The UK Economy: Tales from the frontline

In a sort of 21st Century version of Cobbett’s Rural Rides I have been meeting senior managers at companies across the UK. Some were clients, others were suppliers to clients, some were merely acquaintances, but the common denominator amongst them all was an almost desperate desire to talk about the state of the UK economy. Unlike Cobbett my trusty steed was a Seat Altea and my rides were more urban than rural but you get the gist - I’ve been out a lot.

I personally have three tests of economic vibrancy, namely traffic levels, “sold” signs and skips on my street. All three have been giving off conflicting messages recently, hence my interest in gauging the opinion of those on the front line with real P&L responsibility.

So what is going on out there? My first conversation was with a managing director of a premium priced organic healthcare products company which sells directly to consumers and through retailers. In his words, “we’ve dropped off a cliff”. Ahhh not good then!

In Solihull a chief executive of a financial services company which is strongly aligned to consumer spending patterns, admitted to me last week that things had slackened off but he remains optimistic, despite some inflationary fears. “The thing I have noticed is the price of eating out” he told me. “I draw the line at £25 for a steak. I told the wife to get the BBQ out instead.” However his view is that, rather than not buying at all due to increasing prices or concerns over the economy, consumers will take advantage of the vast range of different price points for products and trade down to cheaper items.

That’s the down-ish side, but a trip to Bedfordshire to meet the managing director of a drainage products company with strong ties to the construction sector painted a different picture. I naively offered the opinion that things were presumably difficult at the moment. “Oh no” he said, “we’ve just had a record-breaking 2010 and we are ahead of target for this year.” Noticing my double-take he went on, “we supply to commercial developments and they’re doing fine.”

I finished my grand tour in Worcestershire at a global machine tool builders which manufactures metal cutting machines for anything from £60k through to £2 million (big ticket items then!). Rarely have I seen a factory so busy. In the words of the harassed looking production manager, “we can’t make ’em fast enough.”

And this is not just a result of the weak pound sucking out exports. I’m told that UK sales are going great guns as well. One of his colleagues in sales offered this opinion: “I think a lot of our customers are taking the view “let’s just get on with it!”

What is clear is that the closer you are to the consumer the more difficult life is likely to be at the moment. If the UK economy is to stop flat-lining and return to growth we need more of that can-do attitude I saw in Worcestershire.

Beyond silo marketing

How many times have you phoned an organisation as a customer only to be told "that's another division, you'll have to phone another number" or "we can't do that, they're a separate company".

A classic example of this is the UK financial services sector, multiple product companies which organise themselves by silo (mortgages, savings, current accounts, insurance etc) all with separate contact centres and customer contact details.

Let me give you an example. At the moment I have a current account, a mortgage, two ISAs and a long term savings product with the Nationwide Building Society. I am a good customer and they want more, regularly bombarding me with information about other products. I was in the Bromsgrove branch on a Saturday a few months ago and one of cashiers tried to sell me yet another savings product.

"What's in it for me?" I asked.

"Well it's a good rate of interest" was the reply.

"Yes, but its no better than what I could get by going online" I countered. "Perhaps if you offered me an incentive, an eighth of a percentage point off my mortgage for example."

I know it was never going to happen, I was just feeling difficult, but you can imagine the reply.

"We can't do that, they're separate divisions."

I was therefore intrigued to read a profile of the Santander Bank in this week's Time Magazine. Buried deep in the profile is one of the secrets of Santander's success, namely a computer programme, called Parthenon, which does nothing more impressive than group information by customer rather than product. That's right, all of an individual's interactions with the bank grouped in one place, no silos or separate divisions.

Parthenon has enabled Santander to strip out millions in costs from its acquisition of Abbey National, it has aided cross-selling opportunities and, crucially, enables Abbey to offer incentives in the form of highly competitive interest rates, to good customers.

Apparently, this is revolutionary for the banking sector, but there is a lesson for all business here. You may think you are being customer focussed by being terribly polite and attentive, but if you are forcing customers to navigate your own internal organisation then you are not and ultimately you will pay for it.