Over recent months, Egg's troubles have become abundantly clear. Last month, its owner, Prudential, performed an about-turn by issuing a profits warning for the second half of 2006, just three months after promising an operating profit for the period, when it announced its results for the first half of the year.
Prudential, which brought Egg under its direct management at the end of last year, after spending months weighing up whether to sell it, said the brand's fortunes had been affected by a 'marked deterioration in market trends that are seen across the banking sector'.
It added that a reduction in the amount consumers are borrowing on their credit cards had driven down the expected income from interest payments. In addition, sales of payment-protection insurance had fallen, following an Office of Fair Trading investigation into the sector.
Egg's loans division is also suffering, having been forced to raise bad-debt provisions to cope with the growing number of customers arranging individual voluntary arrangements - a form of bankruptcy.
The woes of the online bank can be traced back to 2002, when it tried to expand overseas by launching in France,. The venture failed, not helped by ads that offended some, and left Egg with a bill of 拢113m when it left the market two years later.
Even more worryingly for a brand once synonymous with innovation and fresh thinking, Egg's last major product launch, its hybrid Egg Money account, backed by an 拢8m ad campaign, took place more than a year ago.
Perhaps best-known for its credit card, Egg is now placing greater focus on its non-credit based products. Last week, it launched a press campaign backing its offset mortgages - the first promotion it has used for this area of its business in three years.
It is also seeking to cross-sell across the Prudential portfolio, via initiatives such as offering M&G investment funds to its customers, without the barrier of entry and exit fees.
Will this shifting focus and a new chief executive in Ian Kerr, who joins this month from his role as head of retail banking at HBOS, be enough to resurrect the brand? We asked Mike Hoban, Scottish Widows customer brand and marketing director, who has also worked for Barclaycard, and Lucian Camp, chairman of financial services at ad agency cchm:ping.
DIAGNOSIS 1 - MIKE HOBAN, CUSTOMER BRAND AND MARKETING DIRECTOR, SCOTTISH WIDOWS
Despite the hype and investment, Egg remains a problem for Prudential. It is a marginal and unprofitable player in a commoditised market.
Even worse, the brand has no obvious competitive advantage on which to build or point of sustainable differentiation. Rather than a positioning based on a customer need, it has relied on the flimsy platform of differentiation through tone of voice and attitude. With no prospect of profit in place, Egg has turned to some of the more distasteful pricing and charging tactics prevalent in the credit-card industry.
Faced with this situation, it has three options: to drive for volume and survive on economies of scale, be the lowest-cost operator in the market or differentiate by adding value for the customer and extracting a premium as a result. Routes one and two are not open to Egg; it will always fare less well than the banks, which can trawl their huge databases for customers, and it will always be undercut by the monoline cards, notably Capital One, which has invested millions in start-of-the-art targeting technology.
REMEDY
- Define what makes the brand better and different from the competition and base this on a genuine customer need.
- Set up a programme of product and service innovation that gives customers a reason to choose and stay with Egg.
- Switch spend from TV to digital to target prospective customers more effectively.
- Divert spend from acquisition to retention and put in place a cross-sell and upsell programme for existing customers.
DIAGNOSIS 2 - LUCIAN CAMP, CHAIRMAN OF FINANCIAL SERVICES, CCHM:PING
What happened to all of Egg's freshness? Remember that moment in the Zoe Ball launch ad when she admitted she was being paid to appear in it?
Now, Egg is just another boring old financial services company with some mildly wacky graphics and a cute, if not very communicative, ad campaign.
It is hard to stay fresh and mould-breaking as you get older, especially if you have traditional parents - in Egg's case, the deeply traditional Prudential - and money worries of your own.
Moreover, what are Egg's target market and competitive proposition these days? It used to be a lethal combination of very competitive rates and a refreshing attitude. Now, the credit card features plenty of depressing MBNA-style balance-transfer gimmicks, but there is not much to say about rate and little attitude.
While I have been impressed by the speed at which service-sector brands such as Egg have risen to prominence, the question now is whether they will go through their life-cycle in fast motion, maturing and declining as quickly.
REMEDY
- Egg needs a new big product (or service) idea; an 8% savings rate turbo-charged the launch. What's next?
- Remember to keep being different; that balance-transfer stuff is really depressing.
- Be clearer about targeting. Is Egg just about attitude, as First Direct now is (very successfully)? If so, stop looking like a brand for poor, young people.
- The guinea pig ads may be cute and funny, but find an ad idea that says something.