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Low income groups and financial servicesPublished by: Datamonitor Published: Jun. 7, 2005 - 82 Pages Table of ContentsTABLE OF CONTENTS CHAPTER 1 EXECUTIVE SUMMARY 3 Introduction 3 The future decoded 3 Low income populations are shrinking 3 Value of segment swells across the entire region 4 Wallets do overtime as low income consumers increase their spending 4 Price is king in a world of small wallets 4 If the price is right then differentiation will be made by the level of service 4 ‘Masstige’ is of no interest to bottom end consumers 4 Brand plays no role in this consumer segment 5 “Best buy” tables and word of mouth are the main sources of product information for low income consumers 5 Action points 5 CHAPTER 2 INTRODUCTION 15 What is this report about? 15 Who is the target reader? 15 How to use this report? 15 CHAPTER 3 THE FUTURE DECODED 16 Introduction 16 Trend: Low income populations are shrinking 16 Low income consumers are a small piece of the pie 17 The low income segment is significantly larger in more populous countries 19 Trend: Value of segment swells across the entire region 21 Income per capita grows rapidly across the whole of Europe 21 UK low income consumers look the most appetizing segment 23 Trend: Wallets do overtime as low income consumers increase their spending 25 Expenditure grows gradually in most of Europe 25 Food, housing and utilities dominate European budgets 27 Trends in the low income segment should motivate providers to target this sector with renewed vigour 28 Insight: Price is king in a world of small wallets 29 Low income consumers demand rock bottom prices before they put a foot through the door 29 Customer retention revolves around competitive pricing 32 Price-oriented behavior of consumers differs in financial services 34 Insight: If the price is right then differentiation will be made by the level of service 35 Low income consumers purchase with customer service in mind 36 Low income consumers do not tolerate poor customer service 38 Customer service is a must for financial service providers 41 Insight: ‘Masstige’ is of no interest to bottom end consumers 44 Status is shunned by low income consumers 44 Product suitability is more important than ‘masstige’ 46 Insight: Brand plays no role in this consumer segment 48 Consumers do not consider brand in purchasing decisions 49 Insight: “Best buy” tables and word of mouth are the main sources of product information for low income consumers 51 There are geographic differences in product knowledge sourcing 52 Young consumers rely heavily on “best buy” tables 54 Consumers’ information sources differ between financial services products 55 Insights reveal the diverse attitudes and behaviors that providers must understand to successfully compete in the low income segment 56 CHAPTER 4 ACTION POINTS 58 Introduction 58 Make price the focus of all product design and marketing strategies 58 Cut costs in product design and distribution 58 Push price to the top of all marketing strategies 59 Build and market products around suitability instead of ‘masstige’ 60 Create products to meet the needs of low income consumers 60 Marketing must emphasize suitability of products to low income consumers 62 Increase and improve word of mouth marketing 62 Start schemes like ‘recommend a friend’ to gain more exposure 62 Build a customer centric value set amongst client facing staff 63 Train and incentivize client facing staff to maintain suitable levels of service 64 Only offer basic money management services and lending to low income consumers 64 Basic bank accounts offer possibilities… 65 …and so do lending products 65 Do not waste resources on brand campaigns 65 Niche brands are the only feasible option 65 Provide face-to-face buying channels for low income consumers 67 Joint ventures and affinity partnerships with retail firms might prove profitable 67 CHAPTER 5 APPENDIX 69 Supplementary data 69 Definitions 77 Research methodology 78 Future readings 78 Report writing team 78 Datamonitor’s custom research capabilities 79 LIST OF TABLES Table 1: Low income consumers by country, 1995-2002 (% of total) 18 Table 2: Low income consumers by country, 1997-2007 (millions) 21 Table 3: Mean net income per capita amongst low income consumers, by country, 1996-2006 23 Table 4: Total net income of low income consumers, by country, 1996-2006 (EUR bn) 25 Table 5: Mean consumption expenditure by low income consumers per household, by country, 1988-1999 27 Table 6: Selected breakdown of consumption expenditure, Europe, 1999 28 Table 7: Decision-making criteria among low income consumers when purchasing a good or service, by country 69 Table 8: Level of price consciousness among low income consumers, by country 70 Table 9: Level of price consciousness among low income consumers, by age 70 Table 10: Breakdown of consumers who changed providers based on price, by country 71 Table 11: Levels of service consciousness among low income consumers, by country 71 Table 12: Levels of service consciousness among low income consumers, by age 72 Table 13: Reaction to poor customer service, by country 72 Table 14: Reaction to poor customer service, by age 73 Table 15: Reaction to poor customer service from financial service providers, by product type 73 Table 16: Percentage of low income consumers who would leave their current financial services provider if they received poor customer service, by country 74 Table 17: Level of brand consciousness, by country 74 Table 18: Level of brand consciousness, by age 75 Table 19: Level of needs consciousness, by country 75 Table 20: Level of needs consciousness, by age 76 Table 21: Level of brand-orientation of low income consumers when purchasing products, by country 76 Table 22: Level of brand-orientation of low income consumers when purchasing products, by age 77 Table 23: Sources of information relied upon by low income consumers when considering providers, by country 77 Table 24: Sources of information relied upon by low income consumers when considering providers, by age 78 Table 25: Sources of information relied upon by low income consumers when considering financial services providers, by product type 78 LIST OF FIGURES Figure 1: Italy, Spain and the UK have the biggest proportion of low income consumers 18 Figure 2: Growth of low income populations varies across Europe 20 Figure 3: The value of the low income market in Europe will be concentrated in the UK in 2006 24 Figure 4: Price is the most important purchasing criterion for this segment 30 Figure 5: The Netherlands has the most price sensitive low income segment across Europe 31 Figure 6: Price indifference increases with age 32 Figure 7: Low income customers move to get better deals 33 Figure 8: Price indifferent purchasers are still sensitive to price and will move if they find a cheaper alternative 34 Figure 9: Price sensitivity varies in financial services 35 Figure 10: UK consumers are the most service sensitive across Europe and the US 37 Figure 11: Service becomes a priority as the years tick by 38 Figure 12: Americans are most likely to walk out the door when they receive bad service 40 Figure 13: 25 to 34 year olds are more willing and able to walk out 41 Figure 14: Customer service is more important for banks than insurance companies 42 Figure 15: Low income consumers are most likely to leave their insurance provider if they receive poor customer service 43 Figure 16: Italians, Americans and the Dutch are most intolerant of poor service from financial services providers 44 Figure 17: Swedish low income consumers are the most brand tart 46 Figure 18: Products that meet consumers’ needs are the key 47 Figure 19: Senior consumers are highly needs driven 48 Figure 20: Low income consumers show a marked disinterest in brands 50 Figure 21: Young low income consumers show the most interest in branded goods 51 Figure 22: Consumers rely on a number of sources for product information 52 Figure 23: Low income consumers’ preferences for product knowledge sourcing differ across Europe and US 53 Figure 24: Young consumers rely on “best buy” tables 55 Figure 25: Recommendations from friends and family are the most important source of product knowledge for low income consumers when choosing a bank account 56 Figure 26: NatWest is one of the only UK banks to offer a more diverse banking product for low income consumers with a debit card included in the package 61 Figure 27: Provident Financial have increased its personal credit client base through effective word of mouth marketing 63 Figure 28: Yes Car Credit has been successful at building positive brand awareness amongst non-standard borrowers looking for car financing 66 Figure 29: Financial services providers have already engaged in joint ventures with other retailers to gain access to more and more customers 68 Figure 30: Datamonitor’s core consulting capabilities 80 AbstractIntroductionLow income consumers account for 14 per cent, a small but stable share, of the total population in the US and Western Europe. This report looks at the attitudinal and behavioral habits of the 87 million low income consumers in the US and Europe, giving financial services providers valuable insights into an important market to target. Scope Data from an exclusive Datamonitor survey of over 3000 consumers in France, Germany, Italy, the Netherlands, Spain, Sweden, the UK and the US In-depth analysis of data covering low income groups’ consumption attitudes and behaviours, broken down by region, age and various consumer profiles Data and analysis from secondary research on low income populations, income and expenditure in the US and Europe Report Highlights Low income populations have been on the decline, but structural factors are slowing the shrink and there are significant (and exploitable) country variations. Low income consumers react differently to poor customer service depending on the financial services product that they have purchased. 57 per cent of low income consumers would leave their existing insurance provider whereas only 35 per cent would decide to change banks. Reasons to Purchase Understand the size and scope of opportunities within the low income segment in both the US and Europe Improve acquisition and retention rates by gaining a detailed understanding of the consumption attitudes and behaviours of the low income group Design innovative products by learning of gaps in the market where existing strategies are not meeting the needs and wants of low income consumers Scope Focussed research into government and industry strategies highlighting existing approaches and future opportunities for financial services providers Report Highlights Low income consumers’ reliance shifts from recommendations from friends and family to advice from financial advisors when they are seeking information on more complex financial products. Reliance on recommendations from advisors increases by 20 per percent when consumers consider purchasing savings/investment policies instead of bank accounts. Get Full Details About This Report >> |
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