Consumer duty one year on: reframing the role of customer outcomes and demonstrating fair value​

The FCA has been clear that, to consumers, value encompasses more than the just the price of their products.

When it comes to firms’ implementation of Consumer Duty, those receiving the best engagement and feedback from customers consistently deliver on good product design, high levels of customer service and effective expectation management.

These three elements underpin the overarching principle of Consumer Duty – is your firm able to demonstrate that a customer understands their product and is receiving the expected benefits? ​

So how does value manifest for consumers, and what should firms think about when assessing their approach to monitoring and demonstrating outcomes?

eliminate siloed thinking around price

Different customer cohorts will experience value differently based on their personal circumstances, their aims and priorities and other characteristics – therefore, taking a more holistic and / or flexible view of price and value is vital to understanding the outcomes being delivered across the customer base of each product.

A product might not offer the same level of value, or impart value in the same way, to different cohorts of customers; so, using accurate and comprehensive data to identify this and take action to remedy amounts to good practice.

Balancing the cost-to-value equation

When it comes to assessing cost-to-value, it's important to consider the true cost of the lifetime of a product. Any supplementary or renewal fees need to be considered in order to take full account of the value received by the customer.

Conversely to value amounting to more than price, fees alone do not make a product poor value - exit fees for fixed-term mortgages, for example, can be acceptable in light of the significant benefit customers receive in terms of a lower fixed interest rate. Value should be experienced by all consumers of that product, so ensure that the correct considerations have been made on all bundled products.

Differential pricing will be a consideration here, too. The FCA states that “differential pricing is not necessarily unfair, as some customers may place higher value on particular product features and be prepared to pay more for them”. In this scenario, it's important to ensure the value remains and that customer circumstances / characteristics don't reduce the value of a proposition.

Connect price and product design

Good pricing strategy is connected to good product design, in that firms must identify the target customer(s) for their products and understand what their needs are in order to provide value – this work should be documented and able to be cited in the case of any regulatory dialogue you may have.

It could take the form of comprehensive journey maps for each product which log and summarise activities at each customer touchpoint, detail the personae of target customers, specify the channels and systems for interaction at each stage, detail process owners, highlight typical risks to be mitigated and maintain details on the controls which help mitigate these risks.

Communication – more and better

Administration and servicing of products should be responsive and efficient, and customers should be able to access information easily, be this through upfront product literature, or by being able to use the channel of their choice to engage with your firm and quickly resolve queries or issues.

If your products have any associated seasonal peaks, then there is a challenge around ensuring you maintain service levels and overall the quality of your customer communications through these periods via resilience solutions, whether you use internal initiatives (overtime, overproduction incentives with minimum quality thresholds in order to qualify, etc.) or engage a supplier for resource augmentation.

All firms should work to a ‘tell us once’ remit, which improves continuity for customers as they engage with your firm. This has process, system and staff competency implications – what information are you gleaning from customers at each touchpoint? Where does it reside? Do systems speak to each other across products or departments? Are staff sufficiently trained and supported to continually meet customer expectations? Are there tech interventions which can better empower Agents? For example, automations which use behavioural and sentiment analysis to suggest next best actions while on call with customers.

A Focus on the fundamentals

All the elements above talk about ways to ensure fair value for customers when designing your products and services, however for existing products, it is important to undertake fair value assessments with an independent mind, reviewing the customer outcomes being delivered for the overall population through data and appropriate customer segmentation.

Firms can then work back through product design and service delivery to ensure value. For new products, there is a genuine opportunity to create advantage by thinking about fair value through design, and then monitoring it on an ongoing basis.

Thinking about these issues will do more than help you embed Consumer Duty effectively – they can prompt wider conversations about long-term customer strategy and how to place customers at the centre of your organisation.