HBOS slip shows the client is king

Last week\'s news that HBOS had lost market share was a timely reminder that irrespective of what lenders may like to think, the consumer is king. And the lending giant identified its retention strategy as the banana skin that caused the slip-up.

HBOS’ pre-close trading statement admitted that its pricing had been wide of the mark with the retention deals it had lined up to keep hold of customers coming to the end of their discount periods.

Consumers weren’t attracted to the deals and brokers also gave them a wide berth. This resulted in its market share plummeting from around the 15% to 20% mark to just 8%.

At a time when the industry faces radical chan-ges, from retention fees to factory gate pricing and trail commission, HBOS’ bad six months are a time-ly reminder of what can happen when firms try to force consumers down a particular route.

Take the mobile phone industry – it was initially blindsided by the widespread popularity of text messaging. Texts had only been included as an afterthought, but mobile phone users loved them. And after networks splurged piles of cash on expensive 3G contracts, they found consumers didn’t want the pricey video and picture messaging they were relying on to pay back the billions they had invested.

HBOS says it will regain its market share in the latter half of the year, and judging by its product range, this looks likely. Swap rate pricing is now factoring in another three interest rate rises at well over 6%. Despite this, BM Solutions and Halifax are both offering products below the 5.5% base rate.

To maintain their competitive edge, businesses must offer consumers what they want at the right price, not the other way round.

Speaking of demand, the secured loans industry is attracting consumers and brokers at breakneck speed. As a result, next week Centaur Media will publish Loan Distributor, edited by Natalie Martin. Make sure you check it out.