Seeing your real customers: The switcher, the jilted, the savvy and the helpers
Your customers are forever changing. Yet over a long period of time this change can seem so slow and gradual that it seems impossible to determine any movement at all. But without understanding these changes, a business may not be marketing to a relevant audience, or even creating appropriate products and services for them.
The insights from Experian’s Financial Strategy Segments (FSS) tool provide a fresh perspective on today’s consumers, at macro and micro level. It shows what happens to the young when the first rung of the property ladder feels far out of reach, and how some families are coming together to help the generation at risk of getting left behind. The data also highlights the profound impact technology is having on the financial journeys consumers take today – from the rise of price-comparison websites to the use of banking and bill paying apps.
In an increasingly customer-centric world, it’s important to have a depth of knowledge into what makes a customer tick. With greater insight an organisation is better able to meet customers’ demands and expectations. By offering the most appropriate products, messages and channels, businesses can deliver a better customer experience and improve return on investment, as well as ensuring they comply with legislation and safeguard the company’s reputation.
The Financial Strategy Segments by life stage and affluence
The tool provides fourteen groupings that were found to hold statistical significance:
A Earning Potential
B Money Makers
C Growth Phase
D Deal Seekers
E Family Pressures
F Established Investors
G Career Experience
H Small-scale Savers
I Mutual Resources
J Single Earners
K Respectable Reserves
L Cash Economy
M Golden Age
N Home-equity Elders
O Declining Years
Savvy switchers and digital devotees: everything to gain
Sticking with the same financial products and suppliers can mean paying more than you need to for the same thing. Some consumers will have more to gain or lose, just as some people are more or less likely to switch. So who’s most likely to shop around for a better deal?
It tends to be those in the more affluent groups, including FSS groups F, Established Investors, and B, Money Makers, as well as the groups on their way up, such as group G, Career Experience, and C, Growth Phase. For these groups, affluence goes hand in hand with being well informed and making good financial decisions.
Where we see a slight deviation from this pattern is in groups H, Small-Scale Savers, and D, Deal Seekers. Although not so well off, these groups are well versed in making the most of their financial options – likely a result of the rise in consumer-focused money blogs, price, comparison websites and voucher codes.
Those least likely to switch fall into two distinct groups. First the retired population, who are more likely to carry on doing what they have always done, and secondly the least affluent groups such as groups E, Family Pressures, and L, Cash Economy. It is these groups who stand to gain the most, as a proportion of their income, from switching to better deals.
The group most likely to switch consists of 12.8 million people in 5.5 million households, who are likely to be younger. However, many of the same people are least likely to have made any pension provision.
There is also a clear relationship between those most likely to switch and their digital skills. Those who are most familiar with digital platforms will find it far easier to shop around and switch than those who are less digitally engaged, or who feel uneasy about making financial transactions online. This means that older consumers, as well as those in rural areas or with poor internet connectivity, are at a disadvantage in terms of the ease of switching.
Interestingly the areas where people were most likely switch are overwhelmingly based in the south – in fact of the top 20, 15 are within the M25. The list is very London centric. The top five were Kensington, Chelsea - Kings Road, Wandsworth - Clapham Junction, Hammersmith - King Street, and Richmond (London).
Those in the North were least likely to switch to save. As a region, only 30% of the North were switchers, versus 57% in Greater London. Leaving the south and the counties surrounding London, the numbers of switchers fell to around a third over most of the country.
Jilted generation: bearing the brunt of the downturn
Many have talked of the growing gap between generations. We’ve coined several terms – Baby Boomers, Generation X, Millennials – to articulate our differences, and pointed at the vast differences in the opportunities available to young people now compared to those just a couple of decades ago.
Final salary pensions, high house-price inflation and periods of economic growth have all worked in the favour of an older group, leaving them with substantial assets and property. People in this group are retired or soon-to-be retired, have paid off their mortgages and built up their savings and are now enjoying large private pensions. They account for an increasing proportion of consumer spend, especially in the travel and leisure industries. With time and money to spend as they wish, they are a gifted generation.
By contrast, those currently in their twenties and early thirties are faced with high house prices, low wage growth, the repayment of student loans and the continuing cost of renting. This is the jilted generation, and the challenges it faces are of such an extreme that a government enquiry into generational differences in opportunity is underway. When the current younger population gets older they will not represent the same market for goods and services, in financial services or elsewhere.
Today, a couple in their 60s may enjoy a financially secure retirement having had average salaries, largely because they were able to trade up in the housing market and accumulate large amounts of equity, then take early retirement on final-salary index-linked pensions, boosted by outright home ownership. It is very unlikely that their equivalents will be in the same position in 15 or 20 years’ time.
Helping hands: the rise of multi-generational spending
‘The Bank of Mum and Dad’ has become a cliché for a reason: parents have always, to a certain extent, been on hand to help finance the lifestyles of their adult offspring. But given the generational differences we’ve explored, it comes as no surprise that these inter-generational handouts are becoming more commonplace. And it’s likely the trend will continue.
Parents and grandparents, aunts and uncles are increasingly:
• contributing to mortgage deposits
• buying or helping to buy cars
• paying for major household items
• paying for holidays
• paying for meals out
• buying the more expensive presents for their grandchildren
• having their children move back home and live rent free, or at a highly subsidised rate
In some cases, the push of high property costs and lower incomes and the pull of a familiar home and ease of living have combined, leading to several generations living under the same roof.
Another way that the older, more affluent population is helping support the younger generation is through loans within friends and family. The groups most benefiting from these loans are:
Making sense of a changing nation
As the gap between generations grows wider, it brings implications for both public policy and for financial services providers. The changing consumer landscape will mean fewer mortgages are needed, fewer retired people will release housing equity, and those nearing retirement will have less to spend on holidays and leisure. By being aware of these trends, providers can plan for change and market the best products to the people most likely to need them.
What is Financial Strategy Segments?
Financial Strategy Segments collates detailed financial behaviour data about every consumer in the UK: their demographics, personal equity, investments, borrowings, debt, attitudes, aspirations, and even preferred communications channels. The segmentation is tightly linked to each person’s age and affluence. It groups people together based on similar financial behaviours, by household and then by individual. This level of segmentation gives a deep understanding of consumers’ financial behaviour.