Barclays' half-year results, announced earlier this month, came as a disappointment to the ambitious high street bank. Pre-tax profits fell 6% to £1.75bn from the same period last year, hit by a sharp rise in provisions against bad debts in Argentina. The results were worse than expected and Barclays' share price fell 8.6%.
But chief executive Matt Barrett insists that the company's individual businesses performed well, saying: "We remain on track to deliver our strategy and our performance goals."
Barclays wants to strengthen and extend its core UK banking franchise; extend other businesses such as Barclays Private Clients, Barclaycard, Barclays Capital and Barclays Global Investors; grow its retail and commercial banking presence in Europe; and build a leading position in UK and European wealth management. It also wants to enhance its organisational fitness by building what Barrett calls "world-class and industry-leading capabilities in marketing and brand management.
In April 2001 Barrett appointed Simon Gulliford, former marketing director of consumer magazines publisher Emap and one-time head of the marketing faculty at Ashridge Management College, to help him achieve the feat.
Gulliford, Barclays' first group marketing director, was charged with bringing a fresh perspective and innovative thinking to Barclays' vision to be more customer-led.
Gulliford wants to engender the kind of customer loyalty toward Barclays currently enjoyed by Tesco. "We don't want to be Tesco, but I think it is a very good example of transformation on a sustained basis over a period of time, he says.
It took Tesco ten years to become world class; Gulliford believes Barclays can achieve the same feat in five to seven years. Barclays has the twin advantage of having money to invest and high-quality customer data. "Provided you can configure that data from a customer-led perspective rather than a product-based perspective, it turbo charges your effort, he says.
But in a climate of growing consumer cynicism and propensity to switch banks, along with the challenge of differentiating what are essentially commodity products, Barclays has a mountain to climb to rebuild its image as a trusted provider of innovative products and services.
The high street bank is no stranger to controversy. In the past it has raised hackles for threatening to introduce ATM charges and ads have been banned for misleading claims that it could clear customers' personal cheques in 'six working seconds', and that internet banking was available 24 hours a day.
More recently Barclays, along with the other big banks, has been criticised by a Commons Treasury committee for complex credit card charges and for charging small businesses too much interest. As John McFall, chairman of the Commons Treasury committee, says: "The perception is that the consumer is being ripped off."
But Gulliford aims to change all this. His obsession with customer needs has driven his own efforts over the past 15 months. He lost little time in identifying and changing the bank's supply-side focus. "There was no central marketing function and autonomy and authority to act were delegated down to the business units, he says. "As a result, marketing was fragmented and focused on a desire to shift products rather than help customers reach their objectives. It was a classic seller-centric disposition."
Strident messages
Because there was no integrated organisation-wide marketing plan, customers were being bombarded with communications from all quarters. "That just creates noise, says Gulliford. "I'm a great believer that less is more, so long as what is being delivered is strident and distinctive."
The image of Barclays was tarnished by its 'Big Bank' campaign in 2000, which reportedly lost the bank customers every time one of its ads went on air.
"People don't like the idea that they are a gnat on the face of a huge organisation that controls their lives, and the ad came over as smug and condescending, says Simon Ratcliffe, managing director of brand futures and innovation at Corporate Edge. And Barclays' major gaffe was to launch the campaign at the same time it announced widespread branch closures.
But in May Barclays made a fresh attempt at above-the-line advertising.
The campaign - 'Fluent in Finance' - features US actor Samuel L Jackson delivering monologues on issues that surround money, such as secrecy and evasiveness, with the endline 'Money speaks in many languages. Barclays speaks them all'.
Gulliford believes most bank advertising is over-simplistic, arguing that UK consumers are both ad-literate and sophisticated about their banking needs. Barclays' approach has been deliberately thought-provoking rather than handholding.
Gulliford claims the ads have had "an enormous impact with Barclays' 20- to 35-year-old key target audience, and says overall there has been a 24% increase in customer recruitment during the campaign compared with the same period last year.
It was also the eighth most written-about campaign during the second quarter of this year, according to the Ads that Make The News survey compiled by Propeller Communications and Media Report Editorial. But market watchers remain unconvinced.
"It's easy to be different with your ads, says Mike Sommers, marketing consultant and former marketing director of TSB. "But Barclays could achieve that by having Matt Barrett going on TV and dropping his trousers. The ad might well be memorable, but is it distinctive, is the message relevant?"
Mike Godliman, commercial director of marketing consultancy Pragma, points out that image and brand association are critical differentiators in a commodity market. But Sommers believes the Samuel L Jackson campaign merely reinforces people's perception that Barclays is "arrogant and out of touch and that the advertising money should have been spent instead on improving and communicating its basic banking service.
Corporate Edge's Ratcliffe agrees. "It has potentially created another superior advertising tone of voice, he says. "Most people want the basic things done well, rather than whizzy clever things. They want fairness, openness and a sense that the bank will stand by them. If Barclays really wants to differentiate itself, why doesn't it offer the highest current account interest rate, or automatically move people onto more advantageous savings rates, for example?"
Barclays' advantage has always been one of scale, continues Ratcliffe, and that has driven the business. "Now it has to make scale work for the consumer rather than being big for big's sake."
Gulliford restructured marketing, whereby the marketing directors (or 'business partners') of each of the company's principal businesses - personal financial services, the Woolwich, Barclaycard, business banking and so on - report to him as well as to their own divisional heads.
Marketing restructure
They can also draw on 'centres of marketing excellence' headed by directors of marketing operations, brand strategy and customer insight. Both groups are backed by central support teams providing marketing integration, change and strategy and finance expertise.
Gulliford also slashed the number of below-the-line agencies from more than 60 to five. Marketing is now more integral to decision-making, more responsive to customers and communications are better targeted and more consistent.
Customer-focused initiatives introduced over the past year include longer branch opening hours, an alliance with Legal & General to sell life and insurance products and, crucially, Open Plan, an account that allows customers to offset their savings against their mortgage payments.
Within five months of its launch in March, 1.4 million customers had signed up to Open Plan - just short of Barclays' 2002 target of 1.5 million and more than the combined customer base of Halifax's If and Royal Bank of Scotland's Virgin One, according to Gulliford.
Open Plan is a key mechanism for building customer loyalty, he claims.
After years of relying on customer apathy and fear, banks now have to work hard at both winning and keeping customers.
"One of the reasons we need to think more and more like retailers is that the customer just got smart and is figuring out how to get a great deal, he says. In the past people were more likely to change their spouse than their mortgage: now they will switch mortgage every four-and-a-half to five years. That gives banks bigger and more frequent opportunities to influence them.
The age group most likely to shift their accounts are the 20- to 35-year-olds and Barclays is focusing its efforts on this demographic. "The idea is to hook them in with a fantastic product, provide them with fantastic service and keep them by pitching the right things at them at the right stage."
Gulliford borrows unashamedly from the retail sector. Next month (September), Barclaycard customers can collect points at Debenhams, Sainsbury's and BP when the company joins Nectar, the biggest loyalty scheme ever launched in the UK.
There is a new 'back-to-the-floor' scheme - "The best way to find out about customers is to watch and listen to them, says Gulliford. And Barclays customers will shortly be able to check their statements online.
But Gulliford displays a refreshing cynicism about marketing jargon and fads. While data can now be transferred from Barclaycard to other parts of the business, allowing it to offer incentives, such as cinema tickets for frequent cinema-goers, he shies away from marketing tools such as customer lifetime value calculations. "The notion that you predict people's life trajectories based on two or three pieces of information is nonsense, he says.
Likewise, a new customer segmentation model will be operating early next year, but it will segment according to customers' requirements, rather than Barclays' own products.
What may prove a controversial aspect of Barclays' segmentation strategy is its approach to children. Barrett let slip to the Commons Treasury committee that "the net present value of the baby in the cradle is quite attractive and suggested that "low-level credit-card capability might be a good thing.
While the Barclays PR machine tried to pass Barrett's comments off as a joke, Gulliford is deadly serious. "In future more transactions will take place on plastic than with folding money, particularly as e-commerce grows. So I think pocket money will be far more likely to exist on plastic or via a mobile phone."
Finance focus
Gulliford believes there is scope for significant growth across the business.
But rather than trying to stretch the brand into other areas - a move into utilities has been mooted - he believes that the bank must stick to its knitting.
"Barclays is in the business of money and ultimately we have to provide 'effortless expertise' about money. That will be what distinguishes us. If we enable people to get better value from their money through our ability to strike terrific deals with partners such as Legal & General, retailers or car manufacturers then great. But money lies at the heart of it."
But investment analysts believe Barclays is trying to be too clever. The Samuel L Jackson campaign hardly depicts the friendly face of banking that Gulliford wants Barclays to project, says one. What's more, adds the analyst, financial services products are complicated enough, and trying to gloss over that fact arguably plays into the hands of the regulator.
"Barclays should concentrate on providing a good core banking service to Mr and Mrs Middle England. That's where the real value lies, says Ed Firth, banking analyst at Credit Lyonnais Securities Europe.
Barclays' role model Tesco knows a thing or two about Mr and Mrs Middle England. Years ago, when the supermarket decided to shed its cheap and cheerful image, it looked at its basic product offer and upgraded it in every dimension. Only when it had its products, packaging and in-store presentation right did it move toward the service platform encapsulated by 'every little helps'.
Likewise, Barclays needs to demonstrate that it is working toward a better relationship with its customers before it shouts about it, says Ratcliffe.
"The danger with the latest ad campaign is that it may create more unfulfilled promises, which will compound the very cynicism it needs to dispel."
UK HIGH-STREET BANKS
Barclays Royal Bank HBOS LloydsTSB HSBC
Group
Staff 60,400 111,500 60,000 77,000 49,000
Customers 19.8m** 10.43m 25m 16m 6m*
Branches 2084 2293 1200 2300 1666
*plus current accounts
**current and savings accounts
TIMELINE - BARCLAYS
1690: John Freame and Thomas Gould establish the bank that will become
Barclays, as a private Quaker partnership in Lombard Street in the City
of London.
1694: Bank of England founded.
1736: James Barclay becomes partner. The bank is now known as Freame &
Barclay, Bankers.
1896: New joint-stock bank formed - Barclay & Company - also known as
the Quaker Bank - 182 branches, mainly in the South-East and East.
1927: Barclays has 1837 outlets.
1966: Barclays launches the UK's first credit card - Barclaycard.
1967: Barclays installs the world's first ATM.
1981: Barclays is the first foreign bank to file with the Securities and
Exchange Commission in Washington.
1986: Barclays is the first UK bank to be listed on Tokyo and New York
stock exchanges.
2000: Barclays acquires the Woolwich Building Society.
2001: Announces tie-up with Legal & General to sell life and insurance
products to its customers. Simon Gulliford appointed group marketing
director. Review of media agencies concludes with appointment of Starcom
Motive in a contract valued at £15m per annum. Appoints Bartle
Bogle Hegarty. Announces roll-out of Open Plan.
2002: Announces new marketing structure and senior roles. Reduces
below-the-line agencies from more than 60 to five: Fox Murphy, Tequila,
The Forward Group, McCann-Erickson and EHS Brann. Launches Open Plan
advertising campaign and Fluent in Finance advertising campaign.
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