Westpac uses customer ignorance to its advantage
(27 March, 2013 – Australia) Westpac is thundering ahead with a multi-brand strategy to lure customers who don’t want to bank with one of the majors into choosing one of the bank’s subsidiaries instead.
The head of Westpac's Australian Financial Services division, Brian Hartzer, defended the bank's 'multi-brand' strategy on Tuesday, saying it was a key plank of its plan to extract growth in a sluggish credit environment.
Thanks to a series of takeovers in recent years, Westpac has amassed wide range of brands including St George, BankSA, Bank of Melbourne, and RAMS.
Some analysts have questioned if the strategy is right for an era of slow credit growth, because of the extra costs of maintaining the different brands.
'We know from research that there's a good chunk of the population that, for whatever reason doesn't want to bank with a big bank,' Hartzer said.
'Our view is by having alternate brands available to us we're able to put an offer in front of a bigger portion of the potential profit pool than we would if we were limited to just the one brand.'
Hartzer, said the bank had focused on defining each of its brands so they did not compete with other Westpac offerings.
'The trick is to make sure that as much as possible those brands are complementing each other rather than just competing head to head with each other,' he said.
Hartzer argued that Bank of Melbourne, which Westpac launched in 2011 to boost its presence in Victoria, was proof the strategy was paying off.
Westpac's St. George franchise is also targeting the market for business lending, where it has a market share of just 8 percent, compared with its consumer market share of 12 percent.
While Westpac's multi-brand strategy has come under criticism from market analysts, credit unions and mutual banks have also called for tougher rules on disclosure of who owns alternative brands, claiming some customers are unaware of ownership structures.
Thanks to a series of takeovers in recent years, Westpac has amassed wide range of brands including St George, BankSA, Bank of Melbourne, and RAMS.
Some analysts have questioned if the strategy is right for an era of slow credit growth, because of the extra costs of maintaining the different brands.
'We know from research that there's a good chunk of the population that, for whatever reason doesn't want to bank with a big bank,' Hartzer said.
'Our view is by having alternate brands available to us we're able to put an offer in front of a bigger portion of the potential profit pool than we would if we were limited to just the one brand.'
Hartzer, said the bank had focused on defining each of its brands so they did not compete with other Westpac offerings.
'The trick is to make sure that as much as possible those brands are complementing each other rather than just competing head to head with each other,' he said.
Hartzer argued that Bank of Melbourne, which Westpac launched in 2011 to boost its presence in Victoria, was proof the strategy was paying off.
Westpac's St. George franchise is also targeting the market for business lending, where it has a market share of just 8 percent, compared with its consumer market share of 12 percent.
While Westpac's multi-brand strategy has come under criticism from market analysts, credit unions and mutual banks have also called for tougher rules on disclosure of who owns alternative brands, claiming some customers are unaware of ownership structures.