Ethics in retailing: Co-operative News

Manchester’s hosting of the International Co-operative and Mutual Insurance Federation’s biennial conference was a great success. But amidst the presentations from chief executives of some world’s largest life and non-life insurers, arguably the stand-out contribution came from Nigel Waite, a consultant with the Canford Centre for Customer Development. He has been a marketing director with Lloyds and Barclays and is honorary professor of marketing at Nottingham University.

These days, Nigel concentrates on advising financial services firms on integrating the principles of fairness and value into their marketing strategies. He intervened several times during the ICMIF conference to emphasize the connections between the co-operative principles and the need for the finance sector to turn its back on practices that brought global capitalism to its knees and destroyed the personal wealth and wellbeing of millions. The News took Nigel to one side during the busy conference schedule to ask him how, in his opinion, the co-operative movement should respond to the financial crisis.

“First and foremost, co-operatives are commercial organisations, and so they have to, in their chosen segment – whether that be insurance, or banking, or funerals, or in food retailing – aim to be excellent at what they do and to give good value for what they do,” said Nigel.

“But I think they have to go beyond that. It’s a philosophical point – my view is that capitalism is the best way to allocate scarce resources. And the capitalist model is, I think, as opposed to the collectivist model, the most environmentally sustainable approach.

“The difficulty is that it [capitalism] has to work according to certain rules. And it is the absence of rules regarding values-based strategies – and the unbridled pursuit of growth as the primary purpose of commercial organisations – that has caused the crisis that we have experienced these last few years.

“Now it has come to a head. The issue of trust, and the lack of trust, has undermined the relationship of consumers with the financial services industry for decades. So it is a case of co-ops being in the market place, providing products and services where there is a genuine need, doing their best in terms of value for money, but doing it in such a way that they safeguard the interests of the stakeholders and operate in a way that ensures the sustainability of communities and the wider environment.”

One of the strong points that Nigel made in one of his contributions from the conference platform was the disconnect between banks that had strong corporate social responsibility (CSR) policies on paper, yet adopted practices – notably in the case of RBS – that were high risk, overly aggressive and commercially unsustainable. But was there a parallel, we asked Nigel, with parts of the co-operative movement that had got into bad habits by trading off their history and, until recently, failed to deliver in some respects on the standards – such as the condition of the retail trading environment – that consumers expected from them.

“You have two extremes there,” responded Nigel. “If you look at the [co-operative] supermarket side in the past, they have talked a good game, but very often as a consumer your customer experience has been extremely disappointing – poor quality products, for example, particularly on fresh fruit and vegetables.

“And that is why it [co-operative food retailing] has had to up its game. And I think the current ‘tag line’ of ‘good with food’ – and that seems to be reading across to ‘good with money’ as part of a consistent theme – is absolutely bang on. It has to be based on this fundamental principle that you have to compete with the best in terms of customer experience – so the retail side had to up its game in terms of consumer experience. It is improving, but it has a long way to go.”

Nigel went out of his way at the conference to praise the quality of retailing at Waitrose and the rest of the John Lewis Partnership. So should other parts of the co-operative family learn from this?

“It is a very different shopping experience at a Waitrose – and you do pay a premium, it has to be said, over its major rivals. But it has illustrated that you can combine that quality standard of products at a reasonable price in a way which is socially responsible and ensuring that the interests of staff are properly recognised and which is environmentally sensitive as well.”

So if these are the principles and approach that should be adopted in retailing, how might this translate in financial services – in particular for mutual insurers? “Let me give you an example,” explained Nigel. “The Co-operative’s general insurance business has introduced a new product aimed at young drivers, whereby they can elect to have a black box installed in their car and in real time it monitors their driving performance.

“Now this is a very real issue. I speak as a father of four and it costs more to insure a car than it does to buy the car. That’s because of the recklessness of a small minority of young drivers. The vast majority of young drivers who are not lunatics are penalised through these enormous premiums.”

Nigel argues that the use of technology to address a real consumer problem of restricted and costly access to an important financial product is an excellent approach. It brings together best practice in the use of technology, with an enlightened understanding of the principle of fairness, while creating opportunities for young people who otherwise risk exclusion from employment. It may also have a positive impact on drivers’ behaviour, by creating an incentive to drive safely.

“There is also an opportunity for a better environment, because there will be less cars written-off, lower repair bills and for the insurers there will be lower claims,” added Nigel. “That is a very concrete example of a great initiative coming from a co-op.”

What this illustrates – particularly from the Co-operative Banking Group – is the use of technology to recognise consumers’ personal circumstances and to move away from a long-standing practice in retailing to cut costs by treating all customers as the same. Comparable moves are being adopted in food and drink retailing, suggests Nigel, with Coca-Cola no longer selling just one recipe and in the one type of well-known bottle. Now it has a variety of recipes and a range of containers.

“We have moved from one homogenous type of segmentation, to a multiple approach to segmentation,” explained Nigel. “We even now talk about a segment of one.

“If you are in the service field, it actually lends itself more to customer identification, on the basis of this segment of one, than it does in the mass markets. But the problem historically has been that one-to-one, real time, interaction is expensive.

“So [the question] is how can the service environment recognise the individuality of the consumer and satisfy this concept of the segment of one individual. I think the black box from the Co-op Insurance was a great example of a real attempt to do just that.”

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