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Case Study

Nationwide Building Society’s pricing philosophy

Far from being a building society purely focused on mortgages and savings, Nationwide competes effectively across all aspects of the financial services market, including current accounts, credit cards and personal loans.
Nationwide’s approach to its customers is based firmly on the fundamental beliefs it holds as a mutual organization. It delivers best value to its membership by providing financial services products with competitive interest rates and lower fees and charges, and this is all underpinned by a policy of fairness, honesty and transparency. It has also successfully campaigned on the issues of greater transparency for credit cards, personal loans and cash-machine charges, as well as calling on the Treasury to review stamp duty.
Nationwide’s approach to mortgage pricing is based on the belief that existing borrowers should not have to pay higher interest rates to subsidize the lower rates offered to new customers – as is common amongst many of its competitors. This fair and transparent approach means that new and existing customers have access to the same great-value products, which are generally at market-leading rates. They also have the reassurance of knowing that any fees and charges are kept to a minimum and, where they are necessary, these are competitive, fair, and disclosed upfront.
Savings rates offered by Nationwide are subject to a similar philosophy, and are underpinned by the same brand beliefs of honesty, transparency and fairness. The Society is committed to offering competitive savings rates that represent long-term value. Nationwide, unlike many of its competitors in the savings arena, does not offer ‘flash-in-the-pan’ introductory bonuses or place unreasonably restrictive caveats on its products. All of Nationwide’s customers have access to a wide choice of fixed- and variable-rate savings products, and these are available across a choice of branch, postal and Internet channels. All are simple to understand and use.
Nationwide has recently launched several products across the savings and insurance fields aimed at the ‘silver generation’; these demonstrate its commitment to delivering good value and are designed to meet the needs of the older age group.
It has also begun campaigning on the issue of children’s savings, and in December 2005 issued its Children’s Savings report. The report carries with it an action plan which Nationwide believes will help to change attitudes to saving and the way people manage their finances. It calls upon the government to do more to encourage people to save, and to promote the benefits of starting from a young age.
Investment products are also offered through its wholly-owned subsidiary, Nationwide Investment Group. The products have no initial charges and a low annual management charge – both of which set them apart in the marketplace. NIG aims to offer customers competitive annual management charges across the range of products, and strives to ensure that its pricing is both fair and unique in the marketplace.
Some might think that having a policy of not offering introductory bonuses or overly-inflated headline rates would stop Nationwide from appearing at the top of many best-buy tables. While it is acknowledged that many other players manipulate their accounts and rates to ensure that they appear in best-buy tables on a regular basis, this doesn’t show the bigger picture to the consumer. Will the once attractive rate simply slide away to obscurity and be managed down? How will the customer service and experience stack up? Recently, the compilers of these tables have started applying a different (and some might say fairer) approach, and in doing so seem to be making some progress towards quietly illustrating that taking a snapshot of just one feature of a product isn’t always a good guide to the longer term. Hopefully, in the future more tables will start to reflect products that offer a good, consistent rate over a period of time – and when that happens, Nationwide will appear even more frequently.