The endless debate surrounding the merits of communications testing versus market ‘gut instinct’ may be at an end as the Financial Services regulator looks for firms to evidence progress towards smarter communications.

I’m no spring chicken – it’s almost 15 years since I worked as a strategic researcher with a design agency and more than a decade since I supported the marketing efforts of a (at the time) challenger retail bank. Back then, it seemed most firms relied on the experience of senior marketers – of course, there were those who recognised the value of pre-testing communications.

Nowadays, much has changed – sure there are still believers and non-believers when it comes to communications testing. But the big change today, particularly in Financial Services is the regulatory expectation that firms ensure their communications are both “customer focused and rigorous”. [1]

As part of the FCA’s Project Innovate initiative, the regulator has outlined how firms can test new ideas or techniques for communicating to customers, particularly around disclosing product information – they even go far as suggesting they might be able to help firms design their test (though nothing to suggest they can also support deployment of said test). The key benefit to firms may be that the FCA will waive or modify how they apply their rules which might otherwise prevent you from testing your ideas … seems like a good option for firms to work in further collaboration with the FCA and, at the same time, get a little ‘experimental’.

Customer Focused

In terms of being any communications testing being customer focused, the FCA suggests your test must aim to find out the best way to communicate for the benefit of customers. This ‘aim’ might be to find out how best to deliver key information to customers or whether they are more likely to respond to a letter or email. Other communication aims might include establishing whether it is more effective to provide customers with personalised information about how they use a product.

Rigorous Testing

When it comes to rigorous testing of their communications aims, this is where firms might be best supported by an independent research agency – as the FCA guidelines echo a traditional approach to communications testing in a quantitative manner:

• Involve a sample of your customers or a prospective audience sample who are randomly assigned to receive a typical communication or the approach you want to test – external agencies with access to consumer panels can help with the latter audience objective
• Your sample must be large enough to see any statistically significant effects – again, an external agency can help here

Interestingly, if working with the FCA, a footnote suggests you must be willing to provide them with the necessary data to validate your test results (if requested) – I can only imagine that the provision of such data from an independent research partner might go a long way to satisficing the regulator’s needs, particularly if robust as per their suggestions.

Behavioural Economics

Christopher Woodward, the FCA’s Director of Strategy and Competition, once remarked …

“All too often, customer communications are so technical that even the most astute consumer would struggle to understand the information.” [2]

Indeed, Mr Woodward believes that “communications play a fundamental role in helping consumers make decisions about the products and services they buy, which is why it’s so important that we work with firms to get this right.” [2]

However, the FCA’s Behavioural Economics work suggests that information itself does not necessarily empower the consumer and allow them to make informed decisions. To the contrary, too much information can “overwhelm, confuse, distract or even deter people from making effective choices if presents in a way that people struggle to engage with.” In other words, poor information can actually make things worse for your customers and / or prospective audiences as they are more likely to act as a barrier to engagement rather than encourage it.

So what does ‘good’ look like?

Luckily for us, the regulator’s work to-date has previously revealed that the type of information consumers receive, when they receive it and the way it is delivered can drive both poor and positive outcomes. In order to ensure the information your firm shares drives positive outcomes, it is critical to ask yourself the following questions:

• Are our communications clear and understandable?
• Do our communications achieve the desired cut-through (with target audiences)?
• Are their others ways we can find to communicate simpler and clearer?

And in terms of what ‘good’ might look like, consider some of the following examples:

• The use of plain language, short format, bullet points and clear graphics;
• The use of infographics to explain complex information and concepts to consumers in an engaging way;
• The use of interactive apps to help consumers understand and manage their product; and / or
• The use of videos to help consumers engage with the essentials terms and conditions of a product.

So, with a regulator more open to working in collaboration with firms, experienced research agencies with proven communications testing available, and digital research tools available to compliment qualitative and quantitative methodologies, there’s no real need for firms to be trusting their gut instinct. The tech evolution now allows firms to experiment with communications formats during the development phase (rather than before and after), allowing you a better opportunity to maximise the potential of future communications. For me, it’s an exciting time for a savvy marketer as there is an opportunity to use both regulatory expectation and agency expertise to get more creative with your communications efforts.

Good luck out there!

[1] Test customer communications ideas, FCA, June 2016

[2] FCA discussion paper calls on firms to deliver smarter, effective communications, FCA Press Release, 25^th June 2015.

Scott Davidson is Research Director within Harris Interactive’s Financial Services team. Scott supports key accounts with their qualitative and quantitative research needs, covering everything from annual product reviews to communications or concept testing, consumer preferences to new product development, idea generation and opportunity sizing to complaint handling performance. Feel free to get in contact with Scott at sdavidson@harrisinteractive.co.uk