr German says.

Nevertheless, NAB’s renewed customer service push comes when there is talk of a mortgage price war, with larger discounts being offered to customers.

Investors, eyeing any impact on profit margins, are still divided over the success of NAB’s previous ”break up” strategy.

BBY analyst Brett Le Mesurier says that despite NAB’s pledge to have the lowest standard variable rate until late 2012, its Australian loan growth was the slowest of the majors between 2011 and late 2013. ”It has not been a winning strategy,” Mr Le Mesurier says.

Mr Slater maintains the ”break up” was needed because the bank had been losing customers in the lucrative retail segment. Its customer satisfaction ratings were also lagging – these are now second to the Commonwealth Bank.

”We’ve always been a strong business bank. In some ways I think we neglected our retail bank,” he says.

Over the past five years, its market share in home lending has risen from about 9 per cent to 15.34 per cent – but he stresses there is more to be done. Now, however, the bank is increasingly trying to win business through its people, as well as competitive prices. ”Fundamentally we are a people business, and it’s about each one of us reaching out to our customers and having a conversation,” he says.

The message may be filtering through to staff – the bigger test will be how customers respond.

This story Administrator ready to work first appeared on Nanjing Night Net.