Since the introduction of Consumer Duty in 2023, many firms have focused on building compliance frameworks to meet regulatory standards. But as we’ve seen through our work with clients, a compliance-only approach often overlooks broader commercial benefits. At L.E.K., we’ve developed a comprehensive assessment framework to help firms go beyond compliance and use Consumer Duty as a strategic lever for competitive advantage. Centred on four core areas – customer understanding, segmentation, proposition and value – this framework enables firms to unlock growth potential while maintaining regulatory alignment (see Figure 1).
1. Enhancing customer understanding
A key objective of Consumer Duty is to ensure clients are equipped to make informed financial decisions. While meeting this regulatory requirement is necessary, firms that deepen their understanding of what clients truly value can achieve more than compliance.
Clients’ needs are rarely static, and assumptions about their preferences can often fall short. For instance, younger clients may value frequent, real-time interactions, whereas older clients might prefer fewer, but well-targeted, multi-channel touchpoints.
This enhanced understanding allows firms to tailor their offerings dynamically, fostering trust and loyalty by addressing the underlying motivations driving clients’ financial behaviours. Firms that continuously refine their understanding of client needs are better positioned to anticipate demand and build lasting relationships.
2. Rethinking segmentation
Meeting the diverse needs of clients is a central tenet of Consumer Duty. However, traditional segmentation approaches based solely on demographics often fail to capture the complexity of client behaviour.
By adopting behavioural and needs-based segmentation, firms can gain a more nuanced perspective on client preferences. This approach encompasses emotional, product-specific and support-related factors, enabling firms to create propositions that resonate deeply with their target audience.
This advanced segmentation model allows firms to optimise client lifetime value by understanding when service needs – and the associated costs – are likely to fluctuate over a long-term relationship.
3. Developing a differentiated proposition
Consumer Duty mandates that products and services meet clients’ needs. While this requirement is foundational, it also presents a unique opportunity to craft distinctive propositions that stand out in the market.
Effective proposition design starts with a detailed understanding of the distinct needs and values of different client segments. Through our work with clients, we’ve observed that more service isn’t necessarily better. For some, fewer, high-quality interactions are more valuable than constant engagement.
Critically, firms must ensure that they deliver only those services that clients genuinely require, aligning with both Consumer Duty obligations and client expectations.
4. Delivering and demonstrating clear value
One of the more challenging aspects of Consumer Duty is the requirement to demonstrate fair value. Achieving compliance in this area involves more than just competitive benchmarking; it demands a transparent, data-driven approach to validating pricing structures.
This needs to be underpinned by a comprehensive understanding of market pricing, cost to serve, fair margins and perceived client value. Robust value assessments not only satisfy regulatory requirements but also support strategic decision-making, such as defining what your target markets are and determining the optimal scope of propositions before they become cost prohibitive to both your clients and your business.
At L.E.K., we help firms take this a step further by creating robust, client-centred value assessments that go beyond the numbers to reflect the benefits clients actually perceive.
Conclusion
By focusing on these four pillars, firms can make the most of a strategic opportunity. Our framework not only supports compliance but also allows firms to build stronger client relationships, drive sustainable growth and achieve meaningful differentiation in the market.
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