Contemporary Issues in Marketing Practice Online Tutoring

SECTION 1: BRAND AUDIT TASKS

Part A:    Market Insights

The Cooperative Bank Ltd. is a registered bank in New Zealand that provides the everyday banking services including deposits, insurances, loans, savings and the financial support to small-businesses across the country. It was setup in 1928 and got registered as Co-Operative Bank in October, 2011 (The Co-Operative Bank, 2020). It operates in the dynamic and evolving banking industry in New Zealand. During 2020, it showed a 16.4% capital ratio with 5% rise in non-interest income and 4% increase in both mortgage lending and deposits (The Co-Operative Bank, 2020).

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Business Environment & Key Trends

The Co-Operative Bank is operating in the Banking & Cooperative Sector of New Zealand. During 2020, the banking industry experienced a decline due to consistent cash rate cuts since 2015. However, the value of the overall banking industry assets boosted due to strong residential property market and the mortgage lending activities over past half decade. The overall market size of banking industry of New Zealand was $25bn with almost 859 businesses operating within it. The Co-operative sector of New Zealand contributed more than $42.3 bn per annum out of which The Co-Operative Bank had an asset of $1.8bn. However, many factors shaped the recent financial performance of The Co-Operative Bank in New Zealand as discussed below:

Trend 1: The major factor that increased the expenses around bad debt to go up from $3.6mn in 2019 to $8.2mn in 2020 was due to increased provisions, credit losses and customer bankruptcy likelihood caused by the COVID-19 pandemic. The bank had to offer over 2500 loan payment deferrals i.e. 8% of the total home loans and personal loans  (The Cooperative Bank, 2020). This negatively affected the Bank’s profitability. However, during the pandemic, the commitment and value of the brand increased for The Co-Op bank as it offered excellent working conditions amidst lockdown and customers support by proactively contacting thousands of customers to offer support in times of financial crunches. Through this, The Co-Op bank encouraged customers to remain in contact during financial challenges for getting deferrals. This placed positive outlook of The Co-Op bank in New Zealanders’ minds.

Trend 2: In the end of 2019, RBNZ raised the minimum capital levels for the banks over the seven years’ timeframe. It confirmed that the banks including Kiwibank, SBS and Co-Op Bank will have to hold a 16% of the capital from 10.5% (Beckford, 2019). This decision could have both positive and negative spillovers for the Co-Op bank as it might widen rather than reduce the competitive gap between the small and large banks. With this plan, the banks in total would be required to rise more than $20 bn for increasing the reserves that will increase the expenses for The Co-Operative Bank and might impact the customers  (The Cooperative Bank, 2020). It is expected that the expenses due to capital increases would be mostly borne by the customers in terms of increased operational costs. This might impact the brand strategy of The Co-Op as the increased costs will not be taken in happily by the customers  (The Cooperative Bank, 2020).

Trend 3: With arrival of FinTech, the global banking industry has been influenced by digital disruption. FinTechs have been opting to realize the benefits of digital banking for becoming more efficient and offering better customer experience (PwC, 2020). Every financial institution can use digital banking as the chance to shine by putting their best face forward through use of websites, digital media tools and mobile apps (Siracusa, 2018). According to PwC (2020), great brands are not made because of their good quality of products, size of the market or level of consumer recall, but it’s also about how the brands resonate with specific customer segments so that they can self-identify the brand while making their choices. Digital apps provided through iOs devices and android help customers manage their banking needs. In 2020, The Co-Op Bank catered increased number remote customer interactions. This is clear indication of online preference over brick and mortar banks (PwC, 2020a). Also, during 2017, The Co-Op Bank launched online EFTPOS in the internet banking and mobile app (The Cooperative Bank, 2020). It enabled the customers for shopping online for goods and paying through their own transactional accounts. The shift towards changing customer needs and adaption of online banking seems to positively enhance brand image of The Co-Operative Bank, New Zealand.

Trend 4: The playing field is recently shifting from global to local as more and more regional and national institutions are emerging at a dominant position (PwC, 2020a). Developed international banks have been retreated to focus on their home markets and to compete at local levels. The historical advantages in terms of economies of scale enjoyed by international banks have been outweighed by the local regulatory constraints  (PwC, 2020a). There is a shift towards local lending being matched with in-country deposits. Therefore, for building the brands, institutions are required to emerge as local constrained so that they can balance local-customer needs.

According to research by MYOB (2019), around 54% of the Kiwi consumers prefer purchasing services and products from New Zealand owned and operated business (either by visiting brick & mortar stores or through online). Despite of COVID-19 pandemic, New Zealanders still favor local businesses that support The Co-Operative Bank’s brand portfolio growth. Stock (2017) outlined that customers who bank with Kiwibank or the Co-operative Bank are far less likely to switch the banks. The report by Roy Morgan (2019) showed that the four big banks i.e. BNZ, ASB, ANZ and Westpac earned far less customer satisfaction scores as compared to the scores for Kiwibank, TSB and The Co-operative Bank (see figure below). Hence, emerging and providing services as a locally owned bank can strengthen The Co-Operative Bank’s brand reputation (Roy Morgan, 2019).

Market Opportunities

In order to strengthen the current brand equity of The Co-operative Bank in New Zealand, following two opportunities are suggested based on the identified trends above. According to Nam et al. (2011), the high satisfaction rate of customers is likely to strengthen the brand equity by increasing number of loyal customers. Similarly, improving brand awareness through brand identification and recalling can help the banks in building a powerful brand against the competitors. In order to do so, customers must have feelings associated with brands and the firms can induce special features in the audience minds. Through special features, the brand’s recalling will enhance.

Opportunity 1: Digital Banking Solutions:

Due to the increased digitalization, many financial institutions are already partnering up with FinTech companies for providing digital solutions to facilitate the customer needs (see figure below). The financial industry is going through the 3^rd wave of digital transformation driven by blockchain, IoT, Robotic Process Automation (RPA) and API Banking due to which the digital only banks are rising as compared to the branches only banks. Hence, by grappling the new-age technologies like blockchain, IoT, AI and RPA, The Co-operative Bank in New Zealand can gain several advantages. In New Zealand, 70% of millennials use mobile apps as compared to only 17% of older New Zealanders who use online banking (Anne, 2019). This provides huge opportunity for the banks to further engage with this market by using new-age technologies.